Effective Talent Density with Anish Batlaw

0:00And I think the one thing that people don't do enough of is they don't talk to their teams about what success looks like for them.

0:11what would happen if we just told the truth welcome to truth works where we dig into the nitty-gritty of leadership and work and what needs to change i'm jessica neal and i'm patty our journey together started in hr but trust us it's evolved into something wild honest and well a bit rebellious. So throw out the handbook. We're here to redefine rules to work for us, not against us. Let's dive into another episode.

0:46Hi, everyone. Welcome to another episode of TruthWorks. Patty, my partner in crime, is out with the flu. Unfortunately, her grandkids got her sick, but I am lucky because I am with one of my favorite people ever. His name is Anish Batlaw. He works at General Atlantic, runs the entire HR talent practice for them. It's a really big job that I want him to talk about in just a minute. He also wrote this book, Talent, The Market Cap Multiplier. So we're going to talk a little bit about that. But Anish, welcome. Can you introduce yourself a little bit to the audience and tell them a little bit about you, about what you do and your book?

1:33Of course. And Jessica, it's so wonderful to be here. And it's so awesome to be having this conversation with you. So I work at General Atlantic. I lead our talent function in support of our portfolio companies. We have, well, let's say a little over a hundred billion in assets under management. Multiple businesses, one of our key lines of business is growth equity. Growth equity has grown fairly dramatically over the last, gosh, 10 years, but has always been a growth business at GA. And more recently, we added on a few more businesses, credit, climate, and infrastructure or sustainable investment.

2:11My role at the firm is fairly simplistic. It is to work with our portfolio companies, with our investors, to build high-quality management teams in the companies that we invest in and to support them in the development of their board of directors as well. One of the pieces of work that I do for GA is formally and informally, I serve as an advisor, a coach to some of our more senior MDs. We have an exceptional CHRO, so I don't do HR for GA. My role is focused largely on management team development, board development, and development of our senior most MDs. Yeah. I want to get into the work that you do and the impact that it has in a little bit, because you've got some major pattern recognition on what makes companies successful and what doesn't.

3:01And so I want to dig into that. But tell us a little bit about the book and why you wrote the book. My co-author, Ram Sharan, and I, we were having lunch, no, dinner at a restaurant in New York. and we were chatting about the economy, the politics around the world, the businesses, the implication on businesses. And we chatted about work in private equity versus work in the public markets and stuff like that. And as I was telling him about the work that we do, he said, there's a book to be written here. And I think it'll be great if you could share some of your learnings with others. And I was intrigued by the idea and the firm was as well.

3:39And so we went down this path. The one other reason I wrote the book was for many years, I was a bit fed up with people telling me HR or talent is a support function or it's a staff function and it's a stepchild to the main line of the business and so on and so forth. And I was like, no, no. No, it's not. I think if you get talent right, you grow enterprise value. That's like serious stuff. Yeah. And which is why we titled the book, you know, which was using talent as a market cap multiplier. In other words, increasing the equity value, increasing the enterprise value. And talent is so foundational to that.

4:24And I wanted to share that side of the story. Yeah. What's a little snippet of one of the things you delve into in the book? So my favorite chapter is one which talks about if it ain't broke, don't fix it. That's probably the worst advice in business. I was invited in by my partners to a company called Hemnet, which is in Sweden. We did the deal. We were super excited about the deal. Flew into Stockholm three days post-deal to meet with the management team, which is a practice at GA. A vast majority of our companies go through what we call a management assessment and development program. And so we went to Stockholm, met with the management team.

5:10We don't typically change CEOs and the companies that we invest in. But at Hemnet, we discovered that the CEO had a great track record. But the thesis, the deal thesis required a very different strategy going forward. The past strategy had been focused on relationship. It's a real estate classified business. And the past strategy had been focused on building relationship with the broker community, super important, taking pricing action, and having the relationship with the broker community to be able to effectively take pricing action on a year-after-year basis. And that had helped the company grow.

5:51It was almost like air in Hemnet. That was the only company. And so everyone knew the brand. Because if you want to buy a house, you want to rent a house, where do you go? You go on Hemnet. And the deal thesis was all about introducing new technologies, new products, new services, very different from building relationships and a sales function, you know, which had been performed previously. And so we went there. We had a conversation with the CEO. We had conversations with about 20 other people at the firm. And we walked away. Well, we didn't walk away. we came away from those meetings saying that maybe there's a case for change.

6:33And three of the board members flew in the night we finished all our meetings. We decided to have dinner together. I still remember vividly after some chit chat, they asked me what our key findings were. And me and a colleague of mine mentioned that we think there might be a need to change a CEO. you could have heard a pin drop. I'm sure. That was a long dinner. It was a very long dinner. And I think three or four hours later, we collectively agreed that although a difficult decision to take for everyone, right? It was a difficult decision for the board because they weren't anticipating this and the performance of the company was good.

