Reading: The Talent Myth

Mckinsey launched War for Talent to document how America’s top-performing companies are
handling their recruitment and promotion procedures using reports, questionnaires, and interview
transcripts. They discovered that leaders of best companies were obsessed with talent issues and
thus recruiting as many top performers as possible. And for promotions, star performers are
segregated, rewarded disproportionately, and pushed to senior positions.

About the organization: Enron

 Enron followed a system: a belief of having better talent at all levels to outperform its
competitors, commonly known as “talent mindset.”
 The company was bringing in MBA graduates from the very best colleges during the ’90s and
were introduced with star system where they are recruited, rewarded, and paid more than
what they thought they were worth, which led to the company’s bankruptcy.
 The employees were differentiated and sorted into A, B and C groups by Internal
Performance Review Committees
o A – challenged and disproportionately rewarded (top talent)
o B – encouraged and affirmed (middle talent)
o C – shaped up or shipped out
 The open market of hiring: At Enron, anyone could apply for any job, and no manager was
allowed to hold anyone back.

Reasons why Enron was failing?

 The A, B, C system has no merit as a link between IQ and job performance is underwhelming
 Tacit knowledge: Knowledge of necessary social skills and ability to handle difficult social
situations, was neglected by Enron
 To keep the stars or A employees indulged, they were given extreme freedom. And the
needs of the customers and shareholders were secondary to the needs of its stars.
 Narcissism is rewarded in Enron’s culture, and managers are more interested in short term
financial gain.
 Enron believed that an organization’s intelligence is simply a function of the intelligence of
its employees. They believed in stars and not in systems.
 Self-fulfillment of star employees possibly conflicted with the best interests of the firm as a
whole as these star employees were so obsessed with their own success and making sure
that they succeeded in their task, they did not take a step back to look at how their
intentions could conflict with those of the firm.
 Enron’s management consultant, McKinsey were ultimately at fault as they themselves
believed in the talent myth.
 The problem with Enron and its structure are that there was a lack of horizontal
communication between departments despite plenty of vertical communication.
 Because of the open market of hiring, poaching top talent from other projects was
commonplace within Enron, leading to many employees bouncing around the company,
taking on numerous roles within a short period.

P&G doesn’t follow the star system and does not seek out for top talent, and still managed to
dominate the consumer products segment. P&G emphasizes the hiring of students with a balance of

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excellence in school and having tacit knowledge. Much like Enron, P&G has a vast number of
departments operating as individual entities, yet still, work together to help P&G grow as a whole. At
P&G, a high level of inter-organizational communication with cross-divisional management was
observed, making sure that the company’s individual entities are working in sync. The alignment of
goals was a crucial criterion at P&G during recruitment and promotion.

Concepts learned:

 The most “talented” people are often not the right ones for the job.
 Tacit knowledge of managing yourselves and others and being able to deal with people and
difficult social situations is crucial in the success of any good manager.
 Tacit knowledge comes with experience and not from classrooms or top colleges.
 Having good inter-organizational communication can help to avoid a possible disaster or
failure in the organizations.
 Dark Side of Charisma – Flawed managers, fall into three categories:
o High likability floater – rises effortlessly in an organization because he never takes
any problematic decisions or makes any enemies
o Homme de Ressentiment – seethes below the surface and plots against his enemy
o Narcissist – energy, and self-confidence lead him inexorably up the corporate ladder.
These are terrible managers because they resist accepting suggestions and are
biased to take more credit for success than is legitimate.
 People generally hold one of two beliefs about their intelligence: fixed trait, or malleable
that can be developed over time. Those who think it is fixed reject the chance for
improvements, and those are praised for intelligence reluctant to tackle difficult tasks.
 Companies do not just need ‘stars’ but the employees who can create, execute, compete,
and coordinate the efforts of many different people.

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