Talent Management as a Business Strategy.
A business cannot be successful without having the right people in the right place. Ashton and Morton said, “Getting the right people in pivotal roles at the right time should be nothing new to HR professionals, but when implemented effectively, talent management can create long-term organizational success” (Ashton and Morton, 2005, p28). Organisations have realised the fact that good employees are their greatest asset and are what gives them the competitive advantage in the long run. This objective made the HR professionals in these organisations concentrate on finding and building a talented workforce. With the unfolding of the 21st century, there is a growing awareness among HR professionals to focus more on identifying and retaining a talented workforce and making them actively engage in the business’ strategies. The term ‘The war of talent’ by Mc Kinsey & Company, from their research on talent management practices in various organisations, outlines that the high quality of an organisation’s talent will determine its success in the competitive business environment (Michael et al., 2001). Organisations have realised that talent is an intangible asset and better talent will enable them to perform better when compared to their competitors. This made HR professionals in the organisations emphasize and change their approach towards talent management. This essay will discuss how talent management plays a vital role in formulating the business strategies of an organisation and examines how an organisation with better talent can possess a competitive advantage.
In the last three decades, the changes in the workplace from industrial revolution to recent global economic crisis resulted in development and adaption of new talent management practices in organisations. Many new strategies were adopted beyond traditional processes in an effort to manage and engage a talented workforce formulating various business strategies. With the phenomenon of globalisation and increase in outsourcing of company operations to other countries, by the end of 20th century organisations were mainly concentrating on attracting a talented and skilled workforce to work for them (Michael et al., 2001). This evoked a fight termed ‘The war of talent’ between organisations in the process of gaining competitive advantage by attracting, developing, motivating and retaining the talented workforce. This realisation and changes in the business environment made talent management practices a top priority for organisations (Lawyer, 2008). Talent management is the process of identifying, selecting, developing and deploying new employees; engaging, motivating and retaining current employees and attracting a highly skilled workforce to perform valuable operations in the organisation (Berger and Berger, 2003). It ensures that all the people, processes and resources are in place to help the business deliver its strategy. From the research of Mc Kinsey & Company it can be analysed that companies which possessed talented people in their key positions were able to attain high performance and increase their organisation’s profits (Michael et al., 2001). It can be understood that the organisations which realise the significance of strategic talent management and manage their business accordingly will reap higher benefits and rewards1.
Traditionally, the evolution of human resource management is based on the fact that an effective and efficient workforce can improve strategic performance and functional excellence (Beardwell and Claydon, 2007). Talent management may be more a new language of old HR work which is committed to improving organisational performance by involving employees, line managers and HR practitioners (Frank, Finnegan and Taylor, 2004). Today, talent management has become a matter of strategic importance for many organisations. This need for talent management is also driven by macro factors such as growth of new cycles of business, changing workforce demographics, composite economic conditions and growth of new enterprises (Ashton and Morton, 2005). The growth of new cycles of business for an organisation often requires a variety of talent in order to out-perform in each cycle. This emphasises the need for integration of talent management practices within a business strategy and implementation of those processes at every level in the organisation. Also, with the reduction of labour pools due to a change in workforce demographics, there is every possibility of compression of talent in the organisation which evokes the need for talent management. The growth of new enterprises will also result in the attraction of a talented workforce from the large organisations, which will also stress the need for efficient talent management practices. Finally, the recent financial crisis and present complex economic conditions emphasises the need for a talented workforce in formulating crucial business strategies for an organisation at every level (Ashton and Morton, 2005).
At a macro level, another important factor that drives the need for talent management practices is a shift in global focus on development of leadership at every level of the organisation. This leads to a human capital centric (HCC) organising structure which includes integration of a business strategy with talent practices, emphasis on leadership, sharing of information, building of talent at every level and significance of performance management activities. In contrast, a structure centric (SC) organisation consists of traditional bureaucratic hierarchies where managers do not make any effort to engage, motivate and retain employees. It is a much more bureaucratic approach where only the manager talks at all the levels and never considers the need to make future leaders (Lawyer, 2008). This is the primary issue with many organisations, as many still follow a SC approach. But, the SC approach can still work provided management make modest effort to implement talent management practices. All it needs to do is to attract, retain and motivate the right talent within the organisation as it helps to attain high performance through the human capital, making it a competitive advantage factor for the organisation. However, for organisations which mainly rely on the competences of their human capital in order to excel in their performance adoption of a human centric approach is crucial. This is because organising is not just controlling of people costs but it is about how well the human capital (people) performs in their operations at every level, as they form key indicators of performance for an organisation (Lawyer, 2008).
