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Investor Upgrade

Investor Upgrade

     BROKERAGE ALERT:  We are upgrading the target stock price for Talntco following a recent meeting with the senior management team.  While other brokerage firms have recently written positively about the company, we now have insight into a less visible aspect of the organization which will distinguish their long term performance vs. their competitors in the industry.

 

Simply put, their people are better.

 

      The day with the senior executives followed the standard format of presentations on their financial strength, business growth strategies and preview of upcoming product introductions.   While the business plans and quality of the leaders presenting reinforced their recent success, what followed was unusual review of how they systematically build the talent capabilities which is central to their winning formula. 

 

 

STRAT-TAL PROGRAM

 

     Called the Strat-Tal program, it’s a disciplined and well engrained management practice that produces the superior quality of people throughout the organization.  We were asked not the share the particulars of this program, but the material provided did bolster our confidence in the ability of the firm to achieve its ambitious growth agenda and in the process, out-innovate and out-perform  the other competitors in this industry.

     The implications of a firm with a well conceived and integrated talent program also inspired us to revise our current economic valuation model.   We have our own proprietary system to translate business metrics and then model probability of future earnings growth for expected stock price appreciation.  After the Talntco visit, we wonder if we should extend elements of our evaluation to consider the talent management health of the firm.

 

NEW INDICATORS OF COMPETITIVE VALUE

 

We now believe the  underlying value of an organization to go beyond the traditional business metrics to include:

 

  • Pipeline – We usually assess the future business prospects of a firm’s marketplace success to rest in the robustness of its product pipeline.  We now add the robustness of the leadership pipeline in critical business areas.   Talntco provided sufficient evidence in its Strat-Tal program that there is a well tended pool of up and coming talent to fill roles vital to strategic growth plans.  We will begin challenging other firms to provide evidence of leader pipeline health, with a concern for those who may be over-reliant on externally sourcing leaders to fill gaps.

 

  • Retention – We’ve written extensively on the escalating cost of attracting new customers in this industry and the exceptional profitability of firms with strong brand value able to capture customer loyalty.  Our ‘leaky customer bucket’ model has been extended to consider ‘leaky talent bucket’ dynamics.  This is to separate firms with constant talent churn vs. the value-creators in the industry able to attract a higher level of talent and keep them engaged and growing.  We will begin probing firms for their retention ratio efficiencies in key populations.

 

  • Attractiveness – Firms that are well positioned in growing and profitable markets and on-trend categories receive higher marks in our valuation model.   Likewise, organizations with ethical, engaging, and innovative cultures are more able to translate talent potential into exceptional performance.  Talntco’s reporting of their employee survey results, particularly the benchmark leading scores on engagement and commitment to perform represent the data we will be looking to gather across the industry.

 

  • Asset Utilization – Our economic valuation model incorporates a number of metrics such as the efficient use of cash and capital discipline to judge the skill of management in maximizing hard assets.  We can now see augmenting this area with the effective deployment of focused learning and development to expand the talent capabilities within the firm.  Talntco produced an intriguing learning scorecard which reinforced their commitment to invest in growing employee capabilities for higher levels of responsibility.  As with management’s ongoing attention to hard asset investment and optimization, what impressed us most about Talntco was the consistency in development investments.

 

 

      Finally, we recognize that those of us on the ‘street’ who provide clients with investment advice need to go beyond our spreadsheet models and provide final verdicts drawing from our experience and professional judgment.  In the case of Talntco, it was the integration of the four talent factors of pipeline, retention, attractiveness and asset utilization which most convinced us of its power to fuel the company performance and future stock value.  The exceptional nature of this firm lies in how these four factors together will separate it from the rest of the industry.  Moreover, high performing firms have executives in partnership with their talent development professionals who care about these four dimensions. They track talent scorecard progress as intensely as we track EPS and stock prices.

© Kevin D. Wilde

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