Talent Management in the Corporate Sector
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A Talent Management
Talent management is the process that emerged in 1990 and continues to be adopted, as more companies came to realize that their employees' talent, skills drive their business success. Companies that have put into practice talent management have done so to solve an employee retention problem. The issue with many companies today is that many organizations put tremendous effort into attracting employees to their company, but spend little time into retaining and developing talent. A talent management system must be worked into the business strategy and implemented in daily processes throughout the company as a whole. It cannot be left solely to the human resources department to attract and retain employees, but rather must be practiced at all levels of the organization. The business strategy must include responsibilities for line managers to develop the skills of their immediate subordinates. Divisions within the company should be openly sharing information with other departments in order for employees to gain knowledge of the overall organizational objectives.
Talent management refers to the process of developing and integrating new workers, developing and retaining current workers, and attracting highly skilled workers to work for your company. Talent management in this context does not refer to the management of entertainers. The term was coined by David Watkins of Softscape published in an article in 1998. The process of attracting and retaining profitable employees, as it is increasingly more competitive between firms and of strategic importance, has come to be known as "the war for talent."
IMPORTANCE OF TALENT MANAGEMENT IN US CORPORATE SECTOR
US sector always want to grow and improve their system and processes must focus on people practices that allow or foster their growth and improvement. The best practices are known. The key variables (leadership competencies, experience and skill, interest rewards) that motivate people to succeed have been identified and successfully put into practice. Talent Management is no loger a cutting-edge field being solely tapped by pioneers. It is a viable path towards and improving organizational performance.
Integrated, strategically aligned human capital asset management systems have provided significant economic benefits to companies that have embraced them as ongoing processes instead of one-time events. Research done on the value of such systems to companies consistently finds benefits in these seven critical economic areas: revenue, customer satisfaction, quality, productivity, cost, cycle time, and market capitalization. This research clearly shows that adopting and investing in best-practice talent management systems results in bottom-line improvement in each of these key areas:-
1) Increase Revenue
It was initially thought that companies that make more money were associated with better talent management practices only because they could afford them (.19 correlation), but the 2001 Watson Wyatt Human Capital Index Study showed that talent management practices actually increase financial performance (.41 correlation).
According to Watson Wyatt's research 15% of profit performance is driven by:
- Management participation
- Open management style
- Taking some risks, but not too many
- Top managers spending 20% of time with customers
- Around 20% of top management should be outsiders
- Management training is deemed important
- Top managers are effectively incentivized
- Succession planning is done
- A good appraisal system is in place
- Employees get feedback
In addition to supporting Becker and Huselid's 1998 results, the 2001 Watson Wyatt Human Capital Index study showed precisely which HR practices have an impact on the bottom line. 49 specific HR practices across 6 dimensions played the greatest role in creating shareholder value. The research quantified exactly how much an improvement in each practice could be expected to increase a company's market value. For example, a company that makes a significant improvement (one standard deviation) in all of the practices categorized under "Total Rewards and Accountability" should see its value improve by 16.5 percent, and a significant improvement in 43 key HR practices is associated with an increase of 47 percent in market value. Results included:
- 16.5% impact on company market value from total rewards and accountability
- 9% impact from a collegial, flexible workplace
- 7.9% impact from recruiting and retention excellence
- 7.1% impact from the integrity of communications
- 6.5% impact from the implementation of focused HR service technologies
- 33.9% loss from non-prudent use of resources
Careful inspection of all the data shows that for every available correlation calculated over time, the relationship between past HR practices and future financial performance is stronger than the relationship between past financial outcomes and future HR practices. This is the first study to show that HR practices actually increase financial performance (.41 correlation) instead of inferring that companies that make more money can afford better HR practices (.19 correlation).
Given companies of comparable size, those who's CEOs exhibited more emotional intelligence competencies showed better financial results as measured by both profit and growth.
The divisions of leaders with a critical mass of strengths in emotional intelligence competencies outperformed revenue targets by a margin of 15-20 percent.
2) Customer Satisfaction
Knowing and using the critical competencies associated with success creates results.
The 1998 Watson Wyatt study, Competencies and the Competitive Edge, showed that when an organization identifies and communicates the core competencies that it needs to be successful in the present and the future, it has developed a powerful tool to help meet its goals. Competencies define and communicate an organization's strategy and help employees to understand that strategy and achieve its goals. The many roles that competencies can play in an organization include:
- Articulating what the organization values
- Providing a common language for employees and managers to describe value creation
- Establishing a new paradigm for human capital management programs (organizational levers)
- Focusing on the development of the individual instead of an organizational structure
- Linking pay, promotions and growth directly to what the organization values to be successful
- Guiding employees and managers to what is expected and how value is defined even in times of dramatic change and restructuring
Competencies serve as a powerful communication vehicle to focus all members of the organization on the skills and activities that will create both value and wealth. Competency-based programs can make a difference to the bottom line. Analysis of the financial data clearly shows that companies with competency- based programs perform better in the marketplace. Such programs help focus the organization and all the individuals in it on what they can do to add value to the organization.
Contributions are role-related rather than position-related. Adopting this view of contribution to value will help organizations think differently about their human resource and development programs. Organizations can focus on competencies needed for the future and identify the roles that employees do and must play.
Programs that build employee commitment can bring great returns. Data from this and other Watson Wyatt studies clearly demonstrate that both individual and organizational performance increase when employees are committed to their companies. Ensuring that organizational levers that build employee commitment are in place and working will affect the bottom line. This was most notable when the competencies focused on attributes and behaviors that promoted customer satisfaction.
