Talent drives success: Why HR leaders are as important as CEOs | Ram Charan

Why should organizations aim to be talent-driven? “People compete, numbers don’t," says top leadership consultant Ram Charan. His new book, Talent Wins (co-authored with Dominic Barton and Dennis Carey), is a playbook that can lift companies out of outdated, 20th thinking. "Today, and in the past, most companies are paying too much attention to finance, numbers, money; but they forget it’s people who conceive strategy, who execute, who deliver numbers," says Charan. Here he introduces the G3 concept, which turns conventional thinking and business planning on its head. Charan argues that Chief Human Resources Officer (CHRO) should have equal power to the CFO and CEO, and that this team of three should allocate capital and assign talent at the same time—two processes that are usually kept in separate silos. "A great person assigned to a great job may use less funds and create more value," says Charan, as he argues for a more holistic view that deals with people as valuable human capital, "not a pink slip on a Friday afternoon." Ram Charan is the author of Talent Wins: The New Playbook for Putting People First.
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Transcript: In my earlier book, we wrote about a gentleman in GE: he came in early, did evening work, succeeded, and became Vice President of Engineering. He got a bigger job. He began to falter. His boss decided to fire him, but Jack Welch said no. He intervened, he said, “This is a great talent.” He split the job in two; he gave him a portion of it. He succeeded. The other portion was given to another person who retired three years later. The jobs got combined. Later, Welch had retired under Jeff Immelt. This man became the head of total GE R&D.
Deal with people as a resource, not as a pink slip on a Friday afternoon.
The basic idea is that people design strategies. People execute them. People before strategy. People before numbers. People compete; numbers don’t. That was the central idea.
In working in the companies, the talent and the people equation must to be at par or ahead—in terms of timing—with the financial function.
Today, and in the past, most companies are paying too much attention to finance, numbers, money; but they forget it’s people who conceive strategy, who execute, who deliver numbers.
So we are saying the CHROs, the chief human resource people, need to be brought up at the same power, and at the same time both CFO and CHROs need to work as a team with the CEO to drive the corporation’s perpetuity, its long-term health—and the competition is always among leaders and people. Company’s competition comes later.
The G3 concept comes from my observations in a few companies that actually say the company has only two resources: people and money. In most companies they’re in silos and they’re not together.
Assignment of the right people makes a big difference to what money is to be allocated and how to evaluate performance.
So G3 concept is that the CEO and the CFO and the CHRO, the three of them together, really thinking about the future, assigning people and the funds at the same time, seeing the interaction between the two when they’re evaluating monthly, quarterly, annual performance. They should do it together and see: what is the diagnosis? What is the cause?
And together they should see where the competition is going, if the competition’s talent is better or worse. Are they assigned the right way? Are their KPIs and compensation the right way? How does it compare with us? These two functions are relatively politically neutral compared to other functions, and you break the silos between the two of them now.
This is a different way to lead, to create value for customers and to compete more effectively.
Compare that to what we have done: they first allocate capital, they do the numbers, and then later they talk about talent and people assignment. It should be together, and not separate.
In this radically different age of digitization, most of the work is done by talent, and we have three tools. Tool number one is G3: CEO, CHRO, CFO together should be doing the strategic planning because people create a strategy, they should be doing capital allocation, but capital allocation must be done in conjunction with people assignment. A great person assigned to a great job may use less funds and create more value.
And the three people together do the diagnosis and do the re-planning if conditions change. That’s tool number one.