Grow Your People, Grow Your Profit
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“If you're not learning and growing, you're dying. If you've got a whole bunch of folks, performing at an A level, it is probably time to raise the bar. Challenge them to do more, be more, achieve more.”
— Mike Goldman
Talent Density Framework
Focuses on improving talent strength within an organization.
Prioritizes highly productive individuals over mediocre performers.
Emphasizes the importance of talent in strategy execution and profitability.
Productivity
Requires accurate measures, not just based on work hours.
Includes specific productivity indicators and culture fit.
Culture fit and productivity should be aligned.
Core Values & Clear Measures of Performance
Establish three to six measurable core values.
Assess individual alignment with these values.
Use these assessments in performance evaluations.
Quarterly Talent Assessment Meeting
Evaluates productivity and culture fit of employees.
Opens discussions and actions for different performance levels.
Commits to strategies for talent improvement.
Leadership Accountability
Leaders are responsible for increasing talent density.
Regular one-on-one feedback and accountability meetings.
Encourage continuous improvement in performance.
Talent Density Indicator
Measures high performers minus low performers.
Ranges from +100% to -100%.
Used as a benchmark to set improvement goals.
Caution Using Labels
Describe performance levels instead of labeling individuals.
Emphasizes performance improvement and leadership responsibility.
Focuses on continuous development and avoids complacency.
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Grow your talent. You grow your profit, grow your talent, grow your profit. I feel like on this episode, I just want to say that over and over again, about a thousand times, although you'd probably cut me off after about four or five, but I am on a mission, a mission to help people understand what I call the talent density framework, a mission to help leaders understand what it is that truly drives revenue growth and profit growth.
And in my 35 years working with leaders, I think very few actually get it. It's too easy to believe that the way we're going to grow is we're going to come up with some great new strategy or we've got to get better at execution. Or we need to better understand our competition or we need to attack a brand new market.
We need to create a new product. We need to create a new service. All that's true. Those are ways to improve top and bottom line growth. But all those miss the key point. They miss the most direct way, the most important way, the most sustainable way to drive top and bottom line growth. And that's to grow your talent.
The number one driver of profit growth is talent growth. And the framework that I have pulled together, I've been working with my clients for over 10 years on this is called talent density. The talent density framework, talent density is a framework for improving the strength of talent within your organization, the talent density indicator is a way to measure that talent.
A key performance indicator for measuring talent. Now why does that matter? Why do I believe it's the number one driver of profit? Well, a few things. Well, one is just logic. And there's a great philosophy. from a gentleman named Kip Tindell, who was one of the founders of the Container Store, or the founder of the Container Store, was CEO for a number of years, I think up until somewhere in the 2000 teens.
And he had a great philosophy about people. He writes about it in his book, Uncontainable, which is a really good book. And he calls it 1 equals 3. 1 equals 3 says, 1 superstar performer equals the productivity of three mediocre performers. One superstar performer equals the productivity of three mediocre performers.
You've probably all seen that if you lead other people. In fact, there are certain positions within an organization. Where I think it's more like 1 equals 5 or 1 equals 10. Think about someone on your leadership team, on your executive team. I don't think it's 1 equals 3. If you've got a great CEO or CFO or COO or VP of sales, I think they're 5 or 10 times more productive just because of the sheer impact they have and because of the number of people.
That they impact as you cascade down through the organization. I've seen the best sales people are probably 5x mediocre sales people. The best programmers are 5 or 10x mediocre people.
So, it's just logic. 1 equals 3 is a nice way to say it, but your superstars are way more productive than your mediocre performers. And then it's not a big leap to say, if your people are more productive, you're going to grow top line, you're going to grow bottom line. And by the way, if you have mediocre folks, I don't care how good your strategy is.
I don't care how good your product is or your plans of attacking some new market. If your people are mediocre, you're not going to be able to execute on that. Meanwhile, if you have a mediocre strategy, but great people you'll find a way through that mediocre strategy or more likely those people who help build a better strategy, a stronger strategy.
