By Lowell L. Bryan and Claudia I. Joyce
If managing talent in digital-age companies can create wealth without big investments, how do we mobilize minds to create wealth? Lowell L. Bryan and Claudia I. Joyce, both with management consulting firm McKinsey, make the case at a strategic level for thinking-intensive businesses (i.e., those comprised of at least 35 percent professionals and managers). Their proposed way to create wealth is to redesign organizations using backbone hierarchical authority structures, to improve collaboration and reduce employee-interaction costs by formalizing knowledge networks, and to establish one-company governance models. Mobilizing Minds is a blend of practical global survey results (e.g., those cited in Race for the World, which was co-authored by Bryan), flashbacks to classical economic theories on managing interaction and transaction costs to increase human capital rents, and bridges between the two. Be prepared to be challenged.
The book is clearly targeted towards managers and executives who want their companies to be top global players. In the global survey, capitalization per employee growth was tracked between 1984 and 2004, and the differences between the top-ranked 30 companies and those ranked 31 to 60 were substantial the top 30 increased their wealth per employee $30,000 more than companies in the second tier. The seven principles that the authors cite as important to creating wealth were molded from the lessons learned at ExxonMobil, GE, IBM, Microsoft, Johnson & Johnson, Toyota, and BP.
Smaller companies cannot expect to achieve comparable returns because they cannot afford to develop and sustain robust talent and knowledge marketplaces with the required incentive and support systems; however, if a small company focuses on finding a handful of talented people to guide its growth and connect it with budget owners and knowledge seekers throughout its organization, interaction costs should be reduced and wealth creation should follow.
After reading this book a few times, one discovers the treasure that companies of all sizes can benefit by thinking through the issues posed, the measurements suggested, and the analyses used to arrive at the stated conclusions.
Three challenges rose to the top of my list. First, knowledge (i.e., how things work and get done) often flows through informal talent networks rather than through information systems and organizational structures. A fundamental stepping-stone is discovering just how knowledge flows through informal networks and strengthening such networks.
Second, companies need knowledge enablers who sit between knowledge sources and knowledge demanders. The enablers are a talent group that can be mobilized. Identifying talent, at this level, is a pivotal challenge.
Finally, returns are proportionate to the level of interaction costs. Measuring interaction costs will determine if finding the talent and strengthening the knowledge networks is worthwhile. According to McKinsey, interaction costs were over 50 percent of total labor costs in the companies studied. It just goes to show: The warning from economist and 1991 Nobel Prize winner Ronald Coase to watch and manage interaction and transaction costs makes practical sense, even in today’s 21st-century organization.