“Talent” sometimes gets used in the business world as synonymous with “headcount.” You’ll hear recruiters referred to as “talent acquisition specialists,” for example. Saying something doesn’t make it so, however. Talent is fundamentally different than headcount. Using them interchangably as terms hides the fact that most organizations have no idea how to do actual talent management.

There are two essential formulas that you need to internalize if you want to create a great organization. Here’s the first:

That’s your Workforce Quality Score right there. That’s the number you want to maximize. Total headcount times average quality of talent, divided by your total cost (“payroll” is shorthand, but all the direct costs of employing someone go here). [To make things easy to read, we’ll take the final number and multiply by 100,000 to get a visible score.]

Headcount and payroll are easy to measure, and so that’s typically all companies do measure. They also try to make all the adjustments there, too. If their output isn’t good enough, the first lever they try to pull is often payroll – and that’s almost always wrong as a first call. If you pay more than you need to you’re making bad business decisions, and if you pay less than you need to… well, you’ll see how that affects you as we talk about that third variable, “Average Quality of Talent.”

Ready for that second formula? Here you go:

The Average Quality of your talent is equal to their skill level relative to their role, multiplied by how enaged and motivated they are, multiplied by the tools they have to do their job well. Each of these variables is expressed up or down from a base of 1. So if someone is exactly as skilled as their job requires, no more and no less, then their Skill is a 1. Same with Engagement and Tools.

So if someone has exactly the skills they need, no more and no less, and they’re at a baseline level of engagement, and they have precisely the basic tools necessary, then the total “Average Quality of Talent” will be a 1. And in that case, when you plug that back into the first formula, your Workforce Quality Score will be exactly headcount over payroll and that’s that.

Wouldn’t that be nice? I mean, you’d be absolved of all responsibility as a leader if that were the case. In fact, you could even improve your WQS by reducing how much you paid people!

To understand why that typically doesn’t work out to well for organizations, you have to look at that second formula. Note that those things are multiplied, not added together. So if the average engagement of your workforce drops from a baseline of 1 to a 0.7, you’re down to 70% of your Workforce Quality Score right there. You’re paying the same amount of money for 30% less output!

And let’s be clear – your Workforce Quality Score is your output. It’s the driver of every other thing in your business. It’s the most important metric you have, and it’s not even close.

So what are each of those three “force multipliers?”

The average level of knowledge and expertise in your workforce. There are plenty of ways to affect this: You can get better at identifying skill accurately in your hires (especially in hidden places), you can have systems in place that encourage your employees to upskill themselves, and you can even train them directly. Training is a cost, sure – but check the formula. All you have to know to see if it’s worth it is how much it raises the total WQS.

Plus, training (if done correctly) can really improve Engagement. Put simply, this is how much your employees want to do well. It affects how long they stay with your company, how much of their ideas they’re willing to bring to the table, how hard they’re willing to push to reach goals. And it goes both ways! All else being equal, doubling your average level of Engagement doubles your WQS. But halving it is like firing half your workforce but continuing to pay them.

Tools are the objects, systems, and infrastructure that let humans work better, and this variable represents the average quality of the ones you have. Anyone can tell you that it’s better to dig a canal with excavators than with spoons, even if excavators are more expensive. Tools aren’t just physical objects, either. Organizational systems, effective program management tools, and thoughtful communication routines are all tools.

True Talent Management is about maximizing these three variables. In order to do that, an organization first has to recognize that these formulas are true, and that these things matter. If a leader doesn’t recognize that you can get better at finding talent for the same price, for example, then they’re never going to aim to maximize that score; how skilled their employees are will simply always be function of how much they pay for them, full stop. If you don’t see investment in internal communication systems or project management techniques as affecting your output directly, you’ll continue to have sloppy, disorganized teams without the tools they need to succeed. And don’t even get me started on engagement, which a shocking number of leaders don’t seem to believe is real at all.

Let’s put this all into an example!

The CEO of WidgetCo has one hundred employees, with a total payroll cost of 5 million dollars. Multiplying by 100,000 to get rid of awkward decimal places, we find WidgetCo has a Workforce Quality Score of 2. They’re a pretty average company overall, with a net profit margin of 10%. Their Average Quality of Talent to start is a 1 – because their average Skill, Enagagement, and Tools are all 1 as well. So far, so good!

