Author: Lydia Cillie-Schmidt Page 1

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1 Talent Management: An integrated framework for implementation L Cillie-Schmidt: Talent Management: An integrated framework for implementation, Management Today, February 2009 Companies like to promote the idea that employees are their biggest source of competitive advantage. Yet the astonishing reality is that most of them are as unprepared for the challenge of finding, motivating, and retaining capable workers as they were a decade ago (McKinsey Quarterly, January 2008) It is now just more than ten years since McKinsey conducted its War for Talent research and if some of the recent surveys by Bersin and Associates, Talent Management Magazine and McKinsey are to be believed, the problem remains acute and if anything has become more critical than ever. Globalisation is resulting in a contest for human capital and consequently skills shortages abound world-wide. Broad demographic changes are also occurring. Developed nations are facing an ageing workforce while developing nations have greater numbers of young workers. These create a global movement of people and jobs and are contributing to shortages in certain professions that will grow in scope and impact. This situation is compounded by the generation gap, the changing nature of work, technology and the need for agility. Together all these factors are creating work-forces and workplaces that are diverse and very different to the past. This brings enormous, new challenges in managing a radically different workplace and workforce. Our approaches and models that worked in the past do not work anymore. Different approaches are needed. Many companies need a practical roadmap for talent management in a talent market unlike any seen before. In this article an integrated model for talent management will be suggested for companies that would like to implement a step-by-step strategy so that employees can really become a source of sustainable competitive advantage. The need for an integrated approach to Talent Management Many companies have sound business plans, yet struggle to implement an effective talent management strategy. The reason for this might be as a result of senior management s approach to talent management. It is usually seen as a tactical issue and while they may endorse the talent initiatives, they often have a hands-off approach. Another issue is highlighted by the recent Talent Management State of the Industry Report by Talent Management Magazine ( Their survey found that most companies have implemented some talent management initiatives and functions, but only 13% of the respondents indicated that all these efforts are fully integrated. The majority (65%) indicated that talent management is a somewhat integrated process. As a result of this lack of integration, talent management is happening in silos and there is a lack of effective communication and collaboration across talent management functions. As a result of the lack of integration there is often a lack of accountability as there is not a single executive taking ownership for talent management in the company. Many talent management efforts therefore do not achieve the intended results, namely attracting, engaging, developing and retaining the best skills for the business. The following table is an effort to show the flow and place of several components of talent management when implementing an integrated approach. The table should be read bottom-up. Author: Lydia Cillie-Schmidt Page 1

2 Components Specific elements Implementation Actions Outcomes Monitoring mechanisms Talent levers Enabling Processes Foundation Inputs Business strategy achievement, engagement and commitment, retention, a winning company and an employer of choice Engagement and other surveys Performance Management Talent Management metrics Talent Reviews Talent Acquisition Onboarding Compensation and benefits Job-design Learning and development, including Management/Leadership Development Succession Development Career development Mentoring and coaching Exit Management Other Senior management commitment, line manager capacity, HR capacity, internal communication Automated Talent Management Systems, e.g. Performance Management Competency Framework, Workforce Planning, Employer Branding, Talent Management Strategy Business strategy, specific talent challenges in company, company culture and values, internal and external influences, generational theory, company definition of talent, Employment Value Proposition (EVP), Celebