Talent Value vs. Talent Development

Several years ago, top HR leaders gathered to hear the CHRO of one of the most admired companies in the world speak. He and his head of investor relations talked about how they work together to help the investment community understand the financial value and impact of their highly touted talent and succession management system.

Little did the CHRO and his colleague know that they would provide a vivid example of that system, embodied in the role of the head of investor relations.

My colleague Pete Ramstad and I were chatting with the head of investor relations. We commented on how young he was to hold such a high-level position. He said an interesting thing: “Well, it’s true that I’m early in my career, but of course this job is largely developmental for me.”

Pete and I were surprised to hear that such a high-level job was mostly developmental. He said, “In this role, I get experiences with investor groups and with investment communications that will be valuable in my career.

This role demonstrates our leadership bench because someone at my early career stage can take this job. Make no mistake, though. They would never let me mess up the investor relations system. There is a team of long-tenured experts in investor relations that make sure of that, and let me learn on the job without being pressured to perform perfectly.”

How do you define stretch assignments? They are meant to develop leaders, but the word “stretch” usually refers to the performance requirements, not learning. We often assume learning is maximized in difficult assignments that have high performance risk.

My earlier columns note that learning requires reflection, and may require removing some performance pressure. That’s what our head of investor relations was describing — a job where no one would allow him to mess up the system, where a team of seasoned veterans would protect him from big mistakes and allow him to learn.

It may be a mistake to define stretch assignments as those that carry big performance requirements. How to balance development and performance is as old as management itself. You want to create talent experiences that optimize the value of talent, while simultaneously developing them for future positions, but it’s tricky.

You maximize talent value by placing people in positions they know well and perform well, but you maximize talent development by placing people where they don’t know how to perform, but have opportunities to learn.

In earlier columns, I described the idea of return on improved performance (ROIP). In some jobs the difference between good and great performance adds lots of value, but in other jobs, the ROIP curve levels off. Knowing where the difference between good and great is more significant is key to optimizing the ROIP.

In development, the equivalent idea is return on improved mastery (ROIM). It’s like a learning curve, the relationship between time in a role and the mastery that develops. The same role can be highly developmental for some but not for others.

For example, the head of investor relations had a very highly sloped ROIM curve for the young executive, but it had a very flat ROIM curve for the seasoned veterans who supported him. The veterans did not have much to learn and could perform well.

I find that today’s systems are more precise about the performance returns than the development returns, and use roles with a highly sloped — and thus highly risky— ROIP as stretch assignments. This is like teaching people to swim by throwing them in with no life vest. They may learn, but at what risk of performance failures, burnout and stress?

When talent management and business leaders distinguish the development and performance curves, they discover roles like the head of investor relations, with a flat performance curve but a highly sloped development curve.

Those may be hidden gems for optimizing ROIP and ROIM. They also find roles that are flat on learning, but sloped on performance. These roles are essential because they are where you put your masters.

John Boudreau is professor and research director at the University of Southern California’s Marshall School of Business and Center for Effective Organizations, and author of “Retooling HR: Using Proven Business Tools to Make Better Decisions About Talent.” He can be reached at editor@talentmgt.com.