The Importance of Talent Density

What is talent density? In simple terms, the talent density of an organization is the ratio of its great talent vis-a-vis its adequate talent. The higher the ratio of great talent compared to adequate (or poor) talent, the better the talent density of the organization. The higher the talent density, the more likely it is that the organization would be a great place to work that constantly produces outstanding products, solutions, and services.

The Netflix story:

The concept of talent density has been made popular by Reed Hastings (the founder of Netflix) in ‘No Rules Rules’, a book that he co-authored with Erin Mayer from INSEAD Business School. In his book, Hastings talks about a testing time during the early phase of Netflix when he had to fire one-third of his 120-member workforce due to the internet bubble burst of 2001. He decided to classify his employees based on their performance, creativity, and collaborative approach. He retained the top two-thirds and let go of the bottom 40 employees. While he was worried about the negative effect that the firing of colleagues would have on the retained 80 employees, he was surprised to see his office environment improve drastically over the next few weeks and see the team buzzing with passion, energy, and ideas.

He articulates that when we increase the talent density of a team by eliminating just-adequate-performers, we create an environment of excellence that the talented performers love, which in turn makes them achieve a significant lot more. ?

What makes an employee an adequate talent?

Please note that the segregation of great and adequate talent is not determined by skill levels alone. Adequate employees who bring down the talent density in a team also include:

• Those who always only do just-adequate work and never believe in contributing even an inch more than the bare minimum.
• Those who work hard but don’t possess the ability to prioritize or contextualize as per what their roles require them to do.
• Those who do great work but are constant complainers, pessimists, or propagators of negativity.

The impact of adequate talent on great talent.

An interesting study on this subject was conducted by Prof. Will Felps from the University of New South Wales. He formed multiple teams (of four talented college students each) and assigned each team a management task to complete. The best-performing team would be given a substantial financial reward. The students did not know each other. Without the knowledge of the students, he included an actor each in some of these groups. These actors were paid to act as slackers or pessimists. These actors constantly behaved in negative, complaining, and disinterested ways, right through the task. The study showed that despite having equally good talent in each of the teams, the teams that had the implanted actors performed almost 40% worse than the other teams.?The conclusion was that if a team of great talent has even 1-2 adequate performers, that performance will impact the whole group and bring down the overall performance of the entire team.

Similarly, if top teams in organizations have some adequate talent, there are multiple spin-off effects including a reduction in the quality of group discussions and ideations. The great talent also has to work around the inefficiencies of adequate talent to get things done, there by reducing the speed of completion. If adequate talent permeates the team and gets a free run, then great talents who seek excellence would get frustrated and quit. Hence it is critical that organizations take all possible measures to handle adequate talent and enhance their talent density.

How do we increase talent density in an organization?

While the Netflix model seems to advocate the elimination of adequate talent and ensure hiring of only top talent (by paying top-of-the-market packages), that may not be the only potential formula in a world full of diverse talent and organizational constraints. Very few organizations would have the ability and wherewithal to hire and retain only the topmost quality of talent.

Most organizations would end up performing better if they put in sustained efforts to handle and develop adequate performers in their teams. This is an area where the Human Resources/ Learning and Development teams can play a defining role in ensuring that the organization maximizes Talent Density without going the ‘hire only top talent and fire all the adequate talent’ way. Here are some potential focus areas for organizations that are looking to enhance their talent density:

• Hire Right: The importance of hiring right cannot be emphasized enough. This does not mean that you pay the highest to get the best talent. Hiring right means that the candidate evaluation process has the rigor to ensure that the candidate is a right fit from culture and attitudinal front as well, apart from their skills. Organizations should train their interviewers across all levels until this becomes a consistent evaluation process across all their teams.
• Inculcate a continuous learning culture: Make sure that employees have opportunities to get themselves trained to perform at their best in their current roles. Also, give them well-defined paths and associated learning opportunities to develop themselves for their next roles. An organization that focuses on the continuous development of its employees would naturally have a larger ratio of great talent as employees who yearn for continuous development would only rarely be sabotaging the work culture.
• Reward performance and attitude, not just performance: Most organizations have an R&R plan for top performers, but it is important to connect performance with the right attitude as well. A business head may be overachieving his targets but if he is permeating a negative culture within the team, the repercussions could be serious. Similarly, an employee might be highly gifted, but if she refuses to collaborate with other team members for achieving organizational goals, then she is just an adequate talent. Don’t glorify such talent. Instead, make sure that the right feedback is passed on to them along with developmental opportunities to convert them into positive and performing employees.
• Handle bad attitude. Have tough conversations: Do not shirk away from handling employees who bring in elements of pessimism, negativity, and a cribbing persona to work, even if they are meeting their work targets. Have consistent and tough conversations with them to make sure that they are made aware of how these behavioral aspects are being viewed by the organization. Give them the necessary time and space to change their approach for the better. Put them through relevant behavioral training interventions as necessary.
• ?Don’t be afraid to pull the plug: Despite all the organizational efforts, there could still be some employees who refuse to acknowledge the problems and change their approach. As a last resort, don’t be afraid to pull the plug on such employees as their continuing presence could have an exponentially negative effect on the whole team.

In conclusion:

Organizations need to build a high talent density ratio. A high talent density creates a more positive & motivated workforce and hence leads to accelerated organizational performance. However, talent density cannot be increased by just hiring the best and firing the others, as that may not be a practical option for most organizations. Instead, organizations should focus on hiring right while also making sure that the adequate talent that exists in the organization is given enough awareness and opportunity to become great talents. Finally, in the few cases where these efforts don’t bear fruit, be prepared to have tough conversations and if need be, pull the plug!

Wishing you a happy transformational experience in the talent density space.