So we don't need a big 1200 person study to tell us what we know logically is that if we have more talented folks, we're going to be more profitable but right? We don't need a study, but of course I've got one. Why not? There are some skeptics out there. If you're skeptical, I've got the study for you.
Boston Consulting Group studied over 1200 leaders. And they assess these leaders, or actually the leaders assess themselves on how strongly their leadership and talent development processes were. And the folks that scored highest, and BCG called them the talent magnets. The talent magnets grew revenue 2.2 times greater and grew profits 1.5 times greater than the talent laggers, the folks that scored themselves lowest on 20 questions that had to do with leadership and talent development. What other strategy? It's gonna multiply your revenue 2.2 times in your profit 1.5 times. You want to grow the top and bottom line, you got to grow your people, you got to grow your talent.
Now, the phrase most companies use for their talent management, talent development processes is performance management. It's where they are setting goals and holding people accountable for achieving those goals. They're doing those annual performance reviews. Don't get me started on those. I did a whole other podcast on why we need to dump annual performance reviews, but you know, all those things, coaching, development, training, all those things are part of.
What they call their performance management process. Well, the Mercer Group, very prestigious
HR consulting firm back in 2019 did something they called their global performance management study. And they found that only 2 percent of leaders believe their performance management processes resulted in exceptional value.
Two percent. Now if we believe one equals three, if we believe if you grow your talent, you grow your profit, if we believe the BCG study, then the fact that only two percent of leaders believe their performance management processes are adding real value, that should scare the crap out of us. Now, maybe you believe you're better than that and that's great, but we need a better way.
We need a better framework. Now, before I share that framework with you, I want to talk about what I've seen and why I think those performance management tools and processes are not working. Number one, most companies I see, have inadequate or no measures of individual and team performance. Sure, they're measuring revenue and gross margin and net profit.
But, when it comes down to measuring an individual, and say, what does productivity mean? What's the measure of success? For that marketing analyst, for that HR manager.
For that logistics director. How are we measuring success? Do we measure success of marketing by saying, well, our website looks beautiful. The new logo looks great. The text on the new email campaign. That's amazing. We've got more hits to our website. Or should we be measuring marketing On marketing qualified leads that get handed off to sales.
How are we measuring recruiting? Are we measuring it by the number of people they hire and how fast they hire them? Well, that sounds like a measure of quantity, not quality. Should we be measuring them on the number of, "A players" that they hire?
There are certain roles within the organization, like sales, where of course you're going to measure, you know, new clients or new revenue or like accounts receivable where you may measure days outstanding, but for too many roles within the organization and functions within the organization, we do not have clear measures of success.
That's reason number one why I think our performance management systems are not very good. Reason number two is we have not trained our leaders on how to do the right job coaching and developing their people. Most leaders don't know how to be coaches. They don't know the difference between holding someone accountable and coaching someone.
They don't understand that coaching is asking the right questions to help your direct report or whoever you're coaching come up with the right answer for them. It's not just giving them advice and training them to just come back to you whenever they have a problem. So, our leaders are not very good at coaching and development.
The third thing is we don't hold our leaders accountable for coaching and development. We don't hold our leaders accountable for improving talent density, for improving the strength of their talent. We might hold them accountable for sales or margin or inventory turns, but are we holding them accountable for strengthening the talent of their organization?
And lastly, this kind of ties to accountability is there's no clear overall measure of the strength of talent. How can we hold our leaders accountable for strengthening talent when we can't measure it when we say, how are you doing on talent? Ah, pretty good. So there are some real basic reasons why our performance management systems kind of suck.
Better So I'm going to share with you. On this podcast, I want to share with you a framework, a framework that starts with having clear measures of performance.
I believe there are at the basic level, there are two types of measures of performance or two axes we ought to be looking at when we're measuring somebody's performance.
