A year ago some friends were talking about big issues like “How to save
the world.” Brian started his career as a business person (an engineer at a Silicon Valley company to be exact) and then went back to
school to be an environmentalist. He is an intelligent and thoughtful person,
so he asked the question: “How do we get the environmental community working
with the business community, instead of against it?”
I was probably (certainly) a little inebriated, and in that state it
doesn’t take much to get me to hold forth (come to think of it, I do it when I
am sober too). So I said “First, you need to get shareholders to understand
that all pollution is the direct result of converting their capital into things
that bring them no value, and in fact hurt them. Pollution is waste, and waste
is something that all companies must seek to reduce all the time. Getting
shareholders fixated on how the smoke coming out of the chimney is quite
literally their money being burned because management couldn’t figure out a way
to put that stuff to use and you will start to get some traction with
business.” (That’s not the point of this article, but I thought I would get
that out there all the same.)
Not to be stopped, with all around the table scratching their heads and
wondering who would be the first to volunteer to get some coffee, I offered a
solution that met with immediate scorn, and which subsequently everyone at the
table has admitted could really solve some big problems: true cost.
First, a little about human beings. Human beings have this curious
problem they have to deal with every day: rationality versus biology. You see a
car approaching you very quickly. Your brain starts to analyze the situation:
will the car turn, how much time do I have, does the driver look mad? All that
great processing power developed over the last couple of million years, so in
geological terms, it's pretty young. Your body, on the other hand, has been developing
auto-response systems to save your sorry butt since the origin of the first multi-celled
creature over a billion years ago (or, for those of you who believe such
things, just before the Greeks battled at Thermopylae).
Your body doesn’t sit there and do some creative processing. It’s binary:
“threat – response.” Your heart rate goes up, the endocrine glands start
dumping all kinds of nasty stuff into your body, and you haul ass out from in
front of the car. Perhaps you run right in front of another car and get smacked,
or perhaps you make it. Doesn’t really matter – the body is visceral, the mind
is cerebral. It’s flight versus analysis, attraction versus cognition.
This little biology lesson is important background for the next concept
we will review: price vs. cost. Price is visceral and immediate: it is whatever
is published on the sticker. You may do some simple math to determine whether
what you want is worth the price, but marketers have known for thousands of
years that most response to price is biological. Even the modern corporation
has known this since the first loom started turning out cloth on the shores of New England. Do what you can to keep the price down (for
value shoppers) or up (for luxury shoppers), but make sure that the price
resonates with the buyer’s belief about value.
Given this, there is a huge incentive for companies to uncouple the
concept of price from the concept of cost. To all of those in the audience who
think that “price = cost + profit” think again. In America the price of a gallon of
gas is about $3.20 per gallon. But the cost of that gallon of gas includes
money we spend to keep shipping lanes open for transport, paying off dictators
in the Middle East, the cost of clean-up when there are spills, and all the
money spent on trying to solve pollution (waste) generated through the burning
of fossil fuels. And then there are the health cost, etc. By some reckoning
that makes the true “cost” of a gallon of gas in America around $15 a gallon.
Now I am not on some political screed against natural resources companies. This is just the illustration of a point: Gas is just the easiest and most convenient example. There is not one thing you consume or use that doesn’t have a variance between the price and the cost. Producers try to keep their prices low by having costs transferred onto the tax roles, deferred to a later date, provided with legal protection, or cleverly talking around long-range impacts from the use of their product or service. And honestly, some times a producer or provider just doesn’t know.
So my point that evening at the dinner table was that a great way to get people to think more about the environment is to treat them like adults and give them all the information they need to make rational decisions. And a great way to do that is to make price and cost the same thing, or at least aligned. (And yes, I know this is regressive, but that is not a good reason for keeping people in the dark.)
Why bring this up? The same concept holds true for working inside a business. It is easy to advocate for a CBA (Cost / Benefit Analysis). It is much more difficult to figure out what the true “Cost” is. How many times have we seen project manager, hiring manager and executives try to paper over or otherwise avoid the concept of true cost in order to get something they want? For instance, how many times has a hiring manager come to you with a specific candidate in mind? You interview the candidate and quickly figure out that while their resume meets the spec (job description) that the person is not a good fit for the job. Let’s say you decide that they are not a good fit because they are technical proficient but interpersonally deficient. You don’t think that the benefits (value) of the individual are worth the potential downsides (costs). But the hiring manager, anxious to get their position filled conveniently forgets the cost issue and instead runs for price (“The salary requirements are right.”)
If we are in fact committed to moving from a money focus to a capabilities / people (talent) focus (a la Talentism) we must always be focusing on concepts of value and cost. We have written extensively about value, but we must be equally rigorous about what the True Cost of a Talent is. Unlike the finance, marketing and manufacturing departments, this puts the talent department in the position of having to take full account of all the upsides and downsides of their decisions. True, this rigor is often anecdotal and biological (“Hey, this guy just doesn’t feel right for the position) but that doesn’t diminish the validity of the calculation.
So for this final "Principle of Talentism" (and it's hard to believe it took a whole two and half months to get through 14 posts). At some point in the future I'll do a quick review of the rules and what they mean for our day-to-day business lives. I assume it goes without saying that you shouldn't hold your breath.
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