What is Talent Management and Why is It Important?

Table of Contents

1. Introduction
2. Where To From Here?
3. Transitioning
4. Retaining
5. Developing
6. Attracting
7. Planning
8. Talent management model
9. Some Of The Top Reasons To Invest In Talent Management

Introduction to Talent Management

You might have heard of the term talent management and possibly wondered if it is just another word for human resource management. Some view ‘talent’ as employees who are top performers or those with high potential, while others view talent as everyone in an organisation.  The CIPD (Chartered Institute of Personnel and Development, UK) goes on to define ‘talent management’ as,  

“…Systematic attraction, identification, development, engagement, retention and deployment of those individuals who are of particular value to an organisation, either in view of their ‘high potential’ for the future or because they are fulfilling business/operation-critical roles.”  

Human resource management would ideally include talent management, however, some organisations have human resource departments, which are highly transactional, instead of also being strategic and transformational.  This means that organisations might be meeting immediate needs, however, are not allocating time to strategically predicting what their people needs will be in the future.   Ultimately, talent management consultants exist so that organisations can more effectively address their goals and business needs in order to improve business performance in the long run.  A talent management plan will enable your business strategy through your people.  

Some Of The Top Reasons To Invest In Talent Management

Now that we have set a definition of what talent management is, below are some of the top reasons why talent management is important and why your organisation needs to invest in it. Employee motivation: create more reasons for employees to be attracted to the organisation, such as a higher purpose or meaning for employees. 91% of employees surveyed by Chandler and Macleod said that they wanted more than just money to feel engaged and motivated.

1. Attract top talent: Recruit the most talented and skilled employees available. When you have strategic talent management, you are able to create an employer brand, which organically attracts your ideal talent, and in turn, contributes to higher levels of business performance and results.
2. Continuous coverage of critical roles: an organisation will be prepared for gaps in critical skills and have a plan to address the critical roles and highly specialised roles in the workforce. This means that an organisation will have a continuous flow of employees to fill critical roles, which ensures operations run smoothly and your clients and stakeholders are satisfied. It also means that other employees are not left with extra workloads, which could eventually lead to burnout.
3. Increase employee performance: It is easier to identify ‘good fit’ employees, rather than making decisions in recruitment which do not work towards the ideal organisational strategy.  This can lead to less performance management issues and grievances. It will also ensure that the top talent within the organisation stays longer.
4. Engaged employees: an organisation can make systematic and consistent decisions about the development of staff, ensuring that the people you require it have the skills and development necessary and saving money on unnecessary development. Additionally, when there is a fair process for development, employees feel more engaged and this again increases retention rates and also ensures that the organisation can meet its operational requirements.
5. Retain top talent: well-structured onboarding practices create 69% higher levels of retention. This means that an organisation saves on recruitment and performance management costs in the long run.
6. Improve business performance: when employees are engaged, skilled and motivated, they will work towards your business goals, which in turn increases client satisfaction and business performance.
7. Higher client satisfaction: a systematic approach to talent management means that there is organisational wide integration and a consistent approach to management. This, in turn, translates to general communication and dissolving of silos within the business. When systems are more integrated, client satisfaction rates are usually higher, since they are dealing with fewer people and their needs are met faster.

  “Successful organisations like Apple and Google, renowned for a strong company culture and ideology, attract a workforce that doesn’t just work for a paycheque. Employees share the same beliefs and motivations and therefore invest more of themselves in achieving great results and contributing to the overall business success”.  

- Talent Management: The next wave, Chandler and Macleod.  

Talent Management Model

Talent management can include; talent acquisition (and recruitment), learning and development, organisational values and vision, performance management, career pathways and succession planning. While there are many talent management models, the elements of talent management can generally be categorised into five areas; planning, attracting, developing, retaining and transitioning.  

Figure 1. Talent Management Model

Planning

The planning stage of talent management is comprised of 3 key areas.

1. Understanding the organisational/business strategy
2. Evaluation and measurement/analytics
3. Developing a Workforce Plan

With any talent management approach, it is critical to be aligned with the broader organisational strategy.  The environment surrounding the organisation is also taken into account when assessing the organisational strategy.   Prior to developing the workforce plan, an evaluation of previous initiatives, an assessment of the workforce profile and talent performance and the behaviours to date, are carried out.  A workforce plan is then developed based on the current workforce situation and the future desired state. The workforce plan ensures that the right people, at the right time and with the right skills are employed and working towards the strategy.  In other words, the workforce plan translates business strategy into organisational talent needs.   Some of the areas, which are assessed in order to develop a workforce plan include:

Figure 2. Developing a Workforce Plan for Talent Management

The planning stage addresses needs across the organisation and is proactive, rather than reactive to ad hoc needs or the needs of only a few leaders or teams and divisions. The plan enables the organisation to become more integrated, rather than work in silos and to best use the resources available to it, including its employees.   Once the initial assessment or analysis is carried out, then; the talent required is identified, the timeline in which the organisation requires the talent and in what capacity (permanent, contractor, casual and so on).  This is where forecasting talent needs for the future commence.  