7:20It wasn't broken. and for our lead investor, Chris Cocken, on that deal. It was an incredibly tough decision. He was not even a partner at that point in time. He's a senior MD today at GA. But at that point in time, he hadn't made a partner and he had just done this deal. He had not told the IC that there was a possibility that we might change the CEO. So an incredibly gutsy decision on his part to take. But they made the difficult call. You know, we went ahead with the change. Fortunately for us, we found the right CEO to come into the business. And eventually, over a seven, eight year period, the company developed well.

8:04We took the company public and eventually exited from the business. The company is a public company today. We are not investors in the company anymore. it has turned out to be one of our top deals in the history of GA. Yeah, it turned out to be an amazing deal. And this assessment that you do when you go into your portfolio companies, but especially the new ones that you guys have just done deals with and are building a relationship with, you went in, you got a bunch of data and findings, and the things that you found impacted the change in the business. And these were all things that had you not done them or had General Atlantic not have a talent like you in the firm, you wouldn't have found these out.

8:52And perhaps the deal wouldn't have been one of the best in history. Yes. I don't want to take credit for it because. Well, no, you're not taking credit. Yeah. I think there's so many things that went behind making the company successful. But the CEO decision is a very important decision, right? Whether you back a CEO and underwrite, hurt him, and help the CEO in numerous ways, help them build a team, help them with different strategies, network, et cetera, or you don't. And then you help make a change which serves the company well in the longer term. I think that's probably the most important decision that the company makes.

9:31And sometimes people walk in and say, let's not make a CEO change. Let's not make that decision. And I always say, by not making that decision, you're making a decision. Uh-huh. Right. Absolutely. But my point is, is that, you know, that talent, like going in and assessing talent at all levels is a really healthy, important thing. And, you know, had you not done that assessment and had some of these findings, you all wouldn't have had that conversation about the CEO and perhaps wouldn't have made a change. And so it's just so interesting to me that this function, and we can talk about it, oftentimes gets looked at as being fluffy or dealing with the behavior of humans.

10:15Okay, it's not a big deal. It's not important to the bottom line. But it absolutely is important to the bottom line. It is. It is. I mean, we've got data to show that. I've done a fair amount of research on this. And we found that it's not just the CEO. So we did research on the CEO plus the top maybe two people on the management team, so the senior most leaders in the organization. And we found that if a change is required, if a change is required, and it's made in the first year versus if it's made in year two, three, four, or five, the impact on IRR can be three times higher if the change is made in the first year.

10:54Wow. And so speed with which you move and act is super important. But the second thing that we found was that if you were to make a change or if one were to make that change, and if they got the change wrong versus got it right, if they got it wrong, IRR can plunge by about 82%. Wow. So both are important. It's the accuracy of assessment and it's the speed with which you act. You know, and they don't always go together because to drive accuracy, you want to do lots of meetings, lots of interviews, lots of assessments, and your best candidate may turn you down at the last minute. And then you go with your second best candidate and that's, you know, that's going to take even more time.

11:40And if you want to move fast, sometimes you compromise on assessment, but you've got to do both in order to get the right candidate. Not an easy thing to do. No, no, not at all. So tell me a little bit about the assessment and what you all do, how you go about it. So I'll start by saying that we never go into an assessment with a hypothesis that the management team is not right. Rather, we would go in to understand what the company has done, which has served the company so well, which needs to be protected and preserved and built upon to help the company be successful in the future. Our principle is that management knows what's going on.

12:22And the best thing we can do is to have a conversation with them, kind of like the conversation you and I are having, right? Where we go, we spend two to three hours with each executive on the senior leadership team, probably end up spending three to sometimes five hours with the CEO over multiple meetings to understand what prompted the founder to create the company, what's been the journey, what has worked well, what were some of the challenges? What are the aspirations of the founders? What's the ambition? Where does the founder want to take the company in the future? And in that context, meet with the management team to understand, again, what's working, what's not working well.

13:04And as the company grows and scales and becomes more complex, what more might they need from each other? And typically, we walk away from these meetings with circa 300, 400 pages of notes. Do you have like a set set of questions that you ask every time or is it more free flowing depending on? So there's a structure, but it's a bit fluid as well because it really depends on the situation. So there are three things that we largely focus on. The first thing we focus on is clarity of purpose, clarity of goals, clarity of strategies, priorities. You know, how clear is the company on that? You know, are people clear?

13:44Has it been cascaded well? In growth companies, it's usually a challenge because there's so much that people are trying to do. The second thing we usually focus on is the quality of the team, the quality of people in the most critical roles, which will drive value going forward. And do you have the right mix of talent? Do you have the right mix of experience, people who've served in, say, functional leadership roles and have seen scale? Have they had opportunities in the past where they've been in an entrepreneurial setup, but maybe have also been in a company that's chaos, so on and so forth.

