What if smart people are overrated?

[Louis Proyect <lnp3@xxxxxxxxx>]

The New Yorker, July 22, 2002

THE TALENT MYTH
by MALCOLM GLADWELL
Are smart people overrated?

Five years ago, several executives at McKinsey & Company, America's largest
and most prestigious management-consulting firm, launched what they called
the War for Talent. Thousands of questionnaires were sent to managers
across the country. Eighteen companies were singled out for special
attention, and the consultants spent up to three days at each firm,
interviewing everyone from the C.E.O. down to the human-resources staff.
McKinsey wanted to document how the top-performing companies in America
differed from other firms in the way they handle matters like hiring and
promotion. But, as the consultants sifted through the piles of reports and
questionnaires and interview transcripts, they grew convinced that the
difference between winners and losers was more profound than they had
realized. "We looked at one another and suddenly the light bulb blinked
on," the three consultants who headed the project?Ed Michaels, Helen
Handfield-Jones, and Beth Axelrod?write in their new book, also called "The
War for Talent." The very best companies, they concluded, had leaders who
were obsessed with the talent issue. They recruited ceaselessly, finding
and hiring as many top performers as possible. They singled out and
segregated their stars, rewarding them disproportionately, and pushing them
into ever more senior positions. "Bet on the natural athletes, the ones
with the strongest intrinsic skills," the authors approvingly quote one
senior General Electric executive as saying. "Don't be afraid to promote
stars without specifically relevant experience, seemingly over their
heads." Success in the modern economy, according to Michaels,
Handfield-Jones, and Axelrod, requires "the talent mind-set": the
"deep-seated belief that having better talent at all levels is how you
outperform your competitors."

This "talent mind-set" is the new orthodoxy of American management. It is
the intellectual justification for why such a high premium is placed on
degrees from first-tier business schools, and why the compensation packages
for top executives have become so lavish. In the modern corporation, the
system is considered only as strong as its stars, and, in the past few
years, this message has been preached by consultants and management gurus
all over the world. None, however, have spread the word quite so ardently
as McKinsey, and, of all its clients, one firm took the talent mind-set
closest to heart. It was a company where McKinsey conducted twenty separate
projects, where McKinsey's billings topped ten million dollars a year,
where a McKinsey director regularly attended board meetings, and where the
C.E.O. himself was a former McKinsey partner. The company, of course, was
Enron.

The Enron scandal is now almost a year old. The reputations of Jeffrey
Skilling and Kenneth Lay, the company's two top executives, have been
destroyed. Arthur Andersen, Enron's auditor, has been driven out of
business, and now investigators have turned their attention to Enron's
investment bankers. The one Enron partner that has escaped largely
unscathed is McKinsey, which is odd, given that it essentially created the
blueprint for the Enron culture. Enron was the ultimate "talent" company.
When Skilling started the corporate division known as Enron Capital and
Trade, in 1990, he "decided to bring in a steady stream of the very best
college and M.B.A. graduates he could find to stock the company with
talent," Michaels, Handfield-Jones, and Axelrod tell us. During the
nineties, Enron was bringing in two hundred and fifty newly minted M.B.A.s
a year. "We had these things called Super Saturdays," one former Enron
manager recalls. "I'd interview some of these guys who were fresh out of
Harvard, and these kids could blow me out of the water. They knew things
I'd never heard of." Once at Enron, the top performers were rewarded
inordinately, and promoted without regard for seniority or experience.
Enron was a star system. "The only thing that differentiates Enron from our
competitors is our people, our talent," Lay, Enron's former chairman and
C.E.O., told the McKinsey consultants when they came to the company's
headquarters, in Houston. Or, as another senior Enron executive put it to
Richard Foster, a McKinsey partner who celebrated Enron in his 2001 book,
"Creative Destruction," "We hire very smart people and we pay them more
than they think they are worth."

The management of Enron, in other words, did exactly what the consultants
at McKinsey said that companies ought to do in order to succeed in the
modern economy. It hired and rewarded the very best and the very
brightest?and it is now in bankruptcy. The reasons for its collapse are
complex, needless to say. But what if Enron failed not in spite of its
talent mind-set but because of it? What if smart people are overrated?

full: http://www.newyorker.com/fact/content/?020722fa_fact

Louis Proyect
Marxism mailing list: http://www.marxmail.org



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