At this point, an assessment can be carried out if the talent is recruited externally for future needs, or developed from within, and whether or not there is enough talent internally and with the right skills to step into future or higher-level roles.   Developing a workforce plan is a continuous process, once the initial plan has been developed it is revisited when there are major changes affecting the organisation. Below is a sample of a portion of your workforce plan; identifying the roles required currently and in the future. 

Figure 3. Current and Future Roles- Workforce Plan 

Having a workforce plan means that an organisation can be prepared for changes within the organisation and that it is well prepared and resourced.  For example, if an organisation has several highly specialised roles, which are difficult to recruit for, a workforce plan will document the need for the organisation to develop talent internally for such roles (once the current talent leaves the role).  Without a workforce plan, critical and highly specialised roles may go unnoticed and therefore unfilled for 6 months or longer, thus affecting business performance.  

Case Example

A major hospital in the United States was concerned that employees would leave once a new hospital being built nearby opened its doors.  It commenced workforce planning and identifying its critical roles. After extensive analysis, the hospital identified that employees were satisfied with the hospital as an employer and retention rates were close to 90%, which meant that it didn’t need to take as much action to retain staff once the new hospital opened. (Case study was taken from Strategic Workforce Planning report, by The Conference Board, 2006.) Workforce planning can, therefore, be an approach to assess what is really going on in an organisation rather than basing decisions on assumptions.  It can also support an organisation to respond to external drivers and influences, rather than reacting.

Attracting

Attracting Involves:

1. Employee Value Proposition
2. Marketing
3. Talent acquisition
4. Consultants/Freelancers

Organisations that understand what their value is to potential employees, will often develop an Employee Value Proposition (EVP).  The EVP articulates to employees a realistic, yet aspirational statement of the value the organisation can offer to an employee. An example EVP from Hubspot is:   “We're building a company people love. A company that will stand the test of time. So we invest in our people, and optimize for your long-term happiness”.   The EVP forms part of the marketing to then attract the type of talent the organisation seeks to find.  A general approach used to develop an EVP, is to:

Figure 4. Development of an EVP 

Depending on the workforce plan and how much talent an organisation needs to attract, the marketing strategy is developed.  This might be as simple as an online notice of positions available, to hosting a stall at career or school fairs.  The EVP forms part of the marketing strategy, as does the general brand of the organisation.   Consider Apple again, many candidates apply to work for Apple because of the brand and its products.  Google as we had mentioned, is well known for its workplace culture in addition to being a popular brand, this makes attracting suitable candidates easier since talent will mostly seek out opportunities to work there, rather than need to be headhunted or for the organisation to excessively invest resources to attract candidates.  The more transparent marketing and the EVP is, the more likely an organisation’s retention rates will be higher.   Talent acquisition also forms part of the attracting element of talent management, and it is generally recruitment, which is carried out strategically.   Rather than asking, “Is this person a good fit for this role?” an organisation would ask,   “Is this person not only a good fit for this role, but also for the company as a whole, and for future roles they may inhabit?” – JP Medved, Capterra.   Since the workforce plan identifies talent acquisition requirements, it is already clear if recruitment will be focusing on external or internal applicants.  This would also include whether or not an organisation chooses freelancers or consultants rather than employees for some projects or roles.   Attraction is often the first point of contact a potential employee will have with an organisation, the impression that they have as a candidate will influence their experience of the organisation as an employer and possibly guide their decision to take potential job opportunities presented to them, or remain with the organisation. It is critical in attracting to provide a realistic overview of the organisation, and at the same time highlight potential and articulates through communication and the processes, which a candidate is taken through, that the organisation has something of value to offer to a candidate.

Developing

Developing Involves:

1. Onboarding
2. Performance Appraisals/Management
3. Learning and Development
4. Capability frameworks
5. Career pathways

Employees in a well-structured onboarding program are 69% more likely to remain with an organisation after three years. In particular, the first three months of employment are critical to determining if an employee will remain with an organisation and if they will be engaged and productive while they are employed.  This means that it is critical to create the best possible transition into the workplace and to clearly communicate business vision, culture and role accountabilities as soon as possible to new employees.   The structure of an onboarding program depends again on the talent needs identified in the workforce plan.  An example of this is using a tiered approach: a basic on-boarding program for all employees and an additional one specifically for leaders or managers.    

Performance management processes are critical to realigning talent with the job requirements, culture and overall strategy of an organisation. Typically performance appraisals are carried out annually, however, an organisation depending on their culture and needs could have more casual discussions on a bi-monthly or quarterly basis. Performance appraisals are conducive to clarifying expectations and also initiating and formalising development opportunities. Development of talent can include; leadership development, emerging leaders, technical development, team building or team development days, secondments, project work and on the job development. Depending on how an organisation chooses to define ‘talent’ they may focus some initiatives purely on employees who are high performing and with high potential, or they may include all employees.  Either way, part of the talent management process would ideally include processes, which are inclusive and fair, rather than meeting one need and as a result, isolating a large group within the organisation.  