The main issue with many organisations is that they emphasise more on attracting employees to their company but fail to concentrate on identifying, retaining and developing talent within the organisation (Frank and Taylor, 2004). Many companies which realised the importance of having a talented workforce adopted talent management practices to solve employee retention problems. Also, development of a HCC organising structure will help to identify and develop people within the organisation, making them future leaders. This organising structure also enables them to share information with other departments in the organisation which helps to gain knowledge across all levels of the organisation. In a HCC approach, performance management is one of the most important activities where employees are assessed based on their performance. The organisation’s development of talent and leadership qualities in employees at every level is handed over to line managers. Thus, a HCC approach will concentrate on integration of talent management practices with the business strategy (Lawyer, 2008). For instance, the business strategy should include duties for line managers and senior managers to develop the required skills and knowledge to their next sub-ordinates. When a talent management system integrates with a business strategy across all processes of the organisation it will not only help to develop a talented workforce across all levels but will also enable everyone in the organisation to realise the business objectives of the organisation as a whole (Lawyer, 2008).
It can be understood that talent management is a strategic and holistic approach to both the HR department and business planning, which creates organisational effectiveness. This enhances both the performance and talent of the workforce which makes a great difference in the performance of organisations currently and in future. Also, it aims to enhance performance in the workforce across all levels in an organisation enabling everyone to reach their potential targets. In order to achieve high performance and impose talent at all levels, organisations should possess the following five talent management imperatives which help to deliver the business strategy (Michaels et al., 2001):
- Imparting a ‘talent mindset’ at all levels of the organisation: To achieve organisational goals and objectives, it is important to build a strong talent management pool across different levels of the organisation. It is the process of building future leaders and imparting a strong belief of a ‘talent mindset’. People with a talent mindset will always try to excel in their operations and create new ways to enhance talent. They ensure integration of talent management practices with a business strategy so that the long-term objectives of the organisation are achieved (Michaels et al., 2001).
- Creation of ‘Employee Value Proposition (EVP)’: The creation of gaining EVP will help to bring talent into the organisation. It defines what value proposition the organisation provides its employees. People are mainly attracted to organisations for four reasons, becuase: it facilitates exciting and challenging work; it offers good remuneration and rewards; it is a strong brand; and it offers future growth and development for its staff. These factors help to create a winning EVP, thus contributing to employee retention and satisfaction. Figure 1 shows the creation of a winning EVP.
- Attracting a talented workforce: Organisations should always seek highly talented people who can deliver their business objectives effectively. Organisations mainly focus on infusing talent at every level of the organisation right from top management to line managers. In today’s competitive market, identifying talent will ensure companies increase their performance and provide a competitive advantage.
- Developing great leaders within the organisation: It is a fact that many organisations possess a talented workforce but they lack the skills to identify and develop them. The organisation should possess a business strategy which gives responsibility to line managers to identify and develop future leaders. This is the integration of a business strategy with talent management practices which helps to achieve the organisation’s goals and objectives.
- Differentiation of talent: Performance management strategies are vital in differentiating people in the organisation. Often companies focus on assessing the talent of their employees with various performance strategies and differentiate top performers from low performers. They provide top performers with high-profile roles and give good remuneration and rewards for the value they create. It is always challenging for organisations to handle low performers but they can overcome this though relevant training and development programmes. This differentiation will enable organisations to raise the performance of the top performers, making them feel a vital part of the success of the business (Michaels et al., 2001).
These imperatives may be simple but they fundamentally shift the way that employees in an organisation think about talent management.