Training is important, but it is no substitute for good management. A large majority of the organizations participating in Watson Wyatt's study identified training and development as the driver of future corporate success. The high-performing companies identified it slightly more often than the others.
Putting people first by adopting high performance management practices translates into improved morale, more innovation, better customer service, higher productivity, greater cost reduction, greater flexibility, and increased skills development.
3) Improve Quality
Motor vehicle manufacturing firms in US implementing flexible production processes and associated practices for managing people enjoyed 47 percent better quality and 43 percent better productivity than firms relying on traditional mass-production approaches, according to a worldwide study by Wharton School's John Paul McDuffie.
Overall financial performance improved 3.8% per year for ten years when companies stayed with traditional talent management practices, 6.8% when they realized they needed to re-design their talent management practices, and 10.1% when they launched a completely new talent management system
Watson Wyatt's 2002 European Human Capital Index study shows that 36 key human capital variables (practices and policies) are associated with an almost 90% increase in value.
4) Increase Productivity
Initial research on 740 companies' HR practices found that those using high performance work systems (HPWS are defined as integrated talent management practices) had economically and statistically significantly higher levels of company performance. One standard deviation of improvement on their bell curve of integrated talent management systems was associated with changes in market value from $15,000 to $60,000 per employee.
Employee productivity was calculated as the logarithm of net sales per employee using gross rate of return on assets (GRATE), which is less sensitive to depreciation and other non-cash transactions, and Tobin's q, a future-oriented and risk-adjusted capital-market measure of performance that reflects both current and anticipated profitability and often mirrors the price that the market will pay for intangible assets (goodwill).
Further research that included three US surveys and the experience of more than 2,400 companies continued to show significant impact of systems that select, maintain, develop, and reinforce employee performance on both market-based and accounting-based measures of company performance (while statistically controlling for R&D investment, industry market changes, capital improvements, sales growth trends, etc.). Moving from the 60th percentile of integrated HPWS to the 80th percentile improved market valuation by $20,000 per employee. This reflects both operational excellence and alignment with the company's strategy. When the elements are present, but not aligned with the company strategy there is a 27% drop off in measured gains.
Gallup Management Journal reported the following in 2001:
•19% of all employees are actively disengaged from their jobs
•55% of all employees are not engaged in their jobs and
•26% of all employees are engaged in their jobs
at a cost of $292-355 Billion per year to the US economy.
Great people management equals great shareholder value: European companies with the best human capital management deliver around twice as much shareholder value as their average competitors.
5) Reduce Cost
ASTD and SHRM studies companies that is renowned for their ability to retain top talent (Linbeck, Kennedy& Rossi, Zachary, Dow Chemical, Edward Jones, Great Plains, Sears, and Southwest Airlines). One key finding was that all of these companies implemented competency-based position profiles so that employees understood the skills and abilities required to move into leadership positions.
They must also avoid wasting their money on bad human capital investments:
The 2001 Watson Wyatt Human Capital Index study showed precisely which HR practices have an impact on the bottom line. 49 specific HR practices across 6 dimensions played the greatest role in creating shareholder value. Additionally, one dimension, "Prudent Use of Resources" identifies six practices that diminish shareholder value (e.g. training that is not connected to the business objectives and not evaluated for ROI).
A new book shows how Microsoft, Intel, Nokia, Starbucks, Singapore Airlines and 20 other world-class organizations are luring and holding high-quality employees. One senior executive said, "Microsoft has a market capitalization of $450 billion, the largest in the world. If you add up every desk and chair, every computer, every building, every piece of land, everything we own, including the $17 billion or so we have in the bank, it comes to about $30 billion. If you then add in things like goodwill and other financial assets, maybe you'll come up with another $70 billion, if you really struggle. But that means that there is $350 billion more that people have given us credit for that is not there. What is it? Well, it's the stuff in smart people's heads." With that knowledge Microsoft has built and maintains a human capital management system very similar to Mundo Strategies' system to prevent employees from wanting to leave the company even as the stock took a beating in the past few years.
Supervisors who received training in how to listen better and resolve employee problems found that lost-time accidents were cut by 50 percent, formal grievances were reduced from 15 to 3 per year, and productivity goals were exceeded.
Retention is one of the more obvious areas that effective talent management practices can affect. What attracts and retains high performers?
79% stay because of opportunities for advancement
69% stay because their job is redesigned
65% stay because they are learning new skills in their current job.
Why do high performers resign?
56% leave because they are dissatisfied with company management
56% leave due to inadequate opportunity for promotion
50% leave due to dissatisfaction with pay
6) Reduce Cycle Time
There is very little research into the impact of talent management practices on company cycle time. One classic work on cycle time showed that steel mini-mills using a high-commitment approach to management required 34 percent fewer labor hours to make a ton of steel and had a 64 percent better scrap rate than mini-mills using a command and control approach.
7) Increase Return to Shareholders & Market Capitalization
The five highest return to shareholders from 1972-1992 (Southwest Airlines Co. 21,775%, Wal-Mart Stores, Inc. 19,897%, Tyson Foods, Inc. 18,118%, Circuit City Stores, Inc. 16,410%, and Plenum Publishing 15,689%) differentiated themselves from their competitors and the market only through the way they managed their people during the infancy of talent management.
Whereas at the start of the 1990s studying its earnings and fixed assets and adding a token amount for goodwill invariably gauged a company's stock market valuation, by the end of the decade a seismic shift had taken place. When accountants Ernst & Young came to look at the issue, they found that the largest slice of most companies' market capitalization was held in intangibles - primarily, the talent, knowledge and teamwork of its staff. In high-tech companies like Nokia, the percentage was as high as 95 per cent; but even 'old economy' stalwarts like BP, despite its huge investments in oil platforms and exploration equipment, notched up a significant 74 per cent.