14:19And so we look at a mix of talent, and then we walk away with some insights there. And the third thing we look at usually is around teamwork and team dynamics. What's the operating rhythm in the company? How are decisions made? How does information flow? What are the systems and processes? How early is it in the development of processes, et cetera? So we cover all these three. We certainly cover these three areas. We might do something more. But if there is a situation where priorities are not as clear, then we would go deeper there. If there's a situation where there is maybe some toxicity in the culture, then we'd go deeper there, right?

14:58So yes, there's a structure. But the principle is talk to management, invest a lot of time with them. We do immerse ourselves in the company, and we always go to the company. We never have the company come to us because it's great to be there. The water cooler conversations in between those meetings is super helpful. We have done a few of these over Zoom as well. I'm still learning how to be more effective on Zoom. We all are. Yeah, yeah. It's not the Zoom. Yeah, yeah. But you know what? I mean, I think for companies to go back to full five days a week is going to be challenging. Yeah. I think we might end up with hybrid is probably realistic.

15:38Yeah. So I guess we all have to learn to be more effective virtually. I know. Well, you know, pretty soon we're just going to have like our AI robots just talking to each other and we don't even have to show up. Oh, that's helping us so much even now. You know, all this note taking that we were doing. Yeah, you say your 300, 400 pages of notes. Yeah, AI. After every trip that we would make, I would walk away with cramps on my shoulder, my wrist would hurt and stuff like that. And now, fortunately, there are so many apps which will take the notes for you. So I still take a few notes because it helps me think.

16:14Yeah. But these apps, I don't have to take the same 300 pages of notes. What's the one you're using right now that you love? Oh, we've looked at Order. We've looked at a whole bunch of Assemblants, Assembly. We've looked at a few others like those. But we are still in a testing phase. But we are now actively using these apps in almost every conversation that we have. That's so cool. What we haven't found yet, but I think that our, well, Assembly might do it, pulling out core insights from the conversation. So they'll look at the 300 pages of notes and pull out a summary. And so are you recording it and then it's looking at it or are somebody typing in the notes?

16:54So we were writing or typing. Now, if somebody is still writing or typing, I'm doing less of that. But now we have an AI tool which is recording it. So we do ask for permission before we go down that path. Oh, so wonderful. What a time saver. Yeah, it is. I think what takes us about three weeks can be compressed down to maybe two days. You know, the beauty of technology, man. So I want to get back to the assessment real quick. So going back to the company, Hemet, and the book, when you did the assessment and you're taking all your pages of notes because you didn't have AI then, what was it that you heard in those conversations that made you think a change was necessary?

17:40Yeah, that's it. First, we started off with the context. Context is super important for us, right? I always say, expect a fish to climb a tree. It'll spend its whole life thinking it's stupid. It'll never do it. And so context is important. So at Hemnet as well, we started off by saying, what's the context? And the context was, we need the company to work on product. We would need the company to work on services. And so there was an emphasis on product development, technology. There was an emphasis on services. And so we started off with that premise. And then when we went in, it was more what we did not hear first than what we heard.

18:25Because what we heard initially was we spent a lot of time in the field. We spent a lot of time with the broker community. We do a lot to build our relationships with them. We're also constantly looking at when we're going to take the next pricing increase, so on and so forth. So we heard a lot of that, right? And that helped the company be successful. We knew that was not enough for the company to be successful going forward, right? We did not hear, here's how we're thinking about our product strategy. here are the people who are going to drive the product strategy so so we did not hear a lot more about that topic the second thing that we did not hear about or rather what we heard was that the company was trying to restructure into three lines of business and was having an incredibly hard time finding the right people to staff those three lines of business and it was a challenge Jessica you'd really appreciate this.

19:24This was not a big business, right? This was under$100 million in gravity at that time. And it was valued highly, but under$100 million in gravity. And interestingly, the three lines of business meant that each line of business was about a third or less, right? And so now it becomes an even smaller business. But the requirement from the business unit head was somebody who had the ability to have a product vision, to be able to lead the product and tech teams, to be able to lead product marketing, to be able to work effectively with the sales function, to be able to be conversant on the P &L. Very difficult to find people and compensate them well for small books of businesses.

20:09And so the company was running into that challenge and they were looking to hire only in Sweden and people who were based in Sweden. So it was a tough job, which is why they were not able to fill those roles. And the third thing that we heard was not very positive, which was when we went ahead and spoke with the management team, we always asked them, we asked the CEO, what are your top three priorities? We asked each member of the management team, what are the top three priorities for the company? We did not hear complete alignment on what the priorities were. And as we dug further and further into it, it seemed to us that the one thing which was constant was support for relationship development.

