What is Talent Management?
Talent management as it is being defined today is a set of strategies and practices to align performance and career goals with business needs and strategic direction of the organization. It encompasses attracting and hiring for fit, developing and retaining talent, managing performance and succession. An objective of talent management is to help individuals seek and perform satisfying work that adds value to the organization.
Talent management is broader than career development, incorporating career development planning and opportunities for retention and long range effectiveness of valued talent.
Issues Driving the Need for Talent Management Today
Several issues and their implications are driving the need for talent management in organizations today. They include:
-The war for talent
-Demographics
-Cost of turnover
-Changing expectations of employees
-Push for productivity
"The most important corporate resource over the next 20 years will be talent. It is also the resource in shortest supply."(Fast Company Magazine)
"Forty percent of corporate officers said company growth was limited because they don't have the right talent." (The War for Talent, Harvard Business School Press)
Competition is keen for skilled employees at all levels, and is not totally dependent on the economy. It's not about hiring any warm body, or even hiring the best and the brightest, but hiring for fit. Employers need people who can contribute immediately and add value today and who are flexible to continue to add value in the future.
Demographics are driving this competition, and will have greater impact in the near future. In the next ten years, the Employment Policy Foundation reports:
-23 million net new jobs will be created
-The supply of employees will be increasingly outstripped by the demand.
-A 33% shortfall in college graduates is expected
-The US population between 55 and 64 will increase by 54%, (eligible to retire) while those between 25 and 34 will decrease by 8.8% over traditional levels in that age group.
-The American workplace will be short six million graduates for new jobs and to replace retirees.
It is extremely expensive to replace valued talent. Estimates of turnover costs range from .75 % to 1.5 % of an employee's annual salary and benefits. If a company loses 100 people it wanted to retain, who make an average of $50,000 each, replacement could cost $5 million or more. This perspective makes a good business case for managing talented employees instead of replacing them. Savvy organizations know that the competition for good people will increase when the economy improves and they want to have good practices in place.
Employees today have different expectations from their work lives than past generations. Generations "X and Y" (those under 35 years) and many baby boomers are often driven by a set of work values such as continuous development, challenge, independence, work-life balance, and meaningful work. They are likely to leave their employer if these conditions are not met. Rather than blind loyalty, they will make a commitment as long as the work adds value to their careers.
There is a considerable push for productivity and performance improvement in most organizations today. A result of downsizing, reduced budgets, and technology, organizations have higher expectations for individual and team performance. One current trend this need has generated is forced ranking, which requires managers to identify their top 10 percent of employees based on performance, and their bottom 10 %. The lowest group is either let go or pressed for intensive performance improvement. Not a recommended approach to improve morale in the workplace, forced ranking is nevertheless a practice that emphasizes the fact that high-performing organizations will no longer harbor employees who aren't adding the level of value needed from everyone.
Determiners of Employee Engagement
Research by Right Management Consultants has identified some key employment factors that determine satisfaction, drive employee commitment, and increase intent to stay. Right studied Values, Culture, Leadership, the Work Environment, Compensation and Benefits, Development, and Brand Strength (the organization's reputation). The results show that Values and Culture impact all three outcomes: satisfaction, commitment and intent to stay. Some key aspects of all the categories were: (not in rank order)
-Feeling that their work makes a contribution
-Being on a winning team (image in the marketplace)
-Freedom to solve problems
-Long term career opportunities
-Competitive compensation
-Open and honest communication
-Opportunity to be entrepreneurial
-Effective management
-Honesty and integrity
It takes organizational effort to improve these factors.
Key Elements in Talent Management
Three elements are essential for effective talent management. First, managers must be committed to employee development. This means conducting career discussions, leading a meaningful performance planning and management process, and encouraging, not blocking, opportunities in the organization.
Second, employees must take responsibility for their own career development, using available resources for self awareness, career planning, skill development, and involving people who have the power to influence their opportunities.
And third, organizational systems must support development. Some include defining and communicating an employment brand and value proposition, performance management instead of just performance appraisal, compensation systems that reward top performance, development opportunities, mobility systems, workforce planning and other policies and practices. These communicate that the organization values its talent.
When an organization focuses on engaging employees, and on building a development culture, it wins the war for talent and becomes a compelling place to work.
Peggy Simonsen is Managing Vice President of Right Management Consultants, leading the International Talent Management Practice. Peggy founded Career Directions, Inc, in 1979 and was president of the career counseling and consulting firm until it was acquired by Right Management Consultants in 2000. Peggy is the recipient of the Career Development Leadership Award from American Society for Training and Development (ASTD). She is the author of two recent books: Promoting a Development Culture in Your Organization: Using Career Development As A Change Agent, (1997) and Career Compass, Navigating Your Career Strategically in the New Century (2000). Peggy can be reached at:
Right Management Consultants
123 N. Wacker Drive, Suite 2200
Chicago, IL 60606
phone 312-0441-8935
Fax 312-627-7333
Email peggy.simonsen@right.com