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At its crude, talent management (TM) is a matter of anticipating the need for human and then setting out plans to meet it1 (Cappelli, P. 2008). In this short essay, I will be writing a response to the above proposition. Although the concept of TM recently instigated in the current economic conditions, it is rather evident that in most organisations where HR department fails to adopt the principles and practices of TM, it comes up short in terms of corporate performance when compared to a company that practices TM (this notion is clearly supported in fig 1 with reference to appendix 2.0).
NHS for example is currently at its early stage to embed TM. It has placed importance upon building an appreciation upon global best practice and tailoring it for effective application. The research conducted by chartered institute of personnel and development (CIPD) claimed that although, 'It is recognised that while building a robust and systematic methodology is critical in gaining ownership from stakeholders, the real benefits will only come through effecting cultural change evidenced in the adoption of a talent mindset" (CIPD, 2006). Refer to appendix 1 for full detailed report.
There are a range of problems company faces with workforce management. This include; shortage of talent, segmentation of workforce, management of risk and uncertainty etc. With an effective TM system, company can reduce these problems. As previously stated, the most common response to TM is to anticipate no needs at all; make no plans for addressing them rendering the term talent management meaningless. The second most common exist amongst big companies. They rely on structure-centric approach with complex and bureaucratic models which in the current era of volatile environment had failed due to inaccuracy and high cost. The new approach to TM takes into account the great uncertainty faced by business in current Labour market (Cappelli, P. 2008).
As such, my response will evolve around the best practices/new approach available to any organisation to achieve excellence in its talent management approach i.e. a suggested solutions to the HR crisis with regards to managing its workforce.
First, I am going to touch on the recruitment/development aspect of TM2. Recruiting was focused through various communication channels such as classified adverts, college placement offices, internal job post systems etc. All of which created a problem of preference and geographical limitation. However, due to technological advancement, companies have been able to contact wider audience of talents that meet its needs. An example is monster.com (the leading provider of online careers and recruitment resources committed to connecting organisations with individuals).3
Setting simply however, it is more cost effective to develop and retain management talent than recruiting from external markets. Research at Ernst and young estimated the average cost of replacement at $1 million (Atkins R. et al. 2004). As a result, companies should endeavour to train and retain staffs rather than external recruits. Although most companies predominantly smaller once would argue that provided an employee had been trained, what is to keep such employee from running to other companies with better offers? Well my answer to this would be there is no barrier preventing employees from taking deals that will promote their career paths. In fact studies by the consulting firm Watson Wyatt reported that, people who are recently trained decamp from the organisation to make more efficient use of those skills (Cappelli, P. 2008).
However, Peter Cappelli in his 'new way of thinking about TM model' tackles the risk involved in training employees to a degree of satisfaction. He developed what he calls a proposition akin to just-in-time concept i.e. a talent-on-demand framework. Within this framework are four principles. The make or buy principle clearly stating that, an optimal approach would be to use a combination of internal and external recruits. The challenge would be figuring out exactly how much of each to use. P. Cappelli recommended that organisations should strictly stay away from using long term forecast as the volatile market renders it inaccurate. Rather, it should focus on short term need for talent4.The second principle claims that firms needed to adapt to uncertainty in Talent Demand; one way is to break up development programs into shorter units rather than put management trainees through a 3 year functional program.
The third principle is to improve the return investment in developing employees; one way is to require employees to share in cost of development through voluntary hours i.e. hours spent on training will not increase employees payout. Employers have also been more inclined with ways to reduce development cost by keeping employees longer5 (P. Cappelli, 2008). The final principle requires firms to preserve the investment by balancing employee-employer interests. Perhaps, the main reason talented employees leave an organisation is due to discovering better opportunities elsewhere. As such, the key to preserving your investment in development is by balancing both parties interest; allowing employees to share in advancement decision is a good example as employees want prospects for advancement and control over their career6 (Peter Cappelli, 2008). Other models such as L.A. Berger's 3 main TM processes are also very good for an organisation to adopt7. A summary figure of this module can be found in appendix 2.2 followed by detailed note explaining what it represents.
I will now consider the issue of appraisal and performance management and its impact on TM. Talent Reservoir can also be used unchangeably with TM as its objective is to build a pool of high talented people capable of supporting organisations current and future business requirements (Berger, L.A 2004:5). Inside this reservoir are various talent assessment tools; one of which is performance appraisal (PA). PA exist to allow assessment for training needs, review past performances, set performance objectives etc. The aim of PA is to produce different type of appraisal that will allow individual to see themselves as doing the job better. There are various types of PA tools, two of which are; 360 degree feedback and forced ranking.
The latter will be touched upon in appendix 3. 360 degree feedbackallows for what has been missing in modern day appraisal; the opinion of colleagues and peers etc. 360 degree feedback allows for multiple angle of perception i.e. everybody working with a particular individual in a firm are required to give feedback on such individual usually through a survey. This model was developed further into a 540 degree feedback by allowing external agencies into the picture. PwC went extra lengths by developing its own 720 degree model which involved family and friends in the appraisal process as it believed individual externals endeavours outside the companies knowledge can be best justified by family and friends. Although it is important to adopt a model of appraising talents in a company, it is more important to note the key features of a good appraisal which are; relevance (should talk about your job), sensitive (can differentiate different type of behaviour), practicable (able to put into use), reliability (can be used to measure performance at given period) etc. Both forced ranking and 360 degree feedback are not perfect models to employ. They have been subject to critics in the past. Refer to appendix 3.