Number one is productivity. And that's the obvious one, right? We should be measuring productivity at the end of the day or the end of the week or the end of the quarter.
How do we know that marketing analyst was successful? Now the problem is the way most leaders measure productivity, although none of them would admit to this, is they measure it based on how long or how hard someone is working.
That's not a measure of productivity. That's not about achieving something. That's just working long or working hard. I can remember years ago, working at a company where my boss was always in on the weekend. I would come in every once a while on a weekend just to show my face because if I wasn't there, I know my boss would think I'm not working hard enough.
This has become even more obvious post COVID when a lot of us are working in a remote or a hybrid workplace. Well, you know what? We can't see what people are doing every day. We don't know if they're working long or working hard. I was talking to one of my client CEOs, just a few weeks ago, who was angry that on a Friday when they had one of their remote days, if he couldn't get in touch with someone, he believed they weren't dedicated, they weren't working hard.
Now is that the best measure of whether someone is productive. Are they there when you call them? How long is their day? Did they, you know, did they take some flexibility and go see their kid's soccer game or not? Like, how are we measuring productivity? And if all we're doing is measuring it based on how hard and how long someone is working, A, that's just the wrong way to measure it, and B, we can't do that in a remote or a hybrid environment.
So we need to come up with the right measures of success and expectations for that measure. The number of marketing qualified leads per week might be a measure for someone in marketing. So we need to measure productivity. And then even more importantly... We need to measure culture fit. Now, measuring and culture sound like they don't go together.
And it is fairly difficult to measure culture fit. But one of the things I do with my clients, and this isn't the only way to do it, but it's a powerful way to do it, is I work with my clients to come up with three, four, five, core values, core values are not things that look nice on a website. They're not flowery words or phrases.
Core values are the three to five or three to six behaviors, non negotiable behaviors that are what kind of boils up from what's most noble, what's most right, what's best about your organization, three to five, three to six non negotiable behaviors. And for each one of those behaviors, I have my clients actually measure people on are they living that behavior at such a high level that they're a model for the rest of the organization?
Are they just living it consistently? Are they occasionally having trouble with that core value? Are they frequently having trouble with that core value? And if you look at those scores across your three, five, six core values, they actually come up with a score. And I have, for productivity and for culture fit, a very specific set of guidelines I use with my clients so they can come up with scores on a scale of zero to ten productivity, zero to ten culture fit.
And as a result of both of those scores, we know whether someone is performing at an A level, a B level, a C level, or what I call a toxic C level. So in this talent density framework, the first step is to have clear measures of performance, both productivity and culture fit. That's step one. Number two is something I call the quarterly talent assessment meeting.
Now there is a whole other podcast you could listen to called the quarterly talent assessment. Listen to that. It'll dive into more detail on this piece because I did that episode. I'm going to keep this up at a little bit of a higher level, but the quarterly talent assessment meeting is where you get your team together.
So if you're the CEO, this would be your leadership team. If you are the head of marketing, you would be part of that leadership team in the meeting and you would also do this with your marketing team. In this meeting, you are bringing your evaluations quarterly for all of your direct reports. What's their productivity score?
What's their culture fit score? Where do they fit on this model of ABC toxic C?
The purpose of this is not just to say, here are my high performers, here are my low performers. The reason to do this as a team, and if you listen to that podcast, you'll hear it's a process where each member of that team gets up and puts with a post it note on a flip chart.
They're putting each person and their scores up on the flip chart for the rest of the team to see. The reason to do that in a meeting is it becomes the truth serum. It separates the easy scorers from the harder scorers. It allows you, if someone says, well, Joe is a nine in productivity and a nine in culture fit.
Therefore, you know, I believe he's an A player. It allows the rest of the team to go, wait a minute, wait a minute. Joe hasn't hit a sales goal in two years. How are you giving him a nine in productivity?
