Malcolm Gladwell’s Talent Myth was described in his book, What the Dog Saw: and other adventures. This blog makes reference to the book’s chapter titled ″The Talent Myth: are smart people overrated?″ In this chapter, Gladwell does an excellent job presenting observations about Enron´s culture that apparently contributed to the company’s downfall around the turn of this century.
Statements that Gladwell made about Enron in his book will initially be presented, followed by an approach designed to overcome the described talent-myth problem. It should be highlighted that Gladwell’s talent myth issue still frequently occurs in companies, though typically to a lesser extent than it did in Enron.
Malcolm Gladwell´s Talent Myth
The following talent myth statements were made in Malcolm Gladwell´s book, What the Dog Saw:
- ″This ´talent mind-set´ is the new orthodoxy of American management… 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… The company, of course, was Enron.″
- ″Enron was the ultimate ´talent´ company …. ´The only thing that differentiates Enron from our competitors is our people, our talent´ Lay, Enron´s former chairman and CEO, told the McKinsey consultants … But what if Enron failed not in spite of its talent mind-set but because of it? What if smart people are overrated? ″
- ″A Company’s business is supposed to be shaped in the direction that its managers find most profitable. But at Enron the needs of the customers and the shareholders were secondary to the needs of its stars.″
- ″Enron was the Narcissistic Corporation – a company that took more credit for success than was legitimate, that did not acknowledge responsibility for its failures, that shrewdly sold the rest of us on its genius, and that substituted self-nomination for disciplined management.″
- ″The broader failing of McKinsey and its acolytes at Enron is their assumption that an organization’s intelligence is simply a function of the intelligence of its employees. They believe in stars, because they don’t believe in systems.″
- ″The talent myth assumes that people make organizations smart. More often than not, it´s the other way around… There is ample evidence of this principle among America´s most successful companies.″ The book mentions several companies that fall into the category of successful companies who did not have the talent myth issue. The companies mentioned were Southwest Airlines, Wal-Mart, and Procter &Gamble.
Companies may not have a culture where they seeking out stars throughout their organization as aggressively as Enron did; however, often organizations still promote or seek stars to lead their company, which can lead to undesirable results.
The statement that Gladwell made relative to stars not believing in systems could make one wonder about a star-seeking approach in general. In the book, How the Mighty Fall, Jim Collins describes how companies can become arrogant when they are successful and then later have a downturn because of this arrogance. When this occurs, the company then typically hires a new CEO (i.e., a star belief) to turn things around, which more often than not is unsuccessful. The reason for this lack of success is that in order for a company to truly turn around it needs to change its systems and policies; however, to reiterate: Gladwell makes the point that stars don’t believe in systems. Changing systems is not trivial, but with a new CEO this effort is often not what they are thinking of as part of a turn-around effort.
As noted earlier, Southwest Airlines, Wal-Mart, and Procter &Gamble were highlighted in Gladwell’s book as having long-term success with their systems. The question that will next be addressed is how organizations can create a long-lasting system that is not so dependent on the beliefs of a few talented leaders in an organization.
For organizations to avoid Malcolm Gladwell’s talent myth issue, focus needs to be given to the creation of an organizational orchestration system where decisions and the execution/improvement of processes are not dependent on highly talented people at the top and throughout the business. Companies can accomplish this objective when they create a systems thinking organization.
Malcolm Gladwell’s Talent Myth
With systems thinking, Y=f(x) is an important relationship that everyone in an organization needs to understand and appreciate.
That is, the output of a process is a function of the process´ inputs and its steps. With an understanding of this simple relationship one should appreciate that if a process’ response is not satisfactory, either process´ inputs or the process itself needs enhancement.
However, organizations often attempt to manage to the Ys of a process. When this is done, goals can be established for all functions, where each function is tracked against its objective. The monitoring of functional performance against these objectives could be presented periodically in a table of numbers, a stop-light scorecard where green indicates success in meeting a goal and red suggests that objectives are not being met and action needs to be taken. These approaches or a similar monitoring technique may initially appear to be a sound approach; however, there are some fundamental problems with these methodologies.
The issue with this traditional goal setting format and a meet-the-numbers-or-else management style is that this form of running a business can lead to firefighting and playing games with the numbers. This management style does not encourage system thinking where there is a basic understanding that improvement efforts need to be undertaken when the numbers are not satisfactory.
For an organizational system-thinking approach to enterprise management, the following three items should be addressed:
1. Tracking and reporting performance metrics from a system point of view
The common-place performance reporting methodology of a table of numbers, a stoplight scorecards, or stacked bar charts does not have a system perspective for organizational management. To address this issue, organizations benefit when they transition to a predictive performance 30,000-foot-level predictive performance reporting methodology. Ten illustrations of transitioning traditional business scorecards or dashboards to this form of reporting are referenced in the article Predictive Performance Reporting.
2. Reporting functional metrics so that they are in alignment with the processes that created them
Organizations may have those responsible for scorecards in the north wing of the building and those involved with process documentation and improvement in the south wing of the building, where the two functions don’t communicate with each other. With an organizational Y=f(X) understanding, it is important to increase the communication between these two organizational functions. This effort can be physically achieved using an Integrated Enterprise Excellence (IEE) value chain. Predictive Performance metrics in an IEE value chain can be automatically updated using Enterprise Performance Reporting System (EPRS) software so that executives and others can see through a click of the mouse how performance metrics are performing and the current processes that are being used to create those metrics.
3. Using a system that orchestrates the enterprise.
Organizations often try to align their efforts to strategic statements made by talented executives; however, often these statements are worded as if we want to be the best of the best. Traditional strategic statements are often hard to get one’s arms around and don’t address normal operation. Organizations benefit when they follow the structure of the Integrated Enterprise Excellence (IEE) business management system, which among other things aligns predictive metrics with analytically/innovatively determined targeted strategies, leading to improvement efforts so that the business as a whole benefits. Decisions within IEE are based upon data and team assessment, not a few talented people at the top of the organization making gut decisions.
Summary
All the pieces in What the Dog Saw came from pages in The New Yorker, where Gladwell has been a staff writer since 1996. ″The Talent Myth″ chapter was published as part of this magazine in July 22, 2002; hence, some of the following statements are dated.
Gladwell stated in What the Dog Saw, ″The reputations of Jeffrey Skilling and Kenneth Lay, the company’s (Enron’s) two top executives, have been destroyed.″ In addition he states, ″Arthur Andersen, Enron’s auditor, has been all but driven out of business, and now investigators have turned their attention to Enron´s investment bankers.″
Gladwell also points out that ″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.″
It is now almost 12 years since Gladwell’s initial article appeared in The New Yorker, and it seems like businesses are still trying to be a ″talent″ company, like Enron strived to achieve! There seems to be little change in the business system and its associated arbitrary goal-setting objective that is involved with this form of thinking. When monetary gains are attached to the achievement of performance goals, even greater problems and risk taking can result; e.g., the financial crisis of 2008.
What organizations need is a new, enhanced business management system that leads to the 3Rs of business; i.e., everyone doing the Right things, and doing them Right, at the Right time. Integrated Enterprise Excellence (IEE) is an enhanced business management system that addresses these needs. The IEE methodology is well documented in a series of Integrated Enterprise Excellence books.
Questions about the application details of the IEE system, predictive performance reporting, and/or other related topics can be made to +1 512.918.0280 or [email protected].