The upshot was that even companies operating in the same sector with similar earnings could experience widely differing stock valuations. Those ignoring the new emphasis on 'intangibles' invariably found themselves penalized by the markets.
Watson Wyatt also reported that a 26% increase in market value in 2000 was driven by common talent management best practices:
- Use of knowledge and contract workers
- Recruiting excellence
- Consistent pan-European HR practices
- Good union-management relations
- Lack of hierarchy, clear leadership
- Teamwork and 360° feedback
- Customer-focused environment
- Sharing information with employees
The difference between a non-strategic HR system and one that has removed the barriers to performance are dramatic. Improving the relative sophistication of the HR system by adopting best practices does not provide measurable value (20%-60% adoption of a strategic HR system). Integrating the strategic elements of HR into the broader fabric of the organization provides a significant improvement in shareholder value (60%-80%).
When HR systems have adopted best practices and aligned those systems with business priorities and initiatives they return the greatest shareholder value (80%-100%).
The five-year survival rates of initial public offering showed that firms whose talent management practices scored in the top one-sixth of IPO firms had a 33 percent higher probability of surviving than those in the lowest one-sixth. Firms in the upper one-sixth in providing financial rewards to all employees, not just managers, had almost twice as much chance of surviving for five years, according to research by Theresa Welbourne of Cornell and Alice Andrews of Vanderbilt.
COMPETITIVE ADVANTAGE OF TALENT MANAGEMENT IN US CORPORATE SECTOR
Taking a systemic approach to talent
Getting the right people in pivotal roles at the right time should be nothing new to HR professionals, but done effectively, talent management can create longterm organizational success. Here, Lynne Morton and Chris Ashton show how to align talent management strategies to business goals, integrate all related processes and systems and create a "talent mindset" in organization.
TALENT MANAGEMENT (TM) IS more than a new language for old HR work, or just the next "hot new thing" for HR practitioners and managers to get involved in. For many organizations, it has become a strategic imperative. McKinsey research1 reveals that 75 percent of corporate officers were concerned about talent shortages and Deloitte reports that retaining the best talent is a top priority for 87 percent of surveyed HR directors. This need for talent - and, therefore, its expert management - is also driven by macro trends including:
• New cycles of business growth, often requiring different kinds of talent.
• Changing workforce demographics with reducing labor pools and, therefore, a talent squeeze.
• More complex economic conditions which require
segregated talent and TM.
• The emergence of new enterprises which suck talent from larger organizations.
• A global focus on leadership which is now permeating many levels of organizations.
The strategic importance of talent management:-
On the basis of substantive research undertaken for our forthcoming report , they argue that good TM is of strategic importance and can differentiate an organization when it becomes a core competence - and when its talent significantly improves strategy execution and operational excellence. For example, imagine your company has the right talent in pivotal roles at the right time. What difference will these people make to revenues, innovation and organization effectiveness compared with having to operate without them? What is the cost of the lost opportunities - and the downtime and replacement costs of losing critical talent? What are the consequences of having to make do with the wrong kind of leaders and managers in the top two executive layers - or of not
having successors groomed and ready to replace them?
Yet generally, organizations still struggle with TM. According to research, three-quarters of business leaders have invested dedicated resources in TM - but most say they haven't yet felt the impact of doing so.3 Why not? Through one of the research, they tried to provide reasons by asking these questions:
• Why are they doing TM? Is it for the individual, the organization or both?
• What do they mean by talent - and talent management?
• What are their propositions for attracting and retaining talent?
• How do they manage and use the talent in their organization needs?
• How are internal roles and resources deployed appropriately to support TM?
• How is TM integrated across HR processes and with business planning and strategy execution processes?
Talent management at FDC - its focus, leadership, acquisition, retention, evaluation and tools - has evolved over five years, and continues to be a work in progress. The evolving talent plan aligns with goals, business strategy and their organizational implications.
The talent office annually reviews analytics and recalibrates talent to align with growth and other organizational needs. The current growth objective is 15 percent. "Ours is a numbers business, which tends to reflect a short-term view," says Annmarie Neal, senior VP, organization development. "Yet, we also have to build a leadership bench and talent pools, not around the execution capabilities we're known for, but on a customer-solutions focus and strategic foresight. Investments in talent aren't short-term - they need at least three-year horizons to see returns."
The key issue for FDC is to accurately identify high potentials with different capabilities such as strategic thinking, partnership building, results orientation, innovation and talent leadership - and then build succession depth. In effect, they are building talent balanced with buying it, guided by the notion of critical positions - that is, those positions that positively impact on the strategic goals or their execution.
They are now applying their processes for identifying, assessing and growing future leaders to our more junior, untested populations who we expect to be our next VPs." Technology, as Neal explains, has allowed them to do more - in depth and breadth - with the same headcount. TM initiatives at FDC include:
• Talent profiling of individuals.
• Conducting calibrations of business performance and key results behaviors.
• Assessing and forecasting succession depth.
• Implementing organizational assessment summaries to give status reports for leadership talent.
• Using just-in-time, action-learning programs and talent-sharing assignments.
• Developing "talent at risk" tools based on potential derailers and defection triggers.
• Introducing a talent scorecard with five perspectives, each of which has critical indicators - hiring.
As we see it, TM is a strategic and holistic approach to both HR and business planning or a new route to organizational effectiveness. This improves the performance and the potential of people - the talent - who can make a measurable difference to the organization now and in future. And it aspires to yield enhanced performance among all levels in the workforce, thus allowing everyone to reach his/her potential, no matter what that might be.
