Recently we looked at two different approaches to developing talent:  paying premiums in compensation packages and investing in a strong internal culture. 

Yesterday  John Mack, Chairman and CEO of Morgan Stanley told his shareholders that he has to pay employees well to keep top talent and grow the business, but he doesn’t see the ability to sustain that into the future.  The average bonus paid per employee in 2008 at Morgan Stanley was $143,000.  They have seen this as the cost of attracting top talent to the firm. 

The problem is that this is expensive and difficult to sustain, especially for huge companies the size of Morgan Stanley.  Mack referred to a phone call he had with a hedge fund manager who told him:  “I can hire anyone from you (Morgan Stanley) or Goldman Sachs…”, to which Mr. Mack had no real answer.  The chairman and CEO of a Fortune 100 company admits that he has no real clue about how to keep top talent when faced with an extension of his own strategy, which amounts to a bidding war. 

Here’s an idea:  pay people fairly for their talent, but don’t try to flatter their egos with excessive money.  That attracts the wrong kind of people.  Instead, focus on developing a team of people who embrace deeply what the company is about and are trained or equipped to deliver on that core mission.  Developing top talent is not really a money game unless you have deep pockets and are looking for mercenaries; it’s actually a discipline that top managers pursue and hone over time to produce sustainable results.