“Organizations that want talent to drive strategy will look radically different from the hierarchical corporations of the past, the kind laden with multiple layers of managers”

Now CEOs must put talent and finance on at least an equal footing, while recognizing that talent isn’t a thing that can be deployed like financial capital.

Deploying human capital is very different from deploying financial capital. Money will go where you send it—and they won’t complain, of course. People, on the other hand, want to have a say in their fate. And at a time when talent is in such high demand, you must allow—and even encourage—people to have their say if you hope to attract the very best in your field. So, the successful deployment of talent is now largely a matter of creating an environment where the interests, ambitions, and innovations of people constantly shape the strategy and future of the company.

“The central premise of a talent-driven company,” says McKinsey, “is that talent drives strategy, as opposed to strategy being dictated to talent. The wrong talent inevitably produces the wrong strategy, and fails to deliver. Numbers like sales and earnings are the result of placing the right people in the right jobs where their talents flourish and they can create value that ultimately shows up in the numbers.”

A talent-driven enterprise must master four key elements:

1 Design For Agility

“First, design your organization for agility. By agility, we mean the ability to adapt swiftly to the unpredictable trends that disrupt and reshape your industry… Facebook offers a good model. Its people work in teams that form and disband as occasion warrants. It offers alternative career paths and compensation that directly reward value creation.”

McKinsey’s embrace of Agile isn’t simply following a fad. It flows from hard-headed financial reasons. In a related McKinsey report, we learn that “Agile units are over 1.5 times more likely to report higher performance compared to their competitors.”

2 Think Platform Not Structure

Second, firms should “think platform, not structure’’. This means replacing a fixed vertical hierarchy with an internal market that governs the deployment of talent. Traditional hierarchy gives way to a marketplace that provides talent and resources to a collection of small teams that cut across business lines and market segments.

3 Make Work Meaningful

Third, McKinsey urges firms to “make work meaningful… It’s not just millennials who crave purpose at work. A sterile workplace will never capture the full potential of any truly creative person.” Without meaning, “you will never attract, and keep, the great talent that you need in order to thrive in our unpredictable economy.”

At firms like Facebook and Haier, “employees think solution before profit…. There’s an assumption—which has been borne out repeatedly by the marketplace—that excelling at the former will lead naturally to the latter. The solution-first approach reflects an appropriately modern, flexible understanding of how quickly marketplace dynamics can shift, and both companies have shown an admirable ability to pivot quickly.”

McKinsey also points to Gallup surveys which show that less than 30% of U.S. employees feel a strong connection to their company and work for it with passion. Worse, almost 20% of employees are actively disengaged and trying to undermine the company. These findings should be seen as sharp warning to any traditional manager: top talent isn’t going to stick around unless they see meaning in what they do.

4 Understand Organizational Culture

Creating meaning will in turn depend on the organization’s culture. As CEO, you need to “understand your company’s social architecture, and measure and monitor it. This will be an ongoing concern, given that you’re never finished designing and redesigning the organization.”

McKinsey points to the need for very substantial progress in this area. Indeed, the C-suite itself recognizes its own shortcomings in dealing with people. According to a McKinsey survey of corporate directors, “Very few feel they are doing a good job developing people and ensuring that the company has a strong, healthy culture.” Moreover, they don’t have a good grasp of who’s adding value to the firm: according to a McKinsey study, “about 70% of senior executives are wrong about who is most influential in their organization.”

Challenges In Implementing Talent-Based Strategy

McKinsey notes three challenges for implementing a talent-based strategy.

First, companies will have to become more courageous. Daring to be ambitious and to make mistakes and then to learn quickly from them will let companies redefine themselves and create a new and improved offer for their customers.

Second, they must ensure the transformation is inclusive. Strong commitment from the top that is cascaded down through the organization, empowering all levels to deliver improvements is essential.

Finally, they must ensure the transformation goes far beyond technology. In our extensive experience – and backed up by our survey results – the biggest stumbling block to any transformation is usually the company’s culture. As an automotive OEM executive said: “The issue is not the organizational model, the issue is people and mindsets.

In short, the shift from a strategy-led company to a talent-first company requires fundamental changes in the way CEOs understand the very concept of management–the beginning of a new age.