Thursday 24 September 2015

Ram Charan's 2% people drive 98% impact

One of the things I talked about in the People Management webinar was the increasing focus on small numbers of talent (eg Halogen's survey showed a clear focus on senior managers and leaders) and whether this is always valid.

I think workforce segmentation is a very appropriate activity, most of the time, and that most organisations do have 'special ones' but I worry that we overemphasise the variances in their contributions.

This relates to suggestions that, eg, the best people deliver 500 x the value of an average employee and to actual responses to it, eg, the ratio of CEO salaries to average employees (183 x for the FTSE according to the High Pay Centre).

That's despite the increasing role of distributed leadership where everyone has a role of leader (so what's so special about those at the top of an organisation?), the growing importance of collaboration (meaning that we need to look at talented teams not just talented individuals) and research suggesting that the performance factors behind those identified as talent is often more about the broader support provided to these people than it is anything about the individuals identified as talent themselves.)

That impact of our focus on talent is ever more marked as we also differentiate disproportionately against those at the bottom or the weakest performance in our organisations (the 'smelly ones' perhaps?).  I worry that the variance in the deal between those identified as talent and those on zero hour or similar contracts is increasingly tearing the social fabric of our organisations.

None of this detracts from the importance of talent or talent management but it emphasises the importance of identifying talent and investing in them very carefully, and that we position these people within the rest of the organisation even more carefully too.

We need to be especially on our guard when respected commentators who should know better say bizarre and inaccurate things such as that '2% of the people in a business drive 98% of the impact' - as suggested by Ram Charan in his recent HBR article and repeated at the AHRI conference in Melbourne where were both speaking.

How does a comment like that get into the Harvard Business Review???  It's easily and visibly not the case in any organisation I've ever worked in, and in any case, if it ever was, the issue wouldn't be talent management but organisation design!

Ie if 98% of your employee population deliver that little value, the issue isn't focusing on the 2% it's about reorganising and restructuring around the 2%, becoming a much smaller but much more effective organisation, with the small amount of additional value provided from outside of the organisation.

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