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Guest: Linda Brenner and Tom McGuire, Co-Authors, “Talent Valuation”
Episode: 136
Air Date: December 10, 2015
Linda Brenner and Tom McGuire are Co-Authors of the book “Talent Valuation.”Linda Brenner is founder and CEO of both Designs on Talent, an HR consulting firm, and Skillsify, an HR technology company. Together, the firms deliver talent strategy consulting services, talent acquisition process improvement and talent tools. Prior to starting Designs on Talent in 2004, Brenner led Talent Acquisition and Talent Management teams for Gap, Pepsi, and Home Depot. She brings energy and humor – coupled with a bias for action and high quality results – to a wide range of HR speaking engagements. Brenner holds a Master of Arts degree in Labor and Employment Relations and lives with her family in Atlanta, GA.
With over 30 years of business experience, Tom McGuire specializes in Talent Strategy, Executive Coaching and Talent Acquisition at Designs on Talent. Growing up in the Finance function at Coca-Cola, McGuire eventually led Finance in the company’s German Division, after being involved in the marketing management team, and talent acquisition for all talent in North America. In 1999 McGuire took on the role of managing the development of a market level strategy and integration plan for Peru, following the company’s acquisition of Inca Cola. In 2000, McGuire joined Zyman Marketing Group as Chief Operating Officer. Following Zyman Marketing Group, he formed a consulting venture, Human Capital Formation, LLC, where he provided consulting services that guided the redesign of human resources functions and processes. In 2003, McGuire joined Revlon, Inc., serving as Chief Financial Officer and then as President, Revlon International. McGuire rejoined The Coca-Cola Company in 2007 as Group Director, Global Talent Acquisition, a position he held until joining Designs on Talent in 2013.
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Begin transcript
John Sumser: Good morning, and welcome to HRExaminer Radio. I am your host, John Sumser and we’re coming to you live from beautiful, not quite sunny yet this morning, downtown Occidental, California. Regular listeners will know that Occidental, California is where engineering got it’s real start in California. It’s a tiny mountain village of 1,100 people. It was home to all of all of Leland Stanford’s railroad engineering projects. Today, we’re going to talking with Linda Brenner and Tom McGuire, who are the co-authors of a new book called Talent Valuation. I’m going to ask them to introduce themselves. Linda.
Linda Brenner: Hi, John. So nice to be here. My name’s Linda Brenner. I own Designs on Talent and we are an HR consulting firm with a team of about 20 folks that specializes in talent strategy, and talent acquisition process improvement. I live in lovely Atlanta, Georgia, and prior to starting this business 12 years ago, I worked for the Gap, Pepsi, and Home Depot, in a variety of TA, TM, and operations roles.
Tom McGuire: Hi, John. This is Tom McGuire. I am Linda’s partner in crime, also live in Atlanta. I lead the talent strategy practice at Designs on Talent. Prior to being in this role, I spent about 25 years at the Coca-Cola company in various roles, finance, marketing, and HR. Also, along the way was a CFO at Revlon Consumer Products.
John Sumser: You’ve bounced all over the place. Can’t hold a job? Is that the deal or is it something more like a lot of curiosity?
Tom McGuire: A lot of curiosity, and I was thinking earlier today about the last job I held before joining Designs on Talent, which was leading the global talent acquisition practice at Coke. I held that role for 6 years, which was extremely long for me, because I always like to do something for 3 years, figure it out, and then move onto something else.
John Sumser: What is talent strategy like at Coke? I’m not sure that people outside of Atlanta understand the scope, scale, and aspirations of Coke. What are you do in talent acquisition there?
Tom McGuire: Sure. Coke is a unique company of sorts because of the franchise system. The core company that owns the brand and the secret formula and all that stuff, is about 20,000 people, which is small, but great franchise organization is around 800-900,000. This core company of 20,000 people is spread out across a hundred countries around the world. You don’t have a lot of scale in a lot of countries, but you have to hire top talent. The great thing about Coke, is it’s got a tight strategy. You understand what is critical driving the value of the business. That’s articulated clearly in the strategy. The drill, really is being able to find the absolute talent in the world to place in countries as remote as Nigeria or Angola or Iceland. You have to put a machine in place that can go out and do that. It’s quite a challenge.