Last, I will discuss reward in relation to TM. At the culprit of reward in an organisation, pay structure should be designed to fit specific purposes, it should be internally consistent, integrated with other HR processes, controllable and manageable, accepted as equitable and fair and finally it should be flexible. Benefits are an intrinsic part of the value proposition that organisations offer new and existing employees. Research published by The Economist Showed;
"salaries and employee benefits still rank extremely highly in designing a new value proposition for tomorrow's workforce (56%>, second only to providing a better work-life balance through offering flexible working arrangements in terms of hours and place of work (62%). Structuring a flexible benefits programme so staff can select the incentives that suit their lifestyle is a key weapon in the arsenal of talent management and the retention of star employees. The ability to mix and match benefits, from pension's and childcare, to holiday allowances and gym memberships, plays a key role in attracting talent." (Williams, D. 2008).
As mentioned in the development section, it is important for an organisation to reward its talented employees with literal and vertical movement within the firm to allow for retention (S. Rousseau, 2008). Competitors in similar industries will be looking to acquire the best talented individuals from one another especially in this current climate of global recession. Companies require talented individual to help them stir further away from insolvency. As such, retaining such individual should be priority in any company.
To conclude, talent management is not just nice to have, it is vital to every organisation. Talent management is required to manage retention ratio. Effective TM will allow for reduced recruitment cost on external talents. The above collapse suggests how organisation should work across the full spectrum of Talent Management. Going back to the question, it is important that talent management should not be seen as simply an HR initiative. HR role is to facilitate the management of talent and to act as coaches and consultants to line managers. "HR executives and managers must work together to link business strategy with the talent needed to execute it" (Atkins, R. et al. 2004).
Atkins, McCutcheon, Penna. (2004): 'The Talent Management Imperative: A Best Practice Approach', Available at www.compassess.biz[Accessed 08 March 2009].
Berger, L.A. (2004): The talent management handbook: creating organizational excellence by identifying, developing, and promoting your best people, London, McGraw-Hill.
Cappelli, P. (2008) 'Talent Management for the Twenty-First Century', Harvard Business Review, 86:3, 74-81.
CIPD, (2006): 'Reflections on Talent Management', Available at http://www.cipd.co.uk/NR/rdonlyres/F473B522-DD49-49E2-9021-59E0B2BDA288/0/reftalmanca0306.pdf [Accessed 02 March 2009].
Edwards, E. (2008) 'Why Are We Losing All Our Good People', Harvard Business Review, 86:6, 41-51.
Rousseau, S. (2008): 'Human Capital Management', Available at http://www.modernmedicine.com/modernmedicine/article/articleDetail.jsp?id=546970 [Accessed 05 March 2009].
Williams, D. (2008): 'Flexible benefit can help talent management', Available at http://www.employeebenefits.co.uk/cgi-bin/item.cgi?id=7497 [Accessed 08 March 2009].
Forced Ranking: is a technique that requires that all the employees in a particular group are rated against each other and then ranked in order and then placed into 3 or 4 groups derived from a predetermined distribution function. The most common are the A, B, C players e.g. A=20% of workforce, B=70%, C=10%. From a TM terminology we can refer to this as super-keepers 5%, Keepers 15%, solid citizens 70%, and Poor performers 10%. Argument in favour of forced ranking implies it free up organisation by letting off poor performers which enable differentiation in the organisation e.g. if at top level, an individual is performing the worst, there could be better individuals lower down the hierarchy to fill in and perform better. The bottom side however is, forced ranking is not legal as it fails to administer one to one evidence and records. It can be however used to make ranking decisions especially in sports.
1. In its broadest sense, talent management can be used to describe the identification, development, engagement/reflection, deployment of talent within a specific organisational context (CIPD, 2006).
2. Research from DDI found that only 1/3 of executives believed that their organisation's leadership capabilities look promising, while 82% of companies reported having a hard time finding qualified leader candidates (Atkins, R. et al. 2004).
3. "Monster.com, with 36percent of the worldwide web career market, is the largest by far of the plethora of online career websites. In the third quarter of 2003. Monster had 16.7million unique visitors who stayed an average of 15.6 minutes. By September 2003" (Fredrick, D. et al. 2004).
4. Leading corporations such as capital One and Dow Chemical's have abandoned long-term talent forecasts and moved toward short term simulation (Cappelli, P. 2008).
5. About 20% of U.S. employers ask employees who are about to sign a contract specifying that if they leave the business before certain time, they have to pay back the cost (Cappelli, P. 2008).
6. A fictional case involving a company called Sambian Partners and its talented employee Tom Forsythe (who has been shortlisted for top performances by the executives) saw Tom resigned for a better position with the arch rival of the firm. Several exit interviews were carried out in an attempt to retain Tom but efforts were futile. Tom left leaving the management to ponder on what went wrong. One of the staff made a comment saying "I just think he looked above him and realized he was going nowhere fast. No one on the executive team is even close to retiring, and the org chart is top-heavy as it is. Where's the career path?" (E. Edwards, et al. 2008). Perhaps if Sambian Partners had considered the P. Cappelli model or other similar models, things could have been different.