Though this interpretation of talent is inclusive, it strikes a strategic balance between performance and potential. Performance - historically, the primary focus of measurement and management - concerns both the past and the present, whereas potential represents the future. Our position assumes that potential exists, it can be identified and it can be developed. Here are specific ways that two case organizations inthe report define talent:
• Executive management team leaders, directors/VPs and A-player managers in all functions - plus Bplayers as potentials.
• Future business leaders with more strategic capabilities than just operational excellence skills -plus specialist talent able to execute business integration projects on time and to budget.
Clearly, there isn't a single consistent or concise definition. Current or historic cultural attributes may play a part in defining talent, as will more egalitarian business models. Many organizations acknowledge that talent, if aligned with business strategy - or the operational parameters of strategy execution - will change in definition as strategic priorities change. For example, in start-up businesses, the talent emphasis will be different to the innovative or creative talent needed to bring new products to market. Any definition needs to be fluid - as business drivers change, so will the definitions of talent.
What TM involves
Talent management is the integration of different initiatives, or constructs, into a coherent framework of activity. There are certain crucial components and a useful model for defining TM is to think of it in these key words:
• Ethos - embedding values and behavior, known as a"talent mindset," to support the view that everyone has potential worth developing.
• Focus - knowing which jobs make a difference and making sure that the right people hold those jobs at the right time.
• Positioning - starting at the top of the organization and cascading throughout the management levels to make this a management, not HR, initiative.
• Structure - creating tools, processes and techniques with defined accountability to ensure that the work gets done.
• System - facilitating a long-term and holistic approach to generate change.
Integrating TM through a system
It's worth emphasizing that integration is critical. Our research shows that without integrating TM activities,
the effort invested will tend to be dissipated with patchy results. Integration is knowing how all the pieces of TM fit together within a TM system. This will not operate in isolation from strategy, business planning and the organization's approach to people management.
In this sense, the work of talent management cuts across what has been traditional HR silos. If integrated, it functions in a more facilitative, OD-like nature. It will also reach higher up the organization than other HR initiatives, often attracting the attention of boards and senior teams. Similarly, TM reaches down the organization, to include new recruits along with tenured professionals. Lastly, talent planning must be done in parallel with business planning, creating a rich integration of people and strategy.
One way of achieving such system integration and alignment is the CRF Talent Management System (see Figure 1, above right). This systemic view of talent has five elements:
- Need - the business need derived from the business model and competitive issues.
- Data collection - the fundamental data and "intelligence" critical for good talent decisions.
- Planning - people/talent planning guided by data analysis.
- Activities - the conversion of plans into integrated sets of activities.
- Results - costs, measures and effectiveness criteria to judge the value and impacts of TM
Using this system can help TM become a strategic differentiator rather than a standard set of HR processes - if the right conditions, context, timescales and offerings exist in the first place. System integration and alignment ensures that TM efforts are rational and fit for purpose. Since the arrival of the current era of "talent" is widely acknowledged, it's not surprising that renewed significance is being placed on the management of that talent. And as talent continues to be viewed as a strategic differentiator, its management will take more of a strategic role. How fascinating it will be to take the pulse of talent management in the business community in another five years. We believe that while the management of talent will most likely become embedded in the fiber of cultures by then, the HR executives who led those initiatives will have achieved much more prominence.
OBJECTIVES OF TALENT MANAGEMENT:
There are some basic objectives which need to be fulfilled by the US corporate sector while applying Talent Management in the organisation and the objectives are:-
1) TO DETECT TALENT:-
It is very important for the US corporate sector to determine or detect their best talent for the organisation and this Talent Management helps the selector to select the best talent among the pool of various alternatives present in the organisation. Because the best talent helps in generating more and more good ideas which help organisation to achieve or innovate something new. As Talent Management helps in detecting best talent of the organisation within the organisation, this helps organisation to achieve their goal more efficiently and effectively which are set by the organisation.
2) TO DEVELOP TALENT:-
After detecting the talent in the organisation the US corporate next step for applying Talent Management is to develop the talent. It is not necessary that every person has a some talent in him or her but talent can also be developed through regular practice such as training, educating, providing them with the basic guidelines of the respective talent so that the talent of any person can be used for the effective utilization of the talent for the sake of the organisation which will be helpful for the organisation to came up with a new idea with the help of talent which will provide them with the best competencies among the competitor so that they can stay in long run of the business giving tough competition to their competitors and by developing talent US corporate sector tried to change the scenario of the employees by developing their talent and making them more confident, reliable and motivating factor for themselves and for others too which improves the behaviour and efficiency to work. There is a huge change when a person come to some hidden talent in him and this makes them to be more responsible to the work and take the work as natural as play
3) TO MAKE TALENTS MORE RELIABLE:-
Talent Management helps in making talent more reliable and US corporate sector use the Talent Management as their one of the important tool for making their employees talent more reliable as talent management helps in detecting and developing talent by the different mode they used while developing their talent they make the employees to be more confident in their talent which makes them more reliable which means that they will be confident in using their talent and organisation can rely on their talent while doing or making effective decision. Until and unless employees believe themselves in their talent then the organisation too will not have any faith on the employee and US corporate sector never keep such employees in the organisation as US corporate sector is best known for their talent and technologies and the technology is the result of the talent only.