John Sumser: Let me poke a little bit, and then we’re going to talk about the book, but you use the phrase that, one I hear a lot, and I never really understand it. That’s the best talent in the world. It seems like in the United States there are about 7 million hiring entities. If each one of those 7 million hiring entities wants the best talent in the world, where do the other 90% work?
Tom McGuire: That’s a good question. It does come down to the terminology best, which I think is unique for any given company. The best talent for me, at Coca-Cola means obviously the best skills and knowledge I can find, but also it has to be the right fit for my culture. Best is, I would say, is unique to any given company. That’s part of the trick of recruiting, is it’s figuring out what that exact profile of talent is that’s going to work best in your company. Best meaning they’re going to produce at a high level, and hopefully you’re going to retain them for an amount of time that makes sense to you.
John Sumser: You guys have written a book. How did you get to the idea of writing a book? What motivated it and how’s it going?
Linda Brenner: I’ll be honest about the motivation. While I was watching Orange is the New Black, season 2, probably for the second time, Tom was doing original research on connecting business value and intellectual capital and talent. I heard about this, of course, because we’ve been working together now for almost 3 years, and we work on a variety of projects. After a certain period of time, I was like, “That sounds cool. What does this mean? Exactly. Connect the dots for me. What is this all about?” When he did, I was like … Keep in mind, I have an undergraduate degree in Hebrew. He broke it down for me, and I said, “This is astonishing. This is what everybody wants. How can we prove the value of HR investment? Period.” I had been working with Pearson Press on a variety of things, and I said, “This is the book we need to publish.” They said, “Awesome.” Then, Tom wrote it and I supported his efforts, and that is how the book came to be.
John Sumser: Great, so tell me the Talent Valuation story. What you said so far sounds like gobblety gook. It’d be nice to understand what you guys [crosstalk 00:07:12].
Tom McGuire: I can lead off on that. Personally, I just became fascinated with the value of companies to start with and where does that value come from. I literally started taking the price of a share of stock of … Honestly I did Coca-Cola, but I did a number of other companies, and multiplied it by the number of shares outstanding and said, “Geez, that’s a lot of money. If I do that for Coca-Cola, I come up with a number that’s $180 Billion.” I just, from a financial perspective, wanted to know what are they paying for?
If I look at the balance sheet of Coke, as an accountant, I can see that there are bottling lines, there’s machinery, equipment, corporate headquarters, a lot of tangible, I can go and touch these assets. Most of the value, I found out at Coke, more than 80% of the value is not a tangible asset. Of course, it’s easy to say, and it’s true that, “There’s brand Coca-Cola.” Duh. It’s the largest asset that that company owns, but it’s not anywhere on the financial statements. There are a number of other big assets, like that a company like Coke owns, and when I looked into that, from an accounting standpoint, we call those intangible assets. That’s a type of intangible asset that’s really intellectual capital, but once I got involved in HR, I understood that the only place any of that intellectual capital can come from, is people.
Then I started saying, “How do I figure out what people create that intellectual capital?” The answer is, and what we came to what we practiced, what is in the book, is it’s through the work that is done to create any particular kinds of intellectual capital. The model holds true for any other company like a [inaudible 00:09:26] Pharmaceutical, different work, different everything, but the bottom line to all that is there are critical roles in organizations that deliver that intellectual capital, which is most of the market value of most companies today, is the fascinating part about it. The talent for those roles is what we really want to focus on making sure is the best.
John Sumser: I don’t think you mean this, but what you’ve just said is when the stock price corrects, you’ve just decreased the value of any HR investment, and that doesn’t like a smart way to argue for anything. Stocks always correct. To take equity as an indicator of HR value means that you have to be willing to make the argument at the top is always the peak. You know what? That’s pretty variable array of value.
Tom McGuire: Yeah, you have to think about how companies … It’s kind of like a boat on the ocean. There are waves, and basically all boats rise and fall with those waves. The market itself does, just like global economics raises and lowers the value of a company at any point in time. Over a period of time, and especially across industries if you look at it that way, values tend to move in tandem. What we try to do is to look at what is the value within an industry. What’s the value of Coca-Cola relative to Pepsi Cola for example? Or to another type of beverage company. They’re going to, the general economics are going to move those values up and down, but inside the industry itself, the proportion of the value that is related to intellectual capital, which his driven by people is what we’re really looking at. You’re right, John. Stocks move up and down, that is not due to the value of people in the business. That’s just the waves of the economy, I would say.
