Skillfully evaluating information relating to the best-fit placement of ability will tend to have three parts: analysis, psychology, and constraints exerted by principals (i.e. talent seekers and candidates). Accommodating any one of these in a placement process isn’t easy. Being good at all three is rare. Let’s look at each part below.
Before we begin however, let’s review the placement process in total which is as follows:
- Aggregation of intents
- Filtration of preferences
- Introduction of principals
- Prediction via evaluation
- Commitment execution
Although we view process sequentially, in reality our experience is palindromic in that a principal or agent-actor (i.e. placement facilitator) can enter the process at any point and proceed any way. This post deals with #4 of the placement process.
Let’s get to it!
To begin the analysis, the real causes of best-fit need to be identified. Success factors include supply and demand and outcomes. For this purpose, data can provide insight to how markets and their participants actually look. So if there’s a discrepancy between what a person’s ability ought to be valued at and what they are currently valued at, placement facilitators need to develop a theory about why value and pay have diverged. What’s going on that’s causing the gap? The analytical edge is embodied in the theory of what determines the fundamentals and why the ability is misvalued or misplaced.
The edge should also include what Benjamin Graham, the father of security analysis, called a margin of safety. You have a margin of safety when you buy a stock at a price that is substantially less than its value. As Graham noted, the margin of safety “is available for absorbing the effect of miscalculations or worse than average luck.” The size of the gap between value and pay tells you how big your margin of safety is. As Graham says, the margin of safety goes down as the price goes up. In other words, make your margin of safety as large as possible without losing attractiveness.
We’ll get into the Psychology (Part 2 of 3) in the next post.
Do you think it’s possible to value ability similar to how a stock is valued?