In many ways, organizing a successful business isn’t much different than hosting a family barbecue. Picture this: it’s a Saturday afternoon and your family is coming over for a good, old-fashioned barbecue. With only an hour before guests arrive, you need to be smart with your time and available resources. There are three tasks that need doing: mowing the lawn, washing the dishes and buying food.
Thinking through the tasks and family members at home, you know that your partner can operate the lawn mower well, your son is best at washing dishes and you know what to buy for the barbecue. Assigning each family member to their optimal role, everything comes together, and the barbecue is a tremendous success. On Monday, as you reflect at work, you wonder if the same dynamics aren’t at play in the office.
At McKinsey, we’ve heard many organizations say they have their best people in their most critical roles – when this is not always the case.
Many organizations end up losing effectiveness by failing to put the right people in the right roles. Often, they focus too much on building a strong hierarchy, with the mindset that the best people are the top two layers. Likewise, they achieve broad strokes alignment (i.e. thinking: “We need to up our game in marketing, so let’s get someone talented in there”). They also fill key roles as best as possible with available talent –putting IT under Finance, for example, because they thought the department head could handle it, and there wasn’t a more suitable leader to run it at the time.
We put forward an alternate version of this management trope – one that suggests 5 percent of roles in an organization create 95 percent of the value. More details will be revealed on this in a future post. Winning companies identify such roles, find the right talent to fill them, and invest to develop these employees.
To make this happen, here are four things you will need to do:
- Understand how to create value: To make strategic choices that deliver shareholder value, you must identify clearly the sources of current and future value. The best way to optimize your best talent to deliver on your strategy is by being clear on how your business creates value.
- Identify the most important roles: Organizations typically keep track of critical talent. But there are two potential pitfalls: Employers define critical roles in terms of hierarchy and make the mistake of regarding roles and talent as interchangeable. What you really want to do is identify the roles that have a disproportionate impact on value capture. They could include value creators, enablers or protectors.
- Get the right talent into the right roles: Organizations struggle to make unbiased, quick talent decisions when they lack sufficient data to make a case to place employees in certain positions. To avoid this, employers must assess the fit of talent against the specific needs of each role in terms of knowledge, skills, attributes and experience required; identify the biggest gaps; and craft a strategy to address the gaps (e.g. recruit or develop capabilities, build the succession pipeline and rotate talent).
- Manage performance and develop talent in real time: The days of once-a-year HR exercises to review talent and evaluate employee performance are over. Employers need to manage performance and develop talent in critical roles on a real-time basis. This involves making changes to the ongoing talent and business planning processes to ensure that a sustainable pipeline of talent is available to fill key roles over time. As strategies shift, critical roles should be revisited and reassessed with agility.
While this process may seem obvious, few companies do this systematically. A large consumer goods company McKinsey worked with took this approach and was surprised to find that, of its tens of thousands of employees, it could identify 53 individual positions on which the lion’s share of value creation rested. By matching talent to value in the context of its strategy, the company saw a twofold increase in share price, 50 percent reduction in the number of employees and €3.1Bn ($3.7Bn) of value unleashed.
Having highly talented people isn’t enough. They must be put in the right roles if your organization is to hit its goals and become a global champion and market leader in value creation. Or, it at least can help you execute a delicious family barbeque.