John Sumser: Guys there are a lot of people who’d disagree with you, but this isn’t an economics conversation, so we’ll probably move away from that. Now you’ve got this view that there is a correlation between people value, and stock price. How do you turn that into something that HR can actually use?
Linda Brenner: One effect we have John, that might illuminate some of this is I ran succession planning in big companies prior to starting this business. One thing we did that I think illustrates our view about how it should be done differently, is that succession planning, we looked at all VPs and above. We had long, long conversations about every single person across a fortune 50 company that was VP and above. At the end of the day, and now in this context, it occurs to me that was largely a waste of time I would argue. Because a VP in legal, a VP in finance, a VP versus a VP in merchandising, or a VP in operations are not equal. The fact that they’re all VPs is fantastic and great for them, but in terms of where is value created in say, a retailer, it is not equal among legal, and finance, and operations, and merchandising, and supply chain, and customer service, and HR.
In fact, what we should have been doing in retrospect, because merchants controlled every single thing bought in the stores as an example, we should have been talking about every single one of the 130 people that worked in merchandising. Associated merchants, merchants, senior merchants, district … DMMs, whatever. We should have been talking about every single one of them. That is an example of how some talents in a particular company, any company is absolutely essential to building enterprise value. Whereas, all jobs are important, all people are important, the job wouldn’t exist, there wouldn’t be a headcount or a FTE if it wasn’t important. They’re all important. Our perspective, which is counter cultural in some environments, is that only some jobs are critical, and we have to use the financials to tell the story to allow the conversation to identify what are those jobs.
John Sumser: Wow, you deal with people who think that all jobs are equally important?
Linda Brenner: We shockingly, no I’m not going to say shockingly, because this is the norm in America. You would be hard pressed to find a company that doesn’t do this, that doesn’t spread their HR resources as thinly, and as evenly as possible, in a misguided I believe goal of parity, of equity. Every rec is treated the same. Our compensation philosophy to be 60% of market value is the same pretty much for everybody. The ranges are different.
Performance management. Yahoo!, HP, saying all the sudden absolutely no one can work virtually. That’s what we mean when we say … There’s an old industrial model …
John Sumser: What you’re really talking about is the challenge with companies that try to have single policies as a way of lubricating the organization. Across the board policies don’t work very well is what you’re saying. What’s the answer? What’s the procedural answer because frankly, you can’t in some critical tubs, talk about everybody in the department. You have to draw some line somewhere. How do you do that?
Tom McGuire: You do have to. You have to do the work to identify the critical roles in an organization, and again, we do that by saying what’s the intellectual capital value of an organization? What is the proportion of intangible value of a company, and what makes up those components, and actually, what … Just backing up briefly, when we talk about the value of a company, we’re really talking about what drives cash flow, because that obviously is how we determine the value of a company ultimately. We look at that intellectual capital, and it is typically what a company talks to their investors about, because that’s how they’re trying to drive investment in the company. We identify the work that is done to create that brand, and sustain that brand, or that patent, or that technology. We literally examine the work that is done to create that asset, and we overlay organizations on it in order to be able to say, “That role, and that role, and that role are absolutely critical to driving the value of that asset.” Those are the roles that we believe we have to over invest in talent for.
John Sumser: You’ve got a strategy for identifying a group of people who are related to, but different from the high performing, high potential crowd. It’s like there’s a third variable.
Linda Brenner: Yes.
John Sumser: High performing, high potential, high value. You could imagine there’s a three sided thing. How do you go about paying attention to … The dynamic that’s the most interesting part of talent acquisition, which is that in our universe, the job’s never the same job. The job is always a reflection of the person occupying the job. Every bit of talent acquisition involves a prediction about how the person who takes the job is going to modify it. Everybody in the categories that you’re talking about is always concerned about the balance between what the company has been doing, and the reason that they’re on the job. Or the reason that they’re on the job is to bring value, and bringing value means not doing the job that you were hired to do. Or not doing it the way it was done before you. How do you make interesting predictions about that if the value of a particular slot or department is so important?
Linda Brenner: You mean in selecting the individual that’s going to be in the critical role?
