In August 1998, Fast Company set off to cover the war. In one of our dispatches, the combat was nearly literal: A young staff writer spent four days amid flares and smoke bombs in Campbellsville, Kentucky, training at a battle-conditions leadership school run by two former U.S. Army Rangers.
But the far bigger campaign of the day was the war for talent. "The logic is inescapable," we wrote. "The team with the most talent wins. [And] there are simply not enough truly talented people to go around."
Remember, this was a time when every corner hot-dog vendor had a Web site and Next New Things were cropping up faster than Monica Lewinsky rumors. Companies old and new were coming to grips with a new reality: Competitive advantage resided less in access to capital or powerful technology than it did in having to great people. And getting and keeping the best and brightest was about more than just foosball tables and signing bonuses.
It still is. For a brief while after the dotcom collapse, the battlefield was littered with resumes and underwater stock options. But there was no detente, and the war rages on. It has become clear again that over the long haul, there's only one way to compete in the global economy — on talent.
In that 1998 issue, we heard from Ed Michaels, a McKinsey & Co. director who helped run a study of talent involving nearly 6,000 managers and executives at 77 companies. He described a "silent battlefield," as big companies hemorrhaged more young workers than they knew about — and certainly more than they could afford.
Today, the need for future leaders is even more pressing, says Helen Handfield-Jones, coauthor of The War for Talent (Harvard Business School Press, 2001), a book spun out of the McKinsey study. As baby boomers prepare to retire, employers are finally figuring out that there just aren't enough midlevel executives to replace them, Handfield-Jones says. The need now is to develop current staff for higher-level roles — and that in itself may prove the best retention policy. "Make sure your very best people, high-potential people, are having such a steep learning curve and such a rich series of challenges that they won't want to leave," says Handfield-Jones, who now runs her own consulting firm.
Of course, to retain great people, you have to hire them first — and that critical battle is still being waged, too. In 1998, we described an emerging "talent market" that connected buyers of talent with sellers, especially with the free agents who had divorced themselves from traditional career paths. "There is a bull market for talent," we exclaimed, "and we're all in it."
Breathless, yes. But the matchmakers we introduced are still in the game, like M2 Inc., a broker for independent consultants whose client roster has more than doubled, to 12,000. Back in 1998, "there was the mentality, 'Why would I bring in people to help me? Why not hire?' " says M2 senior vice president Lori Perlstadt. Now the idea of a talent brokerage is more widely accepted in corporate HR departments.
If anything, of course, globalization has made the talent market bigger and more powerful than ever. The new brokers are outsourcing firms that connect American companies with low-cost — but still highly skilled — workers offshore. That has created a new sort of talent war, pitting employees in one place against their eager replacements in another.
And it raises the question: Where will tomorrow's talent war be waged? Certainly, any company that hopes to compete will still need to find the best people available. But increasingly, those people will come from... anywhere.
"But there is also a silent battlefield in the war for talent. . . . Most companies are losing more people in these ranks than they realize. . . . They don't know where these people are going. Most important, they don't know why these people are leaving."
Ed Michaels, "The War for Talent," August 1998
A version of this article appeared in the May 2005 issue of Fast Company magazine.