You know, Raj is a ten in productivity and an eight in culture fit. It allows the team to say, wait a minute. I heard Raj in the hallway cursing out the customer service team again yesterday. How is he an 8 in culture fit?
So it becomes the truth serum. You debate in that meeting. You discuss. You come up with actions. Actions for your folks performing at an A level, B level, C level, toxic C level. It allows the leaders to commit to actions, which may be things like re recruiting an A player, challenging an A player. It might be, you know, what are you going to do to take someone performing at a B level and boost them up to an A level.
It could be deciding whether you're going to coach or cut the cord on one of your underperformers performing at a C or a toxic C level. But doing that as a team not only challenges you to be honest about your assessment and the actions, but it then allows you to hold each other accountable for those actions for improving your talent density.
So the first part of the framework was having clear measures of success. The second one was this thing I call the quarterly talent assessment meeting. The third is
leadership accountability, accountability for taking action on those things you commit to in the quarterly talent assessment meeting.
Accountability for increasing your talent density. And in the next and last part of the framework I'll talk about a measure for that accountability for raising the bar. If you get to the point that you have your quarterly talent assessment meeting and you've got 80, 90 percent of your people are performing at an A level, that sounds great and it is going to feel pretty good if you get there.
But if you're not learning and growing, you're dying. If you've got a whole bunch of folks, most of your folks performing at an A level, it is probably time to raise the bar. Challenge them to do more, be more, achieve more. And that may drop folks down to the B category. But that's okay. You've got to consistently raise the bar.
So we need to hold leaders accountable for not just saying, Oh, thank God he's an A player. I don't have to worry about him. No, raise the bar. I've seen more A players leave out of boredom than anything else.
Lastly, within leadership accountability is having one on one meetings, holding your leaders accountable for having one on one meetings with their direct reports. I did a whole other podcast on one on one meeting, one on one meetings called let's dump the annual performance review. So again, I'm not going to go into a ton of detail here, but I hear leaders complain all the time.
I'm in too many meetings. I don't have to do one on one. If I need somebody, I talk to them. You know, we see each other in our boring weekly status meeting. I don't need another meeting.
The one on one meeting with your direct reports, and I believe that should happen at least once every other week, if not once a week, once a week is best. And I believe there are two different types of one on ones. One is what I call the feedback and accountability session. That's a one on one where you are holding the individual accountable for what they committed to do, where you're giving them feedback on performance and or behavior, tips and techniques to move things forward, to improve, getting commitments on what they're going to do before you meet with them next.
And then the second type of one on one is a coaching meeting where instead of you driving accountability and feedback, it's your direct report driving the agenda. They're coming to you with something they need coaching on.
If you believe you don't have time to have productive one on one conversations once a week or once every other week with your direct reports, you should not have any direct reports. Period. That is a critical meeting. That's where a lot of the most important talent development happens. So number one, clear measures of performance.
Number two in the framework, the quarterly talent assessment meeting. Number three is leadership accountability.
And number four is having that clear overall measure of success called talent density, or I like to call it, the talent density indicator, the talent density indicator is a very simple calculation.
Simple only because it assumes you've done all of this other work to assess your talent in the right way. And the talent assessment calculation is your percent superstars, your percent high performers minus your percent low performers. If you listen to that quarterly talent assessment podcast where I get into the depths of people performing at an A level B level, C level, toxic C level, that calculation is your percent of folks that are performing at an A level minus the sum of the percent of folks scoring at a C and a toxic C level.
And if you think about that calculation, your TDI, your talent density indicator, it's going to be anywhere from positive 100 percent to negative 100%. Now, when I first do this with clients, very often they'll come up with a score like negative 20 percent for their talent density indicator. And it scares the crap out of them as it should.
But the point is to use that as a benchmark, not to let your negative 20 percent paralyze you and say, I guess we're screwed. But to say, okay, we're at negative 20 percent now, that's our benchmark. Let's set a goal next quarter of getting that up to negative 10 percent or zero. Let's continue to set goals to improve our talent density moving forward.
