Organizational Behaviour

There is no “War for Talent”

Yet again, consulting firms are making their money on a phony war. This time its a re-run of McKinsey’s War for Talent. The Hay group recently published a report on Leadership 2030. They believe that shifting demographics are creating a war for talent among developed countries. As the population ages, Hay group believes that the economy will suffer, and innovation will decline, while the younger populations of the developing world will be dynamic and robust.

This demographic argument makes the assumption that older workers are not innovative or as intellectually “with it” as younger workers. Research suggests that intellectual capability does not being to decline until after retirement. If we continue to use our minds to learn new things, our intellectual capability does not decline significantly while working.

The “war for talent” also assumes that one must “select” or “recruit” for talent. A recent study by Matthew Bidwell, of the University of Pennsylvania, shows that people who are promoted from within the organization had significantly better rates of performance over the first two years and lower rates of voluntary and involuntary exits than those hired from outside the organization. And those hired outside the organization were paid 18% more than those promoted internally.  External hires tended to have higher levels of education and experience.

Bottom line? The “war for talent” is fool’s gold. It looks like you are hiring talent because they look good on paper.  But these external hires cost more, are more likely to leave the organization and perform less well than internal promotions. Funny how consulting and recruiting firms are promoting this “war for talent”, isn’t it?

Instead of hiring external “talent”, managers need to focus on developing technical, interpersonal and leadership talent within the organization. Not only will it cost you less to develop your own talent, it will increase organizational commitment and reduce turnover within your organization. Quit looking for a miracle performer, and get down to the hard work of developing your existing workforce.

Source: Bidwell, Matthew. (Sept 2011). “Paying More to Get Less: The Effects of External Hiring versus Internal Mobility”. Administrative Sciences Quarterly.


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