Decades ago the sage Peter Drucker was talking about his work as a consultant to large organizations. He noted that senior executives would invariably tell him their organization had attracted extremely talented people, and this accounted for their success. He then went out to meet these extraordinary people. After meeting with many people throughout the organization, he came back to the senior people and told them that their work force did not seem significantly different from all the others that he’d encountered. They were about average as far as he could tell. The difference he noted was that some organizations operated in ways that enabled ordinary people to accomplish extraordinary things.

Charles A. O’Reilly and Jeffrey Pfeffer elaborated the same theme in their book Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People. They highlighted nine companies from various industries that had demonstrated a strong track record of success. Their fundamental conclusion was that these organizations had cracked the code on how to build healthy cultures in which people flourished.

While conventional wisdom would argue that success comes from being in the right industry, creating economies of scale, being at the forefront of technology, being a low cost provider or assembling extremely talented people; these companies had done just the opposite, and their results speak for themselves. Southwest Airlines receives more than 150,000 job applications annually for every 4000 available jobs. The SAS Institute receives 27,000 job applications for 900 openings and has an annual turnover rate of 2.3%.

Seventeen years ago the case for emphasizing raw talent was expressed by a team from McKinsey and Company in their classic report “The War for Talent.” Their conclusion was this: “in the new economy, competition is global, capital is abundant, ideas are developed quickly and cheaply, and people are willing to change jobs often. In that kind of environment all that matters is talent….Superior talent will be tomorrow’s prime source of competitive advantage.”

In that study, some of the top factors listed by managers as being necessary for winning the war for talent were things such as:

* Give high potentials the bulk of development opportunities
* Put high potentials into jobs prior to them being ready
* Eliminate the least effective performers

However, from our perspective this advice does not tell the whole story. We believe organizations can generally function well by hiring good, solid people as long as they ensure the organization has effective leaders throughout.

Read the rest here: http://www.forbes.com/sites/jackzenger/2014/10/31/by-the-numbers-superior-leadership-produces-higher-return-than-superior-talent/