One approach might be to focus development on critical roles, high performers and high potentials, and at the same time create clear pathways for all employees to have other opportunities to develop based on their situation and the organisational needs.   An organisation or leaders within it may also make networking opportunities available to employees or ‘talent’ as a form of development.   A few areas that some organisations consider when identifying talent is included in the table below. 

Figure 5: Typical traits of performance versus potential, by Kyle Lagunas   

Larger organisations will often develop capability frameworks in order to identify what capabilities roles require and what is expected of employees at a basic, intermediate and expert level. This then guides the development initiatives for an employee.   A capability framework can start to develop talent for succession planning; it supports the retention of employees and can also provide measures for performance. It also makes expectations clear to employees, articulate areas of development required to move into certain roles they may be interested in, and it makes the process of development and selection fairer and objective. Below is an example of a Capability Framework.

Figure 6. Sample Capability Framework   

Career pathways within an organisation, identify roles that talent could potentially step into once they have had the necessary development. This is a form of succession planning and an incentive for talent to remain within an organisation, knowing that there are clear steps in the direction that they aspire to.   Development of talent increases business performance, it contributes to an organisation’s continuous improvement and ability to meet changing requirements, and it can also support innovation and retention.

Retaining

Retaining Involves:

1. Culture
2. Remuneration strategy

Retaining talent includes aspects of Developing, which we have already discussed, and it also involves the intentional culture that is set by an organisation and its remuneration strategy.   Culture is made of many elements, it involves the talent acquisition process and the experience employees have when they first commence their employment, to when they start working on projects and are introduced to people across the organisation.  Role accountabilities, communication, and perception of being valued by the organisation all help to form the culture, and of most importance, the leadership team plays an integral part in culture, through setting the norms of what is and isn’t acceptable behaviour.   Culture is a continuous commitment and can be changed over time. This then ties into how attractive an organisation is to potential candidates, and retention rates of current employees as well as to how well the organisation's clients are dealt with and therefore business performance overall.  

Some of the elements that can be taken into consideration when evaluating the culture of an organisation are displayed in the model below.   

Figure 7. The Cultural Web, by Johnson Whittington and Scholes[/caption]   Based on the workforce plan, an organisation can identify what their remuneration strategy must be, in order to attract and retain the talent they require to achieve business goals.  Talent management involves the strategic use of recognition and rewards and is usually tied to identification of high performers and high potentials, as well as critical and highly specialised roles.   The importance of retaining top talent is critical because it can save on additional recruitment costs associated with hiring new employees, it can also save on the time it takes for a new employee to learn the job and start performing. Additionally, if an employee understands an organisation and its clients, and is a high performer or high potential, they have the capacity to significantly contribute to improving business performance and supporting it through times of change.

Transitioning

Transitioning Involves:

1. Succession planning
2. Internal mobility
3. Retirement
4. Knowledge management
5. Exit interviews

  Succession planning is part of the workforce plan and can take place prior to talent acquisition, however, it can also be done when there have been unexpected changes in the workforce. Succession planning is a proactive measure and takes into account the amount of time required to develop talent for a particular role, or to bring someone in externally. It will usually involve the assumption that a particular role will become vacant within the next few years, either because of retirement, the nature of the role having high turnover, or it being a stepping stone type of role.   Succession planning can also take into account internal movements or mobility or may plan for such mobility if identified as the most appropriate solution.  In order to keep talent within the organisation, it must have a strategy and processes in place, which allows for internal mobility. Development, remuneration and culture could serve as incentives for retention if an organisation is too small for such opportunities.   During the analysis of the workforce profile, if an ageing workforce is identified, appropriate measures would be put in place to plan ahead for the retirement of such talent. This could be in the form of transition contracts, such as working part-time for several years or taking on different responsibilities for health reasons (if required). Again, having this knowledge in advance to talent retiring means that as an employer, an organisation can be proactive and plan ahead for gaps in critical roles that will become available and can also support their employees in planning ahead for their future.   Understanding where there will be gaps in critical roles and when is necessary for best practice knowledge management. Often employees may leave with a limited notice period, taking with them implicit and explicit knowledge. Implicit knowledge being the harder of the two to obtain from other employees, means that there is information about the organisation, which is unable to be sourced from anywhere.   “As the Baby Boom generation of corporate leaders and experts approaches retirement, businesses in the U.S., Canada and many European nations face the loss of experience and knowledge on an unprecedented scale,”…“Younger workers can’t be counted on to fill the void, as they lack the experience that builds deep expertise. They also tend to change jobs frequently, taking their technological savvy and any knowledge they’ve gained with them.” - Diane Piktialis, The Conference Board   Lack of a knowledge management plan can result in a significant drain of business wisdom that decreases innovation, lowers growth capacity, and reduces efficiency in the organisation.   Having a plan ahead of time, and a reasonable idea of employees who will be transitioning, for various reasons, allows an organisation to implement a knowledge transfer plan prior to an employee’s transition elsewhere and retain valuable information.