Globalization and the race for top talent have produced many masters of the universe who surround us here on 5th Avenue - now we must decide what to do about them.
Before this great depression:
- anyone who could identify the first ten digit prime value of e while negotiating the 101 freeway was encouraged to visit http://7427466391.com and apply to be a Google engineer.
- ¾ of senior human relations managers thought talent shortages were critically important.
- in a Bangalore office a sign declared "trespassers will be recruited."
- houses were appreciating gold mines, people remortgaged to fund extravagant lifestyles, and this pseudo-virtuous cycle was synchronized around the world
Now:
- the manufacturing sector froths
- the War for Talent is over, the metaphor is dead, there is too much talent, not too little
- too few jobs, too many people looking for those jobs
- unemployment is above 10% in California; in Centro, east of San Diego, the rate is 22.6% which surpasses Great Depression numbers
- societal revolt against top talent: the best and brightest have gotten us into this mess and profited by driving the system to bancruptcy, there was the bete noir scotsman who ran his bank into the ground and received GBP 800,000 in retirement for rest of his life
We realize the war for talent is as fierce as ever and how companies plan and think about this will shape competitiveness for years to come. Companies are shedding average or below-average labor. High flyers are more discontented than they’ve ever been, and one in four will quit during the next year. The demographic trends precipitating the War for Talent are exactly the same and will reassert themselves. Constraining wages is short sighted.
Recent research by the Corporate Leadership Council indicates it is much harder for companies to hire people they want. The real estate situation affects mobility and candidates are intensely reluctant to move.
At the bottom of organizations, there is an increase in disengagement, a "silent strike." At the top discretionary ethic has gone down from 29 to 19 percent over a couple of years, people are demotivated, and that sends a bad message to the second level down. The 401k is disappearing, retirements have been postponed so people can’t move up to the next level, and there is widespread disillusionment. Smart organizations will poach high flyers.
This recession will go on for a while, but for the first time CEOs are beginning to think they’ve reached the bottom. It’s rational to move into the stock market, and interestingly, since 1980, "intangible" assets such as brain power, patents, and know-how have ballooned from 20% to 70% of the value of the Fortune 500, so tacit transactions, judgement, and discretion are in short supply.
Demography is destiny - it’s fixed, and it’s going to determine our lives. The birth dearth in some Western nations will inevitably beget a contraction in the labor force, a huge number of people at the top of companies will retire, and we are going to have to fill those jobs.
The huge decline in corporate loyalty is the result of the tacit social contract dismissal in the 1990s. Corporate re-engineering and downsizing for profit maximization destroyed that contract. Young people are loyal to themselves, their social networks, or their skillsets.
GE has always been a talent warrior, along with the Viacoms, Timberlands, and Capital Ones, but now there are formulas which can segment the market and allow small companies to be more clever than big companies in building a mass market. CEOs of companies have been to business school and have read books about talent and human capital. Cloud computing gives access to amazing amount of computing power. Still the human talent war is pervasive and it's about how you manage it.
Anti-immigration sentiment is rising around the world and the American government has limited H1B visas. The Kennedy – McCain effort to reform immigration laws has collapsed. For the Chinese and Indians, there is a huge retreat to the homeland. China views their diaspora as having been "stored" overseas, and they are now creating science parks, universities, private schooling, cars, and housing to lure them back. The British National Health Service relies heavily on Indian doctors, so that could be an issue for England.
Confronted with restrictions on talent we must think globally, not nationally. Universities must continue to attract highly educated people. The Great Lakes universities are crucial to the Midwest economy. A research center in Akron, OH is now bringing jobs back to a historically "tire" town.
Innovation is going global. 10 years ago everyone wanted to work within a 10 minute radius of Sandhill Road in Silicon Valley. Today Bangalore and Israel make Silicon Valley look slow and backward. Talent is widely dispersed around the world. A great helmsman and leading historian recently opined that the motorcar was invented in the US, but it's future is elsewhere. Denmark is doing great work in batteries, Israel is setting up an infrastructure to charge those batteries, and with Nissan leading, Japan is setting up a consortium to guide the transition.
India and China are re-emerging as the world returns to a more natural, equal state of affairs.
In the global revolt against the best and the brightest, we should be careful of going too far. Top talent is revolutionary. Steve Jobs understood that mini-jukeboxes were a fashion statement as well as an assault on our eardrums.
Venice dominated trade for centuries. This is no fluke - selection and allocation of talent is tantamount to success. In Venice 12 members of the governing council were awarded positions on the basis of academic and entrepreneurial merit. They elected a doge, and rewards and punishments were exacted. If a doge led Venice into an unnecessary war, he was beheaded. The British East India Company led India with the likes of John Stuart Mill for centuries. In the 1830s the biggest export of the United States was beaver pelts, then talented robber barons created companies and extracted rewards. Andrew Carnegie's father was a weaver.
How is it that a tiny country like Israel has sustained itself against a sea of enemies, and Singapore has a higher per capita income than anywhere? NYU was a local school until its president thought “if we recruit the best people, we’ll become a great university." Countries, universities and businesses thrive on top talent.
The internet and globalization may be flattening the world but there are still huge innate differences in ability, and at the far end of the distribution curve, producers are incredibly productive. Top performing programmers are 40% more productive than their peers. Top talent makes the difference in terms of innovation, and in a knowledge economy, entrepreneurial flexibility is essential. Unfortunately the current environment has made that talent increasingly discontented.
During the 1930s Dupont laid off some of its workforce, but it didn’t lay off key people, and the resulting research developed the chemical basis for nylons, radial tires, and the foundation for massive growth.
Winston Churchill addressed the Harvard graduating class in 1940, envisioning that future battles would be battles of the mind. Now centers of innovation beget rising innovation returns. Talent concentrates, driving a rise in inequality but also productivity.