But the CEO doesn’t invest in these things. The world advances and his employees’ skills don’t keep up without training and better identification of new talent, so Skill drops to a 0.9. He ignores anything to keep his employees engaged, and they start to grow listless, reducing Engagement to 0.9 as well. And while he’s kept up with the easy-to-understand factory machines, he hasn’t kept up with project management tools to make organization easier, so that’s dropped to 0.9 as well.

Each of those factors dropped by only 10%. But multiplied together, that reduces his Average Quality of Talent – represented by the same actual humans – to a 0.729! Which in turn reduces his Workforce Quality Score to a 1.458. He’s lost more than 25% on the most important metric of his business, and he probably doesn’t even realize it. Instead, he’ll see declining profits, and the spiral will begin. With no idea what’s really behind the decline, he’ll “tighten his belt,” reducing raises and bonuses (decreasing engagement), denying requests for things to improve their workflow (decreasing tools), and hiring cheaper labor (decreasing skills) to replace the people that abandon the ship. The decline will continue until WidgetCo collapses.

If he did realize what was behind the decline, he could do two things: First, he could look at how much profits decreased and be able to draw a direct line from his WQS to his profitability, giving him clear direction when deciding in the future which methods of improvement were most cost-effective. And then he could begin to implement those improvements!

First, the CEO takes a cost-effective approach of hiring replacement staff from typically marginalized or under-appreciated backgrounds, finding higher-skilled workers that other companies miss, and bringing his company’s Skill score to a 1.1. He dedicates a large portion of his own work time to sending messages of appreciation to all his staff (new and old alike), listening to their ideas, and using the best ones to recover lost business, bringing his Engagement score up to a 1.1 as well. Finally, he takes the risk and invests in management software with modern best practices built in and gets his managers trained on its use, bringing his Tools score to a 1.1.

He’s up to only 10% above his original baseline – these aren’t dramatic improvements! They aren’t overhauls of his entire business by any stretch. But they’ve made his Average Quality of Talent into a 1.331, which makes his total WQS into a 2.662. That’s a vast difference from the state of things prior, and when he sees the new profitability numbers, he’ll be able to measure exactly how effective it was against the costs.

From there, he’s learned his lesson. He’ll continually reinvest in a People Operations team and make actual Talent Management a core part of his business.

So should you.

Refine your technique before you internalize it. Habits are hard to break. That makes bad ones a cage, but can make good ones into a steel scaffolding that lets you build nearly anything.

I was never really much of a football fan. But my children are all into it somehow, and so I’ve become one. And our team has always been the E A G L E S Eagles, and so tonight we got to cheer and scream and laugh and have a grand old time.

Any excuse to do that is a good one.

Go Birds!

People are very bad at evaluating opportunity cost, in general. In both directions. They’ll do stuff that has way too high of an opportunity cost, and they won’t do stuff when the opportunity cost is practically zero.

Someone may say to you, “Hey, want to go do this weird thing with me today?” The wrong question to ask yourself is “Do I want to do this thing?” The correct questions is: “Do I have anything better to do?”

You probably don’t! So go do the thing. There’s a lot of potential upside and very little to lose.

If the scope of something you want to do isn’t working, remember that you don’t have to scale everything up or down proportionately.

If your workout routine isn’t meeting your goals, you don’t have to do more of everything. You can do the same routine more frequently, or you can do one of the exercises more but not the others, etc.

If you try to sell 10 luxury cars in a month and don’t make it, you can try to change just the model of car, or just the number, or just the timeframe.

The point is, if a project isn’t meeting its objectives, that doesn’t mean the whole thing needs to change. You can stretch and crop and adjust the levers individually.

Something is only “its own reward” if you want to do it. If you’re doing it because someone else is making you, they have to incentivize it.

A common thing I see in the business world is that senior leaders try to make mid-level managers do all this professional development, but they don’t reward it or support it. “You have to attend this manager training,” they say, but they don’t carve out any reduction in their work duties to go to it, they don’t promote people who take it, they don’t even make successfully completing it part of what they get evaluated on, let alone actually implementing it.

When the mid-level managers show up to those trainings as disengaged zombies, it’s no wonder. Senior leaders get angry, saying: “Don’t they want to invest in themselves professionally? That’s its own reward!“

Professional development is great. I do want to do it, because I want to be better at my vocation. But I want to be better at my vocation because my vocation is an input that generates other resources. So if I’m “investing in myself professionally,” it’s exactly that – an investment. I want it to pay off. And it will – one way or another, boss.

