Thoughtful Leadership: When The Whole Is a Greater Than The Sum of the Parts

The recent appointment of Satya Nadella as the new chief executive of Microsoft didn’t catch many talent watchers by surprise. Late last year, outgoing CEO Steve Ballmer discretely announced in a meeting with analysts that Microsoft had already found their new leader. Given no major resignations or announcements had been made, other than to end speculation first, over ex-HP head Mark Hurd, and then Ford CEO Alan Mulally shortly before Christmas, the smart money was on an internal appointment.

A lot of money had already changed hands. When Mulally announced that he was staying at Ford and not taking the helm at Microsoft, 1.3% was added to the value of Ford, while simultaneously wiping off 1.13% from Microsoft’s market value. In monetary terms, this amounted to over $4bn worth of value changing hands in one day alone. Similar market dynamics led to Marks & Spencer chief executive Marc Bolland being dubbed the “billion dollar kid” on his announcement as Sir Stuart Rose’s successor.

Depending on where you sit in the talent debate, this level of value attributed to an individual’s capacity to deliver is either a reflection of the market’s efficiency or inefficiency at pricing the value placed on an employee’s head. It is, in my opinion, a sign of how wholly irrational our understanding of talent’s value has become. But then market irrationality is hardly news. For example, how is it Apple’s share price can fall by nine per cent on the news Apple made just $13bn in the last quarter? Let me repeat that: “just” $13bn. And this is still being achieved in a post-Steve Jobs Apple.

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Many would view the vast sums of money changing hands in the markets over leadership speculation at Microsoft as a sign of how investors understand the materiality of talent’s value. I do not see things quite so straightforwardly. In fact, I lean in the opposite direction: if losing one person can represent such a disproportionate impact on the financial value of the company, it is a sign that investors have completely lost the plot, or that companies are not managing their organization quite as well as they might be. Again, these observations might not be news to you.

But many in HR believe in the hidden yet ultimately flawed hand of the market. Not because of the academic logic underpinning market forces: but because at face value it suits them to do so. Leaders might well suffer from hubris, markets might well get a little over-exuberant, but isn’t it nice to be reminded from time to time of the financial value our talent management creates? Two arguments mitigate against such thinking: one is depressing, the other more hopeful.

First, is the depressing assumption known amongst equity analysts as “the warm body thesis”. Simply put, one good person’s leaving represents no more a challenge than finding another suitable person to fill the vacant space: another warm body, with similar talents will soon come along. Yes, it costs money to replace people, and losing people damages momentum which can have deleterious impact on the execution of operations, something everybody in HR needs to be worried about. Interestingly, this takes us into interesting territory in the discussion of attraction and retention in this month’s edition of theHRDIRECTOR Publication.

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A second type of thinking takes me back to Microsoft. As part of the Valuing your Talent project I am currently leading for the Chartered Institutes of Accounting (CIMA), Management (CIM) and Personnel and Development (CIPD), I have been talking to a lot of companies, including Microsoft, about how they capture the value of their talent. As the research continues, what is becoming increasingly significant is not just the talents of our people but the results of their combined efforts. In short, it is not just an individual executive’s talent that contributes to the value-generating capacity of a business, but the sustainability of the architectures these same people build in their companies to enable their smooth operations. The whole, then, is greater than the sum of its parts. Anyone familiar with JP Morgan’s methodology of the same name will know where I am coming from here.

Interestingly, Bullmer and his senior colleagues have spent the last eighteen months talking to a lot of talented individuals in competing businesses about the possibility of their taking the helm at Microsoft. Not only have Microsoft heard from the brightest and best of their competition, but they have now built an unrivalled understanding of what the ‘next big thing’ in the corporate digital ecosystem might be – at least according to their competition. This might be why when talking to analysts last November, Bullmer claimed he knew more about Microsoft’s amazing talent than anyone else on the face of the planet.

So where would you begin when trying to understand the value of your talent? Do you know what you need to attract and what to retain? Answers, please, on an e-card to A.Hesketh@lancaster.ac.uk

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AJH, February 2014