John Sumser: In selecting individuals, yeah. Yeah, because if you’re saying this is not just a performance measurement, and it’s not just an estimate of potential, but this is a trusted asset that you’re handing out for management purposes, but the crap shoot is always you can’t tell what that person’s actually going to do in the job. You can’t predict that significance. Then the case that you’re making suggests that you need to be better at predicting that stuff. I’m interested in how and what you think about that.
Linda Brenner: I know I’d say there’s a long tale and then Tom finish up to add to what I’m about to say is our construct is this notion of over investing in the finding, attracting, selecting, and retention of critical roles. If that’s the construct, we got to over invest. We’re putting, the company’s putting their chips in new product development. We need engineers, architects, developers, let’s just say, for some fictitious company. The way in which we find, select, and retain those people has got to be fundamentally different we believe.
If you want to slice the assessment piece, we can do that. We would invest more in more robust predictive, perhaps assessments for key roles. Or you might say, “This talent is so hot, they’re not going to stand for that. They don’t have any patience for that.” The assessment piece is a critical discussion, and ultimately we’ve got to measure not just the traditional TA metric. When we hear a lot of people talk about quality of hire, do they stay in the role for 90 days? We have to measure who after two years is still in the job, or still with the company, and is a top performer.
Then go back all the way, not just to the assessment, but where did we find them from? What characteristics did they have prior to joining our company that we believe we could start to see a pattern in people that worked at a CPG company that had operations and finance do best in our operations roles. All the way back to the employment branding, which we have a very, very particular point of view on. People can screen themselves in and out. Assessment is a key component of that as well.
Tom McGuire: Yeah, and just to build on, I think those are some of the tools definitely to help be able to find that talent, identify and find the talent. John, also I think to your question for me gets back to definition of best talent because to get someone to go into a role and to make that role or the productivity of that role better than it was before, to take it beyond status quo … Obviously you find that person first of all that’s got the skills, knowledge, and ability.
For me that would say they’ve got the brain power to do the job. It’s going to boil down to the cultural fit for the organization. What does it take in a person to be able to operate above and beyond the norm, or what’s expected in that position? That’s going to be fitting in with the culture. Are they the kind of person that will work well with other teams in that company? Can they do the things within that culture that would be required for a “smart person” to take that job to a different level? For me, it really boils down to fit to answer that question.
John Sumser: Maybe the last question is how do you go about figuring who fits and who doesn’t fit? That would be the pivot point of your work I think. Why do you value talent, and value the slot that the talent goes into? It’s a way of understanding fit I think. What are the mechanics of fit?
Tom McGuire: I think first of all, we’re focused on describing the company in terms of what it’s value proposition is to a candidate. We know that top talent, or at least we believe top talent for any role in our organization thinks of themselves effectively in this world of intellectual capital as an investor. We want to match up the investment that we are offering an employee of a top talent with the investment needs of that person. We will go out and look for the talent who obviously can do the job, but who is a great match. We have to describe ourselves. We have to market ourselves in a way that’s relevant to the talent and understand that talent’s drive or choice, which is what we’re focused on doing.
Linda Brenner: Another thing I’d add too, John is … Oh, go ahead.
John Sumser: Is what you guys, is what you’re saying that the architecture of the employment brand needs to reflect the way that value is actually created in the company? Is that the message here? You design the employment brand around the most important people that you’re trying to reach rather than some generic thing for reaching every one of the 20,000 people at Coke, say.
Tom McGuire: Absolutely.
John Sumser: Is that message here?
Linda Brenner: Yes, you got there quicker than many. Yes, that’s the bullseye. Yeah, it’s not going to repel anybody that’s not in that bullseye, but it is bullseye target on engineers [inaudible 00:25:29] or scientists for [inaudible 00:25:31], or brand managers at Coke. Yes.
John Sumser: That’s a really interesting idea. That’s a really interesting idea. I wouldn’t have gotten that without the conversation. The notion that the way that you manage the program to have an employment brand is driven by your view of where value lies in the organization, and that you can do that in a quantitative way. That’s the case that you’re making, yes?
Tom McGuire: Yeah, bingo.
