Talent management: What it is and why it matters
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Learn how the economic, marketplace and demographic changes impact on talent management Identify the issues facing your organisation Understand the broad impact of these forces on your talent management processes Identify where you stand on talent management |
Great people make organisations great
For decades, many organisations have been well aware that hiring and nurturing the best people is key to success. In the 1990s, these notions of talent management became more formalised and high-profile thanks partly to research by management consultants McKinsey, and the topic now ranks high on many human resources (HR) departments' agendas.
The McKinsey studies coined the phrase 'The War for Talent', which heralds the challenges faced by organisations in attracting, developing and retaining key players. Although this is not a new challenge, something happened during the 1990s that has focused organisations' attentions on addressing talent management issues - global growth and the rapid advance of technology spurred corporate interest in talent management and changed employment strategies.
Many companies undertook major recruitment drives. Even so, many had vacancies they couldn't fill due to skill and capability shortages. Organisations offered high sign-on bonuses to attract talent, while recruiters targeted high-quality candidates in an attempt to satisfy the needs of many organisations that wanted to increase their talent pools. Many organisations were losing key talent to dotcom start-ups, where they were tempted by promises of high share-related earnings from potential flotations.
But at the turn of the new millennium, the dotcom bubble burst and the global economy stumbled. Since then, global uncertainty and worries about potential instability in certain regions of the world has impacted on organisations' strategies and profitability dramatically. The major terrorist outrages of September 11, and the uncertainty that has followed, added to economic uncertainty. Consequently, recruitment rates have slowed, costs have been cut and headcounts in many organisations are constantly under review.
But - to use McKinsey's words - the war for talent will continue. Let's consider the reasons why.
Why talent management will stay at the top of the HR agenda
The following are the issues facing organisations both externally in the marketplace and internally in terms of strategy, structure and capability. Also the demographic changes that add a further dimension to the resourcing of talented staff are reviewed.
Marketplace factors
What drives talent management?
ARTWORK MISSING
Organisational issues and challenges
Demographic changes
Demographic changes will clearly influence an organisation's capability to manage its talent effectively. In Europe, generally, workforces are ageing, while population growth is slowing. There is evidence that for first time since reliable records began, the over-50s outnumber the under 16s in the UK.
McKinsey, in its study, said that in the US, the total workforce would grow by 12 per cent over the 10-year period from 1998 to 2008. However, the number of 25 to 44 year olds - the demographic segment that will supply companies with their future leaders -will fall 6 per cent during the same period.1
The changing age profile of many national workforces adds another dimension that must be factored into those strategies and plans that support organisations' talent management processes.
What will the impact be?
Given the changes in the global economy and taking the three factors outlined previously into account, it is clear that increasing the supply of talented staff is critical to an organisation's success. As is the continued development of such people.
Leaders and managers operate in an environment that is increasingly characterised by uncertainty, ambiguity and complexity. The statement 'people are our greatest asset' may be rhetorical, but, if organisations are to survive, grow and deliver real shareholder value, then attracting, developing and retaining key talent is a must-have feature of successful organisations.
According to McKinsey, the war for talent will continue.2 This is not a short-lived phenomenon, and both the demand and the competition to attract and retain talent will continue.
Actually, organisations' reliance on talent can be tracked back over 100 years. Research undertaken by Butler et al in 1900 showed only 17 per cent of all jobs required knowledge workers.3 Now, more than 60 per cent do.
As a result, organisations globally are facing a talent gap as the pace of economic, marketplace and organisational change outstrips the numbers and capabilities of competent and talented 'players' available.
These players, or future leaders, not only need to operate in today's environment, but must also be developed and retained to operate in tomorrow's world.
Talent management processes need to take into account that today's capabilities will not deliver tomorrow's organisational performance. Creating shareholder value still remains the key challenge for many organisations.
Thus external needs must be balanced with internal delivery processes if success is to be achieved. According to Senge:
"For the first time in history, humankind has the capacity to create far more information than anyone can absorb, to foster greater independency than anyone can manage, and to accelerate change far faster than anyone's ability to keep pace."4
What do talented people want?
The authors of this guide undertook research among a group of executives working in global organisations. They were asked about their experiences throughout their careers to date and their responses have been included in each section of the guide. The first such question was: What were they looking for when they joined an organisation? The results are shown in the table.
What is evident is that HR, as well as coping with a complex set of organisational and marketplace issues, has to deal with an equally challenging list of individual and personal needs. The ability to match organisational and individual demands and needs is one of the factors that separates the mediocre from the 'best-in-class' in terms of talent management.
This, accompanied by the need to cut headcount, deliver revenue growth, customer value and hit financial targets, is an increasingly difficult balancing act for organisations to perform. Achieving it relies heavily on the talent employed by organisations and, therefore, the processes they have evolved to attract, develop and retain their talent bases.
Just how prepared is your organisation to manage, and respond to, the issues created by the demand for a steady supply of competent and capable talent? The remaining sections of this guide offer practical diagnostics, checklists and ideas on how to design and develop a talent management process that is 'fit for purpose'.
Also, the case studies provide details on how four organisations have addressed the issues of talent management, and give very useful insights into what they have learned.
References
1US Bureau of Labour Statistics, Labour Force 2008, Monthly Labour review, November 1999
2Michaels, Handfield Jones H, and Axelrod B, The War for Talent 2001, Harvard Business School Press
3Butler P et al, A Revolution in Interaction, McKinsey Quarterly, No1:8, 1997
4Senge PM, The Fifth Discipline, Doubleday, New York, 1990
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Section one: What it is and why it matters Section two: Where does talent management fit in? Section three: How to manage talent Section four: Implementing the talent management process Section five: How to evaluate success Section six: Looking down the road ahead Section seven: The real world: case studies
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