Talent Density: Solution to a Tough Labor Market or Just Another Buzz Phrase?

In 2001, Netflix had its back up against the wall. The dot-com bubble had just burst and to stay afloat, Netflix needed to lay off a third of its 120 employees, letting go of the 40 lowest performers.

What seemed like a disaster turned out to be a gift. With only top performers showing up each day, the work environment improved drastically. The office buzzed with passion, energy, and ideas.

Reed Hastings, CEO of Netflix, wrote about this in his 2020 book, No Rules Rules: Netflix and the Culture of Reinvention, coauthored with INSEAD professor Erin Meyer. The experience, Reed said, made him realize the power of having a high concentration of top performers and gave rise to the idea of “talent density.” 

Since the book was published, talent density has become one of the hottest buzz phrases in talent acquisition, with everyone from Forbes to industry analyst Josh Bersin weighing in on the subject. In the simplest terms, talent density refers to the percentage of high-performing employees you have within your total workforce. Hung Lee, curator of the Recruiting Brainfood newsletter, also touched upon the subject in a recent LinkedIn post, calling it a way for businesses to increase “skills per capita.”

Whether you’re trying to fill the roster with A-players or increase the skills of the teammates you already have, read on to learn more about talent density. 

What talent density is and why companies are fascinated by it

Talent density is about building a dream team, one great hire at a time. It’s like putting together a basketball team composed entirely of superstars — say, Stephen Curry, Kevin Durant, Giannis Antetokounmpo, Nikola Jokić, and LeBron James. 

When you’ve got talent density as high as this, nearly every person on the team is a rock star. They come loaded with hard skills, soft skills, and motivation. In an article published on LinkedIn, Shannon Anderson, talent director at Madrona, likened it to the “10x rule.” This rule, she wrote, “suggests hiring five phenomenal people who can do the work of 50 average ones, which is crucial for startups that need individuals who can figure things out quickly with minimal oversight.” 

Talent density also seems crucial right now. We’re entering a period of low unemployment; many industries are facing talent shortages; and companies are trying to do more with less. There’s a heightened focus on quality of hire. 

For good reason too. A Longwood University study found that the top 5% of employees deliver 26% of an organization’s total output. When you hire one of these five-percenters, it solves a lot of problems for the company. It also inspires other top performers to do their best work. 

Hiring for talent density is about more than filling seats. It’s about hiring talent that will challenge the status quo and bring new ideas, skills, and ideas to the company, beyond what the role entails.

How to calculate talent density and define a top performer 

If you’re still wondering how to calculate talent density, consider this definition from Jan Tegze, director of technical recruiting at Tricentis:

Talent Density Ratio = Number of High Performers/Total Number of Employees 

Josh Bersin takes it one step further, explaining that if you have a company that is 100% high performers, you’re very dense. If you have a company that’s 20% high performers, you’re not very dense. “It’s easy to understand, but hard to implement,” Josh adds, “because it gets to the point of how we define performance, how we select people to hire, how we decide who’s going to get promoted, how we decide who’s going to work on what project, and how we’re going to distribute pay.” 

How do you define a high performer? While the definition will vary by organization or industry, high performers are generally employees who consistently exceed expectations, drive innovation, and embrace the company’s core values. 

To gauge whether an employee is a top performer, you could look at performance ratings, key performance metrics for each role, 360-degree feedback from peers and managers, and contributions to high-impact projects or initiatives. If your company uses performance ratings, for example, a high performer might be someone who rates 4.5 (out of 5) or above.

A roster of A-players may be a challenge 

When Hung Lee put up his recent LinkedIn post on talent density, he was flooded with comments from readers, many of whom felt the term was just the latest iteration of “hiring only A-players” or wanting candidates with the “laundry list” of skills. 

Whether talent density is a new concept or an old one with a new name, however, it’s not always a possibility. Very few organizations have the ability and resources to hire and retain only the best of the best. For starters, there is a limited supply of top talent. And the only way to retain this kind of talent is by compensating them very well (although it’s possible that by hiring top talent who can do the work of several employees, you could also save money).

Packing a company with only A-players, however, may not even be desirable. It could be another way of hiring experienced people with fancy pedigrees, limiting your talent pool to those “who look or think like us,” or went to the same schools. Biases like these could choke out diversity and inclusion. And when you focus narrowly on a limited set of skills or backgrounds, you often get homogeneous teams that lack the varied perspectives crucial for innovating and problem-solving. 

When your company relies on a smaller number of high performers, it can also put a lot of pressure on those employees. “This seems like a perfect recipe for burnout and turnover,” commented Andrew Lewis, head of talent acquisition at Worldly, in response to Hung’s post. At some companies, for example, employees who are not top performers are let go. 

This can lead to highly competitive and cut-throat environments. It also misses the point that employees are human beings who sometimes go through personal challenges that may temporarily affect their performance. And when companies gain a reputation for letting go of employees who do not meet the high-performance bar, it can hurt the employer brand.  

Create density with the talent you have 

While everyone wants to hire the best talent available, it’s also possible to grow your “skills per capita.” 

“Most organizations would end up performing better,” wrote Binoj Vasu, HR head of retail banking and head of talent at YES BANK, in an article on LinkedIn, “if they put in sustained efforts to handle and develop adequate performers in their teams.” 

Josh Bersin weighed in on this too, saying that at any given point, an employee may be among the “adequate” performers. But as they learn and grow and find the things they’re good at, they could become a top performer.

In other words, companies that make the investment in learning and development and offer employees opportunities to build the skills they need could also achieve talent density. They’d simply be getting there by a different route.  

Final thoughts: Most teams need all kinds of players 

While it may seem like every recruiter’s — and hiring manager’s — dream to have a team stacked with A-players, it’s not always what’s best for the team. Even the highest performers need employees who can help execute their plans and even so-called adequate employees can offer brilliant insights or innovate in unexpected ways. 

Going back to the basketball analogy, a team is more than its parts. While you may need a Steph Curry to make game-winning three-point buckets, you also need players who can set screens, fight for rebounds, and make the critical passes. “Talent wins games,” Michael Jordan has been quoted as saying, “but teamwork and intelligence win championships.”