4) TO PROMOTE TALENTS TO STRATEGIC PROJECTS OR TO HIGHER POSITION:-
Talent Management helps in promoting talent to strategic projects or to the higher position because US corporate sector that every talent should be given their own position. If the talent deserves higher position then he should be given the higher position irrespective of any other things which might be taken in account such as education or qualification. They think that if the post deserves that talent then that talent should be given that post. When talent is promoted it acts as a motivating tool for the employees to make them more responsible and work towards the achievement of the goal set by the organisation which also enhance their style and attitude towards their work.
5) TO BUILD TALENT NETWORK:-
Talent Management helps in building the talent network for the organisation and US corporate sector uses this as by that they tried to build different talent network by bringing all the different talent under one head and make them work together for the achievement of the goal of the organisation set by the organisation only. Building talent network helps knowing different talent of the people working together for the organisation and when people knows each other they start co-ordinating and co-operating each other and helps each other for the accomplishment of the target. Building talent network helps in improving the inter relationship of the employees among themselves and make the working condition more suitable for working together under one head.
6) TO RETAIN TALENTS WITH COMPANY OR GROUP:-
Talent Management helps in retaining talent with the company or the group and US corporate use Talent Management again as a tool for this purpose. Through talent management as they detect and developed talent in the employees they always provide them with new responsibility which enable a employee not to get bored from the monotonous of the work and always tried to engage the employees in work which something is new to them and by this employees also get interest in doing something new and they come to know many thing about the job and they were motivated to work and know more and more about the work which makes them more efficient and work more effectively and thats why US always try to retain their talent in the company and one reason behind this is that if they let them go this talent out of their company they will join some other company and will help them with more talent which will be the problem for the present company and the other company may create tough competition for the company and the present company knows very well the capacity and ability of their talented employees and they will never be loosing their talented worker. So its important and that's why US corporate sector always try to retain their talented worker.
What data do US corporate sector have for TM?
Annual appraisal dialogue - assessment of goals and Competences
Annual development dialogue - interests and ambitions
Past selection procedures data (as a student or candidate)
Participation in projects and assessment
Salary system data - promotions and rewards
Individual training plan
Who are talents?
Talents are high performers.
They have actual, valuable knowledge, specific experience and skills (or high potential to get it in a short time period).
Their contribution to success of the company is extraordinary (or high potential and motivation for it).
They have experience in strategic projects.
How US corporate sector recognize a top talent?
Gives sharp remarks
Shows will power
Varying interest in teamwork
Gives a demanding impression
Puts the job before everything
Broad thinking style
Has a unique perception of occupation
Is very time conscious
Has a high level of commitment
Has a phenomenal amount of energy
Shows a vibrant sense of creativity
Strives for continuous improvement
Reasons for Implementing Talent Management:-
Talent management has become one of the most pressing topics within HR organizations today. And it's no wonder, given the current economic environment. Under the cloud of a potential recession, the majority of HR professionals are under increasing pressure to cut costs. With this emphasis on belt-tightening, companies are trying to squeeze every last ounce of productivity out of each employee.
At the same time, the aging workforce has opened up significant gaps in their organizations' leadership pipelines, putting corporate performance at risk. And it's not only a shortage of top executives that businesses face; more than half of companies also cite shortages in directors and line managers.
These pressures have brought talent management to the forefront of corporate HR agendas. But to date, few organizations have progressed very far in their efforts. Within most organizations, the structure and processes are just beginning to develop. In fact, only 5 percent of organizations say they have a clear talent-management strategy and operational programs in place today.
The study was conducted in February, when a sample of contacts from HRE's database were e-mailed invitations to participate in an online survey. The final analysis included corporations, nonprofits, government agencies and higher educational institutions with 100 or more employees from around the world. The final count of qualified respondents was 976.
This research is important because talent management is not just a "new buzzword" applied to old HR processes. Rather, it represents a significant transformation in the HR function -- a new way of integrating processes and systems that, until now, have been stove-piped, and a new way of looking at employees in a more strategic way.
This special report gives HRE readers an exclusive first look at the key study findings. Included is information about how to organize for success, where to focus efforts to improve talent-management initiatives, and other important considerations about strategic processes such as performance management, workforce planning and competencies.
Leading the Charge? Who's
Once organizations realize they need an integrated approach to talent management , how do they organize for success? It is clear from our research that the involvement of a top business executive in driving or actively participating in the talent-management strategy is critical to its success.
However, only half of the companies interviewed have a top business executive actively engaged. These latter organizations have much more mature and effective talent-management processes. The other half of companies will likely struggle in their talent-management initiatives until they gain active support from an executive.
To create focus and ownership for integrated solutions, some companies are creating a dedicated role to oversee talent-management activities . Currently, about one in four companies has consolidated talent-management activities under a single executive. This person is typically responsible for leadership development, succession management, career development, performance management, recruitment, learning and development, and workforce planning. Not surprisingly, companies that do have a dedicated talent-management role are far more likely to have more advanced and successful talent-management programs in place.
In addition to deciding how to structure and manage the talent-management function, organizations must choose where to focus their efforts in order to improve talent-management initiatives. Since most processes are still in their fledgling stages, there is a lot of work to be done.
Developing the Next in Line
In the study, companies chose "leadership development" and "succession management" as the top two priorities for improvement . Given the current and impending shortages of executives and directors, most companies feel a sense of urgency around these issues.
Leadership development is still immature within most companies. Our survey found that a disturbingly large number (approximately half) of the companies interviewed have no formal process for leadership development.
These companies may offer only e-learning libraries or sporadic courses for managers or leaders. We find that this approach is of fairly low value to the company, since offerings are generic, often underutilized and inconsistently applied. Companies with this approach to leadership development are generally less effective overall in meeting their business objectives.