So four different parts of the framework, clear measures of performance, the quarterly talent assessment meeting, leadership accountability, the talent density indicator, that measure of success. And by the way, back to that measure of success, you can calculate that not only at an overall organizational level.
But imagine understanding what the talent density indicator is for marketing versus sales versus operations versus service. Understanding your talent density indicator at a senior leadership level versus a management level versus a supervisory level. Understanding for a leader what their talent density is all of those things are critically important.
Now, a couple of things to share before I wrap this up. One is I want to talk about labels. I used a label a number of times on this podcast to make a point, but it's a label I shouldn't be using. It's a label I don't use with my clients anymore. Sometimes I forget.
But I do my best. And that's calling people A players, B players, C players, toxic C players. As opposed to, you heard me say a number of times, people performing at an A level, performing at a B level, performing at a C level, etc. Now what's the difference? It's the same thing, right? No. I realized that labeling people A players, B players, C players, toxic C players was a mistake about a year ago when I was working with one of my clients.
It was a new client and they were talking about folks performing in the B category as if it was all their fault. You know, these B players, you know, they're just not willing to work hard enough and they don't stay late and they don't take ownership and they, they, they, it's all the B players fault as if that's who these folks were.
As if 35 years ago, their mother gave birth to an eight pound, two ounce B player. It's just not true. And by doing that, it takes the onus off you as a leader to help them get their performance up to an A level performance. Cause it's not about me. It's just he's a B player. Well, maybe he's performing as a B because you're not leading him
in the right way. You're not inspiring in the right way. You're not coaching. You're not developing. You haven't provided the right environment for growth. You don't have the right processes. So it's not a B player, it's someone performing at a B level. Even for someone at an A level, performing at an A level
saying they're an A player may feel like a compliment, and it is. But if you believe that's just who they are, they're an A player. Well, then you're going to say, I don't have to worry about Susan. She's an a player. That's the last thing you should be doing for your superstars. You should spend most of your time with your superstars because those are the folks you're going to leverage to be great.
Those are the folks on the phone right now with a recruiter offering them a job at 50 percent more. So saying they're performing at an A level. puts a little bit more of the onus on you as a leader to make sure they continue to perform that way, that they even rise, raise the bar to a higher level. So be careful of labels.
The last thing before I wrap up is where do you start? I shared a lot. This framework is simple to follow, but can be complex to implement and takes a lot of change management. Don't boil the ocean. Don't try to implement all of this stuff in one shot. Start at the top. Start with the senior leadership team.
Start with getting clear measures of performance for the senior leadership team. Form one level down, have that quarterly talent assessment meeting just for the senior leadership team. Assessing one level down, just do it at that level and get it right. And when you get it right and it's working, start to cascade it down.
Now, as I said at the beginning of the podcast, I am on a mission. I just know the importance of this, the groups that I work with, whether they're CEO groups like Vistage or my clients or the keynotes I'm doing. When I talk about all the pillars of building a great leadership team, it's this idea of talent density that resonates the most.
It's this idea of talent density where people tend to score the lowest as to how they're doing now versus where they want to be. So I'm on a mission because of how important it is. And selfishly I'm on a mission because my big project for the remainder of this year into 2024 is that's my next book.
Don't know what it's going to be called yet, but that's my next book is all about talent density and growing your talent to grow your profit. I'm working on software as well. I will put in the show notes, I will be building a page on the website about talent density and something called a talent density launchpad to get people going on this framework and these measures and this accountability.
So stay tuned for more information on the talent density launchpad. Look in the show notes. I hope by the time this comes out, I'll have a link to something on the website, but anyway, super passionate about this. You've heard me in previous episodes talk about that talent density. You will hear that phrase a whole bunch more coming up.
What are you doing to grow your talent? Because if you grow your talent, you will grow your profit. Go to it.