20:52What we also heard from them were many initiatives had been kicked off in the past, which were new, which stayed for a period of time, maybe six months, nine months, and then died a natural death. There's nothing else that had sustained, a strategic initiative that had sustained over a period of time. Yeah. So it was a combination of all of these things that we took back to the board. And as you can well imagine, we kept unpacking issues at that meeting. Yeah, well, ah, that's just fascinating. I want to talk a little bit about the role that talent partners like myself, like you can play in organizations because what your assessment was doing, of course, it ended up in a change with the CEO, but you were looking at the organization's health as a whole.

21:42How effective are you, right? Is everyone aligned? Does everyone understand the priority? And if you go into organizations and you start talking to the, you know, and then that's a problem. And that's, because I very much thought about that as my job, right? When I was at Netflix, like my job was to make sure I didn't, And people have heard me probably say this on the show. I never thought about my job as being a human resources officer. In fact, I didn't even like being called that. I was like, I don't do that. I'm the chief effectiveness officer. I want to make the company effective. And how you make the company effective is all the things that you were just talking about.

22:26When those things are broken, then you're not effective. You're not growing. You're not making the right strategic calls. You may not have even the people that can make those calls, right? So I just wish that more people from our function thought about their role that way versus being a place of compliance and de-risking things for the organization. I was talking to a company that I'm working with earlier today, and they took out their CHRO and have a new person in the role. And that person's actually from the business. And I think it'll be a great change. And they just got finished doing their listening tour.

23:10And, I mean, the things that are broken are like there's been somebody in the company that's been trying to relocate. But because of the relationship between finance, legal, and HR, this one person has been held up in limbo for four months. And they can't figure out how to agree on the relocation. It's country to country, and there's some complexity behind it and visas and whatever. But it shouldn't take four months. You know what I mean? And then the reputation of the team is they're not great. And I often see that, right? But I want to get your perspective to see why you think that is, because you might see that pattern too.

24:02Well, your story and Patty's story and the Netflix story is so inspiring. And we've embraced a lot of the concepts from your work into how we pursue the talent strategies for our portfolio companies. I think there's a lot of work that needs to happen in an organization, in a growth organization, in a company that's scaled. There's a lot of work that needs to happen. Compliance, HR compliance and employee relations. I think important pieces of work should happen in a company, right? But I think, you know, my sense is what should engage the chief talent officers or the chief HR officers or, you know, whatever those titles might be should really be a focus on, you know, one, they're part of the top team.

24:53They are part of the first team in the company. And so clearly they're enterprise-wide leaders. And so one of the top priorities should clearly be sustainably growing the value of the company over a period of time. That needs to be the number one objective. And if you ask the CEOs, and there have been so many surveys on this, KPMG does it, PwC does it, there are a whole bunch of companies that do it, right? What is the number one issue? A vast majority of the CEOs would say talent is their number one priority. More recently, a lot of them are saying technology, AI as well, right? But talent has always been either number one or number two, right, priority.

25:31And so if talent is the number one priority for a CEO, then talent is what the CTO or the CHRO should be obsessing about, because that is what's going to grow the enterprise value sustainably, which is great for every stakeholder. And so I do think obsessing on, do we have the right talent in the most critical roles in order to drive the strategy that the company is going after? And the strategy, by the way, is informed by the quality of the talent in these critical roles as well. Exactly. So it always comes back to talent. And the interesting thing is I was talking to the new person that took this over and they were like, what's the metric?

26:11And I'm like, do you have the best talent? Do you have the best leaders? Do you have the best talent? Like if you focus on that, it's not retention because if you're retaining the wrong people, don't matter. you know like it's like get the best people on the planet and when you don't act fast to your point when you make a mistake get them out so it's like I always think about it as like saturation of talent and do I have it right and then there's there's the people that shine bright who you know are stars there's the people at the the very bottom who shine differently you know they're terrible.

26:53Those are easy calls, but it's all the people in the middle. And so you have to be just aggressive about those folks. And, you know, are they good or are they great? And if they're just good, you know, you have to say goodbye because that's the drag on the company. Yeah. Yeah. So we've taken, I couldn't agree more with you. We've taken the work that you did on Talent Density and Netflix, and we've converted that into a KPI that we review at the highest levels in our firm. which is, as you know, an investment firm that invests in companies, right? Yeah. And so we've taken talent density, created a KPI.

27:29I believe, and I think my firm does too, that this is the most predictive KPI in business, right? If you think about revenue, you think about earnings, right? These are all lagging KPIs. They're not predictive KPIs. I think talent density is probably the most predictive KPI. And for us, talent density, in the way we've defined it, and it's a little bit different from how you may have defined it, Jessica, because our approach to this has been first to define what is talent density. And our definition was it's essentially a concentration of A players in the company. How concentrated is your company?