The five talent management imperatives form the business strategy of the organisation and aims to achieve the organisation’s long-term goals and objectives. However, the proper implementation of talent management practices and beliefs also depends on pre-conditions such as knowledge of information technology, managerial work experience, employee engagement techniques, and work motivation mechanisms (Perman, 2010). The lack of these conditions will create difficulties in identifying and developing the right talent in the organisation and this will in-turn result in the shortage of talent. With changing demographics and technology it is important for organisations to impart new knowledge to their employees as it will help them to realise future potential growth. Managers should be responsible for motivating and engaging employees to formulate strategies, thus stepping towards developing future leaders. Also, the shortage of talent may be due to a traditional SC approach where scope of future talent is limited. Finally, culture issues and lack of a proper HR department in an organisation will result in a shortage of talent. It is important to set these conditions primarily in order to implement talent management practices and beliefs creating organisational effectiveness and excellence (Lawyer, 2008).
Performance management strategies in an organisation differentiate employees as either good performers or bad performers (Bacal, 1999). According to Deb, employees in an organisation, depending on their performance, can be broadly segmented into four types: super-keepers, keepers, solid citizens and misfits (Deb, 2005; p14). Both super-keepers and keepers exceed performance expectations and deliver operational excellence with their core competencies, whereas solid citizens work in accordance to their roles, meeting their set objectives and expectations. Misfits refer to under-performers who do not meet the employer’s expectations. It is often difficult to manage under-performers and this may result in roles being changed or weeding them out of the organisation altogether (Berger and Berger, 2004). Depending on the segmentation, the three main practices or beliefs of talent management are:
- Identifying, selecting and developing super-keepers within an organisation.
- Developing and integrating an efficient workforce (keepers) to the key positions in an organisation to provide effective functioning.
- Providing training and development to the employees who can contribute to organisational excellence (Deb, 2005).
The major difficulty in implementation of talent management practices and beliefs as a business strategy lies in the identification of the talent. It is always a sophisticated process of identifying a talented workforce within an organisation using performance strategies. Also, organisations adopting talent management practices concentrate mainly on attracting new people rather than retaining their talented workforce. Due to lack of motivation and employee engagement mechanisms, managers are not considering the fact of developing their next sub-ordinates into future leaders at every level of the organisation, thus leading to reduction of talent pools (Lawyer, 2008). To overcome the above-mentioned barriers, it is important for organisations to focus on increasing their talent by integrating with business plans and processes, which will help them to manage their employee talent efficiently and effectively. To achieve this, HR professionals should mainly concentrate on identifying and retaining talent, attracting new talent, developing leadership competencies, training and development activities, and performance management strategies (Deb, 2005).
During the current economic crisis, many organisations have realised the importance of talent management practices. Companies were happy to cut expenses by eliminating the workforce. In fact, the main problem regarding talent management is its inability to determine risk and uncertainty with respect to change in the competitive business environment (Perman, 2010). The two major risks involved in talent management are the mismatch of people and skills and the cost of lost talent (Capelli, 2008). According to Capelli (2008), to overcome the risks associated with managing talent the following four principles are potential HR practices (integrated with the operations management processes) to be considered. This includes:
- A make or buy decision which emphasises the development of internal talent or recruiting external talent.
- Managing demand for talent by growth estimating models and cost-effective methods.
- The return on investment for the experienced talent and reduction of uncertainty in enhancing future talent by training and development.
- Developing talent pool within the organisation with core competencies (Capelli, 2008).
Thus, Capelli’s four principles will help in overcoming the risks of talent management in association with HR performance management and succession planning processes.
In this competitive-based knowledge market, organisations possessing efficient and effective talent management practices will attain a competitive advantage compared to their competitors. Organisations have realised the fact that employees are the intangible assets providing sustainability and operational excellence. The integration of talent management with business plans and processes will help in building a talented workforce within the organisation at every level. It is worth emphasising integration of talent management practices with the business strategy, as this aims to deliver organisational goals and objectives. The essay outlines the fact that, without integration of talent management activities, it hard to obtain organisational excellence. The five talent management imperatives help in achieving high performance and enforce talent at every level of the organisation from top management to line managers. Finally, talent planning must be done in parallel with business planning, creating a rich integration of people and strategy which helps to deliver business strategy as a whole.
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CIPD website. http://www.cipd.co.uk/NR/rdonlyres/6101AA06-F0C7-4073-98DA-758E91C718FC