(Xiaoming Zhao/istock)

Talent Matters: A new column by CEB

Introduction by Tom Monahan, CEO and Chairman of CEB

Why do companies stop growing? It’s a simple, yet powerful question that ultimately leads you to examine the drivers of business performance. Our company, CEB, has examined this question for years in partnership with the world’s largest companies. The results consistently point to a fundamental insight:

Talent matters.

Extensive research on corporate performance shows that there is a consistent set of root causes — external, strategic, and organizational factors — which explain why companies stop growing. You’d assume that these “growth stalls” can be attributed to things such as geopolitical sea changes or the rise of a key competitor. But, the remarkable thing is that people issues play a key role in nearly 50 percent of growth stalls (and they are an influencing factor in even more). These are factors completely within a company’s control and related to their own people.

Much like Disney’s “Hidden Mickey” — the creative and subtle placements of the iconic Mickey Mouse ears throughout their parks and merchandise which only become evident once you know to look for it — talent is the factor hiding in plain sight for companies seeking to improve their performance.

So, if managing talent is so important to maintaining growth, then corporate executives should already have developed the insights, data and tools to ensure they are making fully informed and precise decisions about this critical asset, right?

The truth is most hiring managers are probably using more powerful tools to manage their fantasy sports team. The dramatic rise in the popularity of fantasy sports has been met with an equally impressive array of data and tools to measure performance, assess potential, and ultimately optimize fantasy teams. Compare that to recent CEB survey statistics: Only 15 percent of human resources managers used analytics to change a business decision in the past year, and only 8 percent agree they receive significant returns on analytics investments.

Now for the good news: The progressive companies that are beginning to put more rigor into their processes are seeing the benefits. Not coincidentally, the high-tech industry, with its focus on analytics and a tighter-than-average labor market, provides a good case study of the benefits of a more rigorous approach to talent yielding benefits.

Consider Amazon.com’s “bar-raisers.” Bar-raisers are senior-level trusted hands who assist in candidate assessment and selection and are specifically charged with upholding the company’s focus on hiring top talent. They interview candidates inside and outside their own function or area of expertise against an established talent profile and provide their insight back to recruiters and hiring managers. (Amazon.com chief executive Jeffrey P. Bezos owns Capital Business and its parent, The Washington Post).

As an Amazon executive told the Wall Street Journal earlier this year about the program which also extends to their C-suite executives, “We want to be as objective and scientific in our hiring as possible ... the point is to optimize our chances of having long-term employees.” The story goes on to note that, “Amazon believes the program ... screens out cultural misfits and helps make the e-commerce giant a feared competitor in fields as diverse as logistics, tablet manufacturing and television production.”

Initiatives such as these often begin as exercises in more keenly assessing a candidate’s culture fit, which has as much as a 12 percent impact on quality of hire. According to our research, such personalized recruiting methods can also enable organizations to get a view of how well the candidate will fit into the way colleagues work. This so-called “network fit” has twice the impact (30 percent) on quality of hire as culture fit, and hires with network fit substantially improve business performance — up to $16 million for the average Fortune 500 organization.

That sort of benefit to the bottom line — even if you don’t run a company the size of Amazon — is why we’ve partnered with Capital Business to share the stories of progressive firms and the emerging talent management approaches they are using to drive performance. In fact, we first identified Amazon’s bar-raiser approach as a best practice in 2005. Nine years later, it is still considered cutting-edge.

My hope is that as this column progresses, you’ll begin to more clearly see the “Hidden Mickey” of talent management and how it will impact your own business or department. The tools are available now, and the best companies are already using them.

Tom Monahan is chief executive and chairman of Rosslyn-based CEB, a member-based advisory company that works with top companies to conduct research and identify best practices. This is the first of what will be a monthly feature on talent management. For more about CEB, go to cebglobal.com.