Sooner or later, every executive faces a similar people problem: as part of a large corporation, you may oversee, say, ten regional vice presidents, store managers, or unit heads and must assign them effectively. You know that the adroit management of small variations in their preferences and skills can make a marked difference in their productivity—and in your company's earnings. Sorting out the possibilities for those ten managers confronts you with 3.6 million permutations (Exhibit 1). Multiply the challenge as you move down to your managers' direct reports and to their direct reports, and the complexity of the task becomes truly mind-boggling.

Faced with so many possibilities, most companies abandon the attempt to make rational choices and instead merely guess how best to assign employees to jobs. By treating people with diverse skills as an undifferentiated resource, these companies forfeit the chance to make substantial gains in productivity, profitability, and personnel development. Moreover, deploying employees more effectively is only the start. A manager who wants the best people to do their best work must anticipate the company's workforce requirements, provide training tailored to individual goals,...