Linda Brenner: Yes. I’d say the other element here that even comes before that, and the most important work we’re doing with some companies is with the senior leaders, reflecting back to them what they’re telling investors and facilitating a conversation that is data based to help them identify these critical roles. Because obviously you can’t target the employment branch of critical roles if the identification of those roles hasn’t happened yet. To facilitate a conversation with a senior team where some of them are debating it’s sales, some of them are debating it’s the product, some of them are debating it’s supply chain, and to get them to agree on not only most critical functions, but within the top function, the most critical roles really paves the way for all this work.
John Sumser: I’m going to do something I don’t really usually do here, and ask another another [inaudible 00:27:02] kind of question at the end here. That is, every organization that I’ve ever been a part of has fundamental disagreements on what the most important organizations are. There are often multiple organizations who are absolutely certain that they are the most important value creation engines in the company, and they each have sound arguments. They’re centered on the needs of that particular function, but there are many sound arguments, and it is generally impossible to resolve that conflict, because it’s the five blind wise men, and the elephant conflict. Everybody’s got their piece. They think it’s the center of the universe. Do you have a method for reconciling that particular kind of conflicts so that you can have a meeting with people who think they’re the most important in the room, and your meeting is all about the fact that they’re not?
Tom McGuire: Yes.
John Sumser: I realize that seems like the execution problem here.
Tom McGuire: That’s the perfect question, and the answer’s yes, we do. One of the services that we have begun executing and offering to clients is, what we find is absolutely imperative is literally getting the CEO and the C-suite in one room and we prepare ourselves coming in with an understanding of the value of the company, how it’s created, which they know better than us, of course. We facilitate them because of our knowledge of talent of making those connections, and having the conversation of you guys decide. We facilitate the conversation to the subject of what is the work that’s done to create that value of your company, which you guys are very aware of, and that’s the only way that I think that can be done, and it works very well because what you said is exactly right, John.
When you get the CEO and the direct reports, or the C-suite in a room, and they have to rate and rank roles in an organization based on the value of their company, which again, they understand. You’ll get a different answer if you ask them that question and give them 30 seconds than you will if you ask them that question and work for 30 minutes on it. They always come to the right place is my experience.
John Sumser: That’s interesting. That would be the opposite of theory but that’s different.
Linda Brenner: That’s a very different conversation than what I have been a part of the in the past, which is we all, all the executives sit in a room and we talk about who’s a high po. It’s completely untethered from how value’s created, and what’s our business plan for growth. That’s the big difference, John.
John Sumser: Got it. This is a really interesting idea. I hope that you get some traction with it. Do you want to walk away from this conversation with a couple of closing points that you want people to remember?
Linda Brenner: Yeah, I think it is time for a dramatic change in the way we approach HR initiatives and investments, and how we measure the return on those. Which many of us in the past have said could not be done. It not only can be done, it is essential for the survival of many, many businesses today. What we do is help HR leaders and senior leaders identify the value of the business, critical roles, and how to over invest and hiring and keeping them.
Tom McGuire: I see, because I look for it, but I think everyone sees and will see the discussion about intellectual capital value in the press, just in the general business press. It’s an opportunity for HR to grasp onto that. Because it really is the answer to the challenges in this space are in the wheelhouse of HR, and I think the more that we can grasp onto that, and bring our expertise around people to the table, then what’s going to raise the value of the HR profession in general?
John Sumser: That’s an interesting idea. Thanks for doing this. Would you both take a moment and reintroduce yourselves, and let people know how to get ahold of you?
Linda Brenner: Definitely. Linda Brenner with Designs on Talent, and I can be reached at linda@designsontalent.com. Thank you, John.
Tom McGuire: This is Tom McGuire at Designs on Talent, and I can be reached at tom@designsontalent.com and also thank you very much for having us this morning, John.
John Sumser: Oh, you’re very welcome. It was a lively conversation. I appreciate the pushing good ideas around. That’s what the audience checks in for. We’ve been talking with Linda Brenner and Tom McGuire who are the co-authors of the new book called Talent Valuation, which traces value creation to people, and then provides a frame work for thinking about how to invest in the hiring and development process. It’s been a great conversation. Thank you both for being here.
Linda Brenner: Thank you, John.
John Sumser: You’ve been listening to HRExaminer Radio. I’m your host John Sumser. It’s been great to have you. I hope you have a great weekend. We’re getting the rain we need in California. Thanks again Linda and Tom.
Tom McGuire: Thank you.
End transcript