Fewer than one in five companies has a comprehensive leadership-development approach that we would consider either "focused" or "strategic." In a focused leadership-development approach, programs are customized and progressive, building on one another throughout a leader's career. The process is supported by top executives and aligned with the business strategy.
A strategic approach goes a step further by integrating leadership development with the company's overall talent-management process. Executives are fully engaged and hold managers accountable for developing employees. And, as a final step, programs are monitored and assessed by senior leaders. The overall curricula are continually improved to ensure successful development of future leaders.
Similarly, succession planning is still evolving within most companies. Our research found that only one in five organizations has a consistent, enterprisewide process for succession planning. And many of these companies focus only on top executives. Half of all companies have no process for succession planning at all. This is of great concern, given the number of impending retirements within most companies
• Need to have solution for key positions in case present manager leaves: competent successor
• Probability analysis of vacant positions in future - rule: before manager's retirement successor appointed, trained / coached
• Talent pool is open: there are different possibilities for talents - one is never planned only for one position.
The people problem or finding in talent management:-
Talent-management processes can't work if managers don't think it's important to develop their people.
Increasingly, companies view the ability to manage talent effectively as a strategic priority.
1) Yet I find that senior executives largely blame themselves and their business line managers for failing to give the issue enough time and attention.They also believe that insular "silo" thinking and a lack of collaboration across the organization remain considerable handicaps. Moreover, executives who think that their companies' succession-planning efforts are deficient don't, on balance, see talent-management processes and systems as the chief problem. The results include —which included in-depth interviews with 50 CEOs, business unit leaders, and human- resources (HR) professionals from around the world—suggest that the obstacles preventing talent-management programs from delivering business value are all too human (exhibit).
2) As one leader commented, "Habits of mind are the real barriers to talent management." Nearly half of the interviewees expressed concern that the senior leadership of their organizations doesn't align talent- management strategies with business strategies. "This is a real blind spot for our leaders—they don't realize the importance and significance of it," commented one HR executive.
Furthermore, 54 percent of those interviewed agree that senior managers don't spend enough time o talent management. "Senior managers aren't managing their time well or don't see the point of managing people and getting the best out of them," lamented one respondent.
Business line managers—the group responsible for a company's day-to-day operations—were found equally culpable. Fifty-two percent of the respondents identified an insufficient commitment to developing talent on the part of line managers as a critical barrier. Moreover, 50 percent observed that line managers were unwilling to categorize their people as top, average, or underperforming, and 45 percent felt that line managers failed to deal with chronic underperformance by employees. As one interviewee noted, "We recognize underperformance, but the challenge is what to do about it. We find it difficult to have the 'hard' conversations."
Silo thinking—focusing on the interests of one part of the organization rather than the whole—not only hinders the mobility of talent within a company but also under- mines the sharing of knowledge and the development of interpersonal networks (or "social capital") across the organization. It was singled out as a problem by 51 per-cent of the interviewees. "People will choose to resign and reapply for another division rather than signal to their manager that they are not committed," complained one European HR director. Succession planning and a lack of understanding about the organization's most critical jobs remained significant barriers for 39 percent of respondents, though interviewees blamed an inability to exploit the data they produce rather than corporate succession-management systems. "We do succession planning to an unbelievable degree," said another European HR manager.
"But once we do it, we don't use it. Never have we reviewed a senior vacancy and looked at the succession plan. It's almost done as just another tick in the HR box."
The findings show how the debate over talent management has evolved in recent years as demographic changes, deregulation, and the economic shift toward developing markets have intensified. A 1998 study, for example, found that managers were concerned with the ability of their companies to attract talent or to install efficient and robust systems in areas such as performance management, feedback, and recruitment processes.
The vast majority of the respondents, for example disagreed with the suggestion that the value proposition of their companies—whatever distinguishes one organization from another in the eyes of applicants—is an impediment to attracting quality people.
These recent findings, which are consistent with the results of an earlier European study,4 reflect what we see in our client work: talent management cannot be isolated from business strategy. Companies achieve the best outcomes by actively involving senior leaders in talent development during the early stages of strategy formulation. Those that rely solely on HR to drive their strategy for talent are missing an opportunity to align the behavior and capabilities of the workforce with the priorities of the business.Executives should find ways to make line managers unambiguously responsible for developing the skills and knowledge of their employees—by including people development as an explicit objective in annual evaluations, for example. Without compelling top-team role models, however, this effort would likely prove an uphill struggle.
Organizations should also make bold moves to break down internal silos by moving talent around (through rotations and international assignments, for example) and by creating formal networks to foster the relationships that promote the sharing of knowledge across divisions. As one business unit executive explained, "The top 500 [people] should be owned by the top team and not by the divisional freedoms."
3) Competencies Misunderstood :-
When an organization tries to build an integrated talent-management strategy, its leaders quickly realize that many of their design decisions are dependent on a clear definition of job descriptions, roles and required competencies.
Unfortunately, less than half of the companies surveyed have a standard process for using competencies in either recruiting or performance-management activities
Action plan for talents in year 2008
Younger talents: deeper insight of company, getting brighter knowledge from the field of work, participation in discussions, direct communication with top managers, challenging assignments, exposure and visibility
Experienced professionals: getting special knowledge from the field of work, help to transfer important knowledge, which is difficult to codify and store, nominations for projects, participation in conferences, direct communication with top managers
Managers, heads of units: deeper insight of Group, training in Project management, leadership trainings, nominations for projects, active participation in conferences
Top managers: MBA and leadership excellence programmes, active participation in conferences, coaching.
Issues related to Talent Managementor or Suggestion:-
1) Making the most of (US corporate sector) most valuable resource:-
The war for talent doesn't stop during a downturn - it gets worse. Forward-thinking organizations use innovative talent-management approaches to gain a competitive advantage, to help them ride out the downturn and create a strong platform for recovery and growth.