If you make your mid-level managers attend mandatory training in the way I’m describing, you get only one of two outcomes. Some people gain nothing from it and are annoyed, stressed, and less productive because of the experience. Others gain a lot from it and leave when you don’t reward them for it.

There’s no third person, the unicorn that says, “I’m so glad someone else decided my professional development path for me, made it mandatory, and then didn’t support or reward me in any way for doing it!”

But a lot of senior leaders seem to assume their staff is nothing but those unicorns. Do better. Because the reward is real: a team that works.

When germ theory was first introduced to doctors, they weren’t just skeptical. They were offended to the point of hostility. The suggestion that infections in surgical patients could be caused by germs on the doctors’ hands was an absolute insult. Their hands were clean, obviously! They were medical professionals who knew how to wash their hands, and to insinuate otherwise was dire slander.

Nowadays, we know better. Not only do we know that germ theory is correct, but we know that scientists like Louis Pasteur weren’t insulting the doctors. To point out that you have microscopic bacteria on your hands that you couldn’t have known about isn’t an example of fightin’ words. It’s a fact of the universe, and it was offered up in the sincere hope that the knowledge would help people overcome it. Once we know that our hands have infectious diseases on them that we can’t see but that can nonetheless threaten a patient’s life, we can take steps to eliminate those germs and protect the patient. Having germs on your hands doesn’t make you an unclean wretch. Only refusing to take responsibility once you know the truth should mark you as an enemy of progress.

Of course, I say “nowadays we know better… with germs. Sadly, we’re doing the exact same thing today in another sphere. Replace “doctors” with “leaders” and replace “germs” with “unconscious bias, heuristics, and mental noise” and you have a good approximation of the state of leadership today.

All humans have these “mental germs.” It’s a fact of our evolution, our psychology. It’s not an insult to say that a human is susceptible to recency bias any more than it’s an insult to say that humans are susceptible to having germs on their hands. But like the doctors of the 19th Century, the leaders of the 21st tend to get awfully mad when you suggest it.

The point, of course, isn’t to offend. When I run a training course on the halo/horns effect, I’m not telling leaders: “You shouldn’t be a manager of people because you, specifically, keep making this stupid mistake, dummy.” I’m telling them specifically how to overcome a dilemma that every single human has. I’m telling the doctors how to get rid of the germs.

Some doctors, of course, were more concerned with their status as gentlemen than they were with the potential harm to patients. And some leaders are more concerned with their position than they are with effectively leading people. I feel your pain, Louis.

We all want to believe that our minds, in their natural state, are as unbiased and rational as the doctors believed their hands were clean. But true responsibility to those under your care requires that you acknowledge that they need active sterilization in ways that don’t occur to you naturally. If you shirk that responsibility, then I am saying that you shouldn’t be a leader. If those are fightin’ words, so be it. I’m fighting for the people who count on you.

A small job done well is better than a big job done poorly, or not at all. Don’t judge your accomplishments by what you set out to do, judge them by what you actually did, and by how you did it. There are many small jobs, but only small people resent them.

Nobody can undermine you like you can. Self-sabotage is the most effective kind of sabotage there is. A shocking amount of progress and success can be had just from figuring out where you’re shooting yourself in the foot and stopping.

Imagine driving somewhere, in big rush. You’re in a hurry, so you think: “The best thing to do is get out of my own car and push it, to add speed.”

There’s a… sort of logic there? Pushing something generally does make it move, after all. But you’d be completely wrecking yourself. You’d give up steering for physical effort, and you’d lose the ability to add mechanical effort as well. Everything you wanted to do was best accomplished by you being a force multiplier. By directing the efforts of powerful resources instead of being a far less powerful one yourself.

This is what people often do as leaders. They “get out and push” and the whole thing moves more slowly. They create bottlenecks, they let the whole thing start veering off the road, they get themselves disconnected from the process. It’s a mess.

Stay in the driver’s seat. Recognize when the panicked impulse to push is misguided, which is pretty much always. Don’t undermine yourself.

Get to the hard stuff quickly. Don’t delay a punishment or a trial. Face all things at your most brave, and bravery is eroded by time more swiftly than any other feature or emotion. If you are ever shot by a firing squad, may they shoot you in the front.