[Here is a portion of the Podcast transcript.]

Simon London: Hello and welcome to this edition of the McKinsey Podcast with me, Simon London. Today we have a very special guest, McKinsey’s worldwide managing partner, Dominic Barton. Earlier this year, Dominic published a new book titled Talent Wins: The New Playbook for Putting People First, with coauthors Ram Charan and Dennis Carey. The book argues that CEOs and boards don’t spend nearly enough time on people, particularly the people who occupy those pivotal roles that make the difference between success and failure, growth and stagnation. As you’ll hear, these aren’t necessarily the most senior people by any means. They can be found up and down the organization. I caught up with Dominic in London to talk about why in a world awash with capital and turned upside down by technology, he believes that talent wins.

Dom, thank you for being here today.

Dominic Barton: Thank you for having me.

Simon London: Why don’t we start with the question of, why talent as a topic? You’re jetting around the world; you’re meeting interesting people. There must be any number of topics that you could have put time and energy against. Why talent?

Barton: I have this rule of meeting two CEOs or government leaders or social-sector leaders a day, which I’ve done for the last nine years. One of the questions I ask, particularly CEOs, is, “If there are three things that you could teach your younger self, what would they be?” What I’ve found consistently across countries and sectors is that CEOs say, “I would have spent more time on people. I would have removed people faster. I would have pulled people up faster. And I would have spent more time with people.” It was consistent. The most scarce resource is talent. We are awash in capital. It’s talent that you need to drive it.

The book The War for Talent, which came out probably 17 years ago, is a really important piece of thinking and work.

London: I was going to ask you about The War for Talent because that was quite a significant book at the time. It argued that hiring and retaining extraordinary talent was going to be like the next frontier of competitive advantage. So, here we are, pushing 20 years on. What’s changed? What’s different, if anything?

Barton: I think they were right. I think they were ahead of their time, if you will. There are a couple of things that make it particularly apropos now. One, as I said, is I think we have a huge amount of capital in search of people and ideas for people.

London: Financial capital?

Barton: Yes, financial capital. It’s talent that people are looking for. I think the other big shift that has occurred, and it makes this very different than what we saw nearly 20 years ago, is the analytics that we can now do on the talent side.

The amount of money that’s gone into digital analytics on talent has just exploded in the last five years. I think we can now use that. We can use it to ensure that we’re recruiting the right people. We have a better sense of predicting who will leave. We’ve got a better sense of who creates value within organizations. We can be much more granular about that. The whole analytics around people has changed.

I would argue it’s very similar to what we saw for CFOs 50 years ago. A big reason we went from accounting personnel to CFOs is because of tools like Lotus 1-2-3 and Excel spreadsheets. You could do scenarios with the financial capital, with expenses, to see what might happen. This, I think, elevated the role [of finance] and required a CFO because you could do those sort of things. We now can do that increasingly with talent.

There always will be a need, by the way, for the intuitive, the gut. I don’t think one can ever eliminate it. There was a rumor that we [McKinsey] were hiring people without interviewing anyone. We are using artificial intelligence to help us screen résumés, but we’re going to, at least for quite some time, want to see people and interact with them.

Even so, there’s a big shift that we can do a lot more with the analytics to be able to pinpoint and find people we wouldn’t otherwise be able to find and help people progress faster than they otherwise would.

London: One of the recommendations in the book is the “G3”—this idea that, at the top of companies, there should be a group of three executives: the chief executive, the CFO, and the chief human-resources officer [CHRO]. Can you talk a little bit more about why that’s important and how it works?

Barton: Sure. Our Strategy Practice has found that organizations that reallocate capital more than the average—which means you’re taking capital away from a business unit, which is a very difficult thing to do—outperform organizations that just look at last year’s budgets and add several percentage points, which is what most organizations do. It’s the same for people. You can’t separate the capital or expenses from people. People go with that capital. Too often, we’re thinking about people as an afterthought: “Well, let’s make this investment; let’s make this bet; let’s shift our business towards this area.” And then as an afterthought, we think about the people. You can’t do that. The type of people you have [within the organization] may affect how much of a shift you want to make. It can’t be a derivative; it has to be part of coming up with the answer.

There’s no business plan without a talent plan. I’ve stolen that [phrase] from Steve Schwarzman at The Blackstone Group. He introduced it into the organization when he hired Sandy Ogg, who was CHRO at Unilever, as an operating partner to come in and help think about the financial plan for a company that they bought.

You have to have the people plan go with the financial plan or it doesn’t work. And be explicit about it.

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Here is a direct link to the complete interview.

Dominic Barton is McKinsey’s global managing partner, and Simon London is a member of McKinsey Publishing and is based in the Silicon Valley office.