So at the same time as looking to identify and implement employee cost reduction initiatives, they need to find ways of holding on to and developing their top talent. Their human capital professionals help them in this.
Ernst & Young's global mobility team advises many of the world's largest global employers — as well as those just venturing into their first foreign country.
Their performance and reward professionals help them in designing compensation programs and equity incentives that really engage their key people. They help them to meet their executive tax compliance obligations, stay on top of regulatory change, manage their global talent effectively and improve their function's strategic alignment. So they get the support they need to manage their most valuable resource through challenging times.
2) SUCCESS FACTORS:-
As we know Talent management refers to the process of attracting, selecting, training, developing and promoting employees through an organization. Managers who focus on developing talent in-house ensure their employees have the tools and resources they need to perform well, receive proper compensation and transition to leadership roles. Internally developed leaders are valuable assets because over time they have developed the necessary core competencies and internalized company values.
Communication between supervisors and employees is also very important, specifically about the skills and knowledge that align with company goals. By communicating what senior leaders see as important future human capital needs, employees are more engaged and see a greater opportunity to invest in their own development.
These actions by management increase the probability employees will be more valuable in the future while improving the likelihood that the company will retain the talent it needs.
3)Process to detect talents:-
Selection by objective data (long list)
Interview with potential talent's manager (short list)
Interviews with talents: their ambitions, unused knowledge, willingness to work on different fields or abroad
Psychological tests to determine potential for professional or managerial career.
HR specialists coordinate actions and develop plans
4) Performance management:-
Performance management encompasses a number of different processes, and in one survey it is asked organizations to rate the maturity of some of these processes. The one area in which organizations are performing particularly well is in performance appraisals. While we all understand that such a process is vital, many organizations tell us that the appraisal process itself is not well understood or integrated into other parts of performance management.
For example, only 57 percent have a standard process for establishing employee goals, and only about 40 percent of companies consistently use cascading goals, wherein employee goals are aligned with manager- or corporate-level goals.
Finally, only one-third of companies say their employee-development plans are consistent across the organization. This is important because managers should all be using a standard approach to employee development. Fewer still, just one-quarter of companies, say they offer formal coaching programs for employees. (Interesting, in our High Impact Talent Management research, coaching was found to be the "highest impact" performance-management process of all.) The net takeaway here is that, although some aspects of performance management are widely adopted, it tends to be a "work in progress" in most companies.
4) Talent-Based Workforce Planning
In the context of talent management , workforce planning is one of the most strategic processes an organization can undertake. This process goes far beyond tracking open head-count requirements. It includes identifying critical job roles or skills, and then determining current and future talent needs for these roles.
Forward-thinking HR professionals will take this a step further by identifying business and demographic trends that may affect these job roles, and, finally, working to implement solutions to fill short- and long-term talent gaps.
Today, however, workforce planning is a fairly immature process in most organizations. Most companies are limited to using information on current open head count for planning purposes. A minority of companies (37 percent) develop plans for future head-count needs.
And even fewer organizations use information on current or projected skills gaps in their workforce planning. As a result, organizations are doing a mediocre job of identifying talent gaps. A miniscule number (1 percent) of organizations say they have an "excellent" view of talent gaps, and only 22 percent say they have a "good" view of talent gaps.
What this tells us is that today, workforce planning is not really a talent-management process; rather, it is still a process of consolidating head count for budgeting and reporting. Given that few companies are focusing on this area, workforce planning will likely be slow to evolve.
5) Adopting the Right Systems
As the talent-management market is becoming more clearly defined, nearly every software provider for HR systems has re-branded itself as a " talent management solution." How well are these systems being adopted and what impact are they having?
Our study gathered data on current and intended usage of several key systems, as described below. The data shows a "tower of Babel" in most large organizations. On average, companies are using three to four different, nonintegrated HR systems today. And they plan to continue buying more: Approximately half plan to purchase one or more new systems in the next 12 months, with an average budget of $610,000.
Integrated HRMS (HR and payroll system). The HRMS system is still the lynchpin of any talent-management infrastructure because it stores the core data model for employee information and organizational hierarchy. It is hard to find a sizeable company today that doesn't have some type of automated HRMS.
This was the first piece of the HR process to become automated, since employee information and payroll are so critical to the company. Overall, 80 percent of organizations are using an integrated HRMS, and 18 percent are planning to purchase a system in the next 12 months, either as a new system or replacement for an existing system.
While the HRMS is a "must have" system of record, it has not kept up with talent-management needs. Oracle, PeopleSoft, SAP and many others are just now making major progress in deploying integrated talent-management systems.
6) Recruiting/applicant tracking system.
These systems have become more sophisticated and now include interfaces for job applicants, recruiters, business and HR managers. They include workflow management, integration with Internet-based job banks and analytical capabilities to measure time-to-hire and quality of source.
Our study shows that more than 60 percent of organizations are using a recruiting/applicant tracking system today, the highest penetration after HRMS systems. And 23 percent are planning to purchase one in the next 12 months -- the highest purchase intent of any of the systems we studied. This shows that this market is not even close to being penetrated; there is an opportunity for significant growth in this area.
Compensation systems. Tracking and managing compensation has largely been addressed with in-house systems and highly complex Excel spreadsheets. Now, however, it is becoming a software market in itself. One of the drivers for a new breed of compensation systems is an increasingly heavy focus on pay-for-performance plans, which enable managers to establish complex pay rules based on individual performance, workgroup performance and business performance.
