WHEN every business is striving to get ahead of its rivals, sharing the information that gets it there seems self-defeating. Yet persuading companies to pool their knowledge for the betterment of all is the modus operandi of business advisory service the Corporate Executive Board Company (CEB).
CEO Tom Monahan boasts that the insights CEB offers are so powerful that adopting a single piece of advice delivers an average tenfold return on investment. As a result, its services are used by 80% of the FTSE 100 and most large players on the JSE too.
It was originally a research house working on bespoke jobs for individual clients, which had limited application and a limited shelf life. "We knew more about the ballpoint pen market in France than anybody, but nobody else benefited from that," Monahan jokes.
Then one customer said he had a sneaky suspicion he was tackling exactly the same problems his peers in other companies faced, and he would benefit hugely from seeing their statistics and knowing how they found an answer.
"The simple premise it was founded on is that if a head of human resources (HR) is struggling with a problem, it’s likely that hundreds of other HR heads have all been through the same problem. Our real core competency — and I know that’s jargon — is engaging these companies in sharing data and best practices. If someone has a great sales process, we have to make it safe and valuable for them to share it."
CEB then pools the collective knowledge to create research-based management tools that members can use to improve their company. That includes software tools, guidance on best practices and benchmarking reports for the areas of sales, HR, finance, technology, legal issues and compliance.
Every company has ideas about how to do things, and its own examples of what has worked and what has failed. Once they join CEB, they receive that feedback from everyone else, so it is akin to having hundreds of consultants on the books for the price of one.
"Ten thousand companies later, it’s a lot easier to get companies on board than it was 20 years ago when we were trying to get this model started."
Monahan was in South Africa to address a talent measurement seminar organised by its branch in Centurion. The event focused on CEB’s tools for succession management and for identifying high-potential employees, both of which are crucial when a lack of skilled and experienced black managers is a growth inhibitor.
He admires business leaders in South Africa for attempting to plan leadership succession strategies further ahead than average, and for their enthusiasm to accelerate rising talent through the ranks.
Although South Africa faces its own specific challenge of black empowerment, different flavours of skills shortages plague every other country.
The answers are universal. "You have to be great at competing for the best people if the talent pipeline isn’t as robust a you’d like it to be. You have to have a powerful message in the university market so people want to work for you. And you have to assume some responsibility not only for picking the best people but for developing them. I can’t think of any country where a CEO says the universities provide me with a capable pipeline of people and I can sit back and do nothing except allow them into my company."
Talent management is the one thing every company must excel in, he believes. "Every large company on earth has come to the realisation that corporate strategy is talent strategy. Whether you are going into a new market or managing a new product, ultimately your ability to do that depends on getting the right people into the right places."
Fifteen years ago, a global study looked at how major corporations perform in the long term. It found that most stumble at some stage and suffer shrinking sales and profitability. Bad talent choices are usually to blame, Monahan says. This includes poor succession plans, the wrong CEO, a poor management team, or a lack of sales or engineering skills. "Better talent choices at all levels, from the leadership down to the person who greets a customer when they walk into your store, have such power to drive the enterprise. When you make better hiring decisions places are transformed — you get powerful and often close to immediate improvements in the business."
Yet most companies use art to reach such decisions instead of science: "They should apply rigorous analytical depth to a whole host of decisions they currently make through one or two people’s judgments. Bringing science and analytics to talent decisions can help companies spot high-performing new employees who have the power to rise and be leaders."
Every year, about 25% of C-level executives either move on or are replaced, yet it still seems to catch companies out and they are ill-prepared to slot in a suitable replacement. For every 100 executive changes, three will be spectacular failures and another 47 will struggle. "Half the time, when you transition a leader you get a suboptimal performance. Companies always react like it’s never happened before but it’s one of the most regular occurrences. And it’s not managed with science and rigour."
This reminds me that some Microsoft shareholders are baying for founder Bill Gates to step down; should he go? Monahan sidesteps the question nicely, telling me that CEB’s science-based tools to evaluate people are not only about whether they should stay or go. They also uncover the areas in which a person can best develop, what they need to learn, where their gaps lie and what they will excel in.
He has taken CEB’s own tests to confirm he is the right person to head the company and says that if there had been too many negatives, the board would have taken action.
Later, he returns to the Microsoft question, with a diplomatic answer: "The skill sets required for tomorrow are very different from those in place today. My guess is the skills that made Gates and (CEO Steve) Ballmer effective leaders at Microsoft are probably not the skill sets the next generation of Microsoft needs."
Monahan argues that the Edward Snowden scandal, with Snowden blowing the whistle on the US’s spying habits, shows that his hiring process was performed poorly. Proper background checks would have shown that Snowden lacked the ideal technical capability, track record or behavioural profile for the job: "Simply put — for whatever reason, salary, location, assignment, corporate reputation — the right candidate wasn’t available for this role, but Edward Snowden was."
Not every substandard recruitment has such catastrophic consequences, but lower productivity, theft, fraud and damage to the brand or customer experience are common and serious results.
It is equally crucial not just to surround yourself with the best people, but to make sure they function well as a team.
The team must also have a diversity of skills and opinions, he says, because if everyone thinks the same but is driving the company in the wrong direction, it will simply get there faster.