Archive Article: The War For Talent. 2nd August 02.
December 29, 2008

The Enron financial scandal in the United States has led to a large amount of soul-searching. I have just been reading an excellent analysis of what went wrong with the type of people recruited to work at Enron.

Malcolm Gladwell has written in the July 22nd edition of “The New Yorker” magazine an article entitled “The Talent Myth: Are Smart People Overrated?”

Five years ago, McKinsey & Company, the US’s largest management consulting firm, launched what they called the War for Talent. They examined the most successful companies to find out why they were successful. They found that the key ingredient was talent. Successful companies recruited ceaselessly, finding and hiring as many top performers as possible.

The “talent mindset” became the new orthodoxy of American management. Enron was seen as the leading example of how well the new orthodoxy worked.

Corporations selected their own “A” team of particularly talented people and let them loose to make money. Even if they failed, they were still let loose to have more attempts. This was linked with the prevailing management trend of reducing middle layers of management so as to free up the staff.

There is, of course, nothing new under the sun when it comes to management thinking. The same old ideas get recycled from time to time. The current fashion has been around before and ran into problems. It simply requires a new generation to learn afresh the lessons of their forebears.

Malcolm Gladwell compares the success of the Royal Navy in defeating the German U Boat menace in the Atlantic in World War II with the US’s failure to protect its own coastline during that war. The Americans had star players running their navy, who acted individually in what modern management theory would call a highly decentralized system.

The British, by contrast, had a centralized organization that moved the ships around the Atlantic like chess pieces. The Americans thought that smart individuals make smart teams – the British thought that smart teams make smart individuals. The British were right. It was only in 1943 that the Americans recognized the wisdom of the British approach: it was not so much a matter of recruiting talented individuals (the Americans had always had them) but more a matter of creating a talented system to run them.

Malcolm Gladwell notes the success of Procter & Gamble. This does not have a star system. How could it? Would the top MBA graduates from the top management colleges move to the middle of the United States to work on detergent – when they could make much more money in corporations like Enron? Proctor & Gamble is not that glamorous. But it has dominated the American consumer products field for close to a century because it has a carefully conceived managerial system and a rigorous marketing methodology.

Malcolm Gladwell concludes with the observation that Enron and the other glamorous corporations were always looking for people who had the talent to think outside the box. It never occurred to them that, if everyone had to think outside the box, maybe it was the box that needed fixing.

Broadcast On Friday 2nd August 2002 On Radio 2GB’s “Brian Wilshire Programme” At 9pm And On 4th August 2002 On “Sunday Night Live” At 10.30pm