A large number (61 percent) of companies are running compensation systems today; however, we believe most of these are homegrown systems, often using Excel or proprietary systems. Currently the market for third-party compensation systems is small, and it appears it may be starting to accelerate, as 12 percent of companies plan to purchase a compensation system in the next 12 months.
Performance-management systems. While once considered an automated solution to paper-based performance appraisals, this market has redefined itself in the last two years. Many vendors are transforming their forms-driven performance- management practices to include tight integrations to other key strategic process areas, including goal-setting, assessments, development planning, competency management and succession planning.
Today, 53 percent of companies use performance-management systems, and 19 percent are planning to acquire one in the next 12 months. The market for these solutions has been hot. However such stand-alone systems are under threat of replacement by integrated talent-management suites, now available from a wide variety of vendors.
Learning-management systems. Every major LMS vendor has jumped on the talent-management bandwagon by developing a host of related functionality. Basic features include integrating learning programs with employee-performance plans. More advanced applications, which are being developed by most LMS providers, include succession planning, leadership development, and rating and ranking of employees for compensation decisions.
Today, learning-management systems are used by approximately 40 percent of companies, and 14 percent are planning to purchase a system in the next 12 months. Organizations shopping for an LMS can now buy an integrated talent-management suite from many of these vendors. But in most cases, the LMS is either purchased separately or already exists, leaving the integration of learning and performance management a project for the coming years.
Succession planning. Given the immaturity of succession management in general, it is not surprising that only 24 percent have a software-based system today. We believe that most of these systems are proprietary, in-house built applications that are only used by the succession-planning team.
However, as we saw earlier, succession planning is the No. 2 area slated for improvement in the coming year. Today's performance- and talent-management systems are rapidly gaining succession-management functionality, so we expect succession management to become more automated in the coming years.
Integrated talent-management suites. Finally, we see a tremendous amount of investment focused on integrated talent-management suites. The vision of a talent-management suite is a set of software offering all of the functionality stated above, plus advanced features such as career planning, workforce planning and complex analytics. By our definition, no one provider currently offers a complete solution for all elements of talent management , but each vendor is building upon its traditional strengths to extend into the other talent areas.
Adoption of these suites is still very small, but we expect the numbers to continue to grow as the market matures. With 11 percent of companies planning to purchase an integrated suite, the growth rate could exceed 60 percent over the next year.
We believe the market will trend toward these integrated suites. Just as we saw the market transition from sales-force automation tools to CRM systems, we expect to see the HR systems market transition from individual-process solutions to more fully integrated suites.
ARTICLES OF TALENT MANAGEMENT:
Talent in the commercial world is sometimes hard to spot. It is sometimes well hidden, covered by the daily pressures generated by the short, medium and long term results required by the business. It is massively important that this talent is uncovered to fulfil its potential.
According to a year long study conducted recently by a major Global consultancy - a study involving 77 companies and almost 6,000 managers and executives - the most important corporate resource over the next 20 years will be talent: smart, sophisticated businesspeople who are technologically literate, globally astute and operationally agile. And even as the demand for talent goes up, the supply of it will be going down.
We can be blunt about what will result from these trends: Its report is titled"The War for Talent". The search for the best and the brightest will become a constant, costly battle, a fight with no final victory. Not only will companies have to devise more imaginative hiring practices; they will also have to work harder to keep their best people.
So where do we start to fight the battle. Well securing the "home front" is the obvious place to start. There are four key battles to be won: The "Hidden Talent battle", the "Square Peg battle", the "Inertia battle" and the "Oppression battle". Let's deal with them one by one:
Hidden Talent: Often found lurking in the most unlikely places there are people within your organisation who leave most signs of their talent at home! In their life outside work these people hold down positions of responsibility (e.g. volunteer youth worker, rugby coach) or they display outstanding creativity (i.e. they are an acclaimed artist, performer, playwright etc.) At work however
these people are frequently categorised as "someone who does a good job and then goes home." The question remains: "Is this the limit of their ambitions?"
Square Pegs?: Sharing some of the characteristics of the hidden talent battle this one is a frustration for individuals and management alike. How many of your customer service people would be more suited to a job in the finance department? How many potentially outstanding Technical Support personnel are toiling in your warehouse? Is there someone in your Sales Team whowould be a superb marketeer?
The Inertia Battle: This challenge is as old as business itself and can be somewhat chillingly described as a "dead mens shoes culture". There is a success at the heart of this battle in that the organisation is retaining its people and engendering long term loyalty. The other side of the coin however can be extremely pernicious as talented people are likely to be frustrated as they find no outlet for their ambitions and little prospect of advancement. Almost certainly, they will leave!
Oppression: In this situation it is not that talent has not been identified but that Managers know exactly where it lies. Some managers then adopt a selfish or defensive strategy. The selfish manager will guard their talented individuals assiduously, knowing that holding on to these people makes them look good! The defensive manager is afraid of talented individuals and fears that they will be outshone by them! Either strategy leads to talented individuals being blocked, thwarted or even persecuted!
So what can be done? Well in order to win the "Hidden Talent" and "Square Peg" battles. Talent Management must be placed squarely among the Organisational priorities. Managers must be encouraged to analyse and identify the talent within their teams. Plans should be drawn up for the development of that talent and supported by effective succession planning. Rewards for managers promoting talent successfully can help to motivate this behaviour.
Winning the "Inertia" and "Oppression" battles is sometimes more difficult however with some bold organisational initiatives these battles can be won! The key issues here are the creation of fluidity and movement within the organisation. Many organisations ensure that no manager stays in one post longer than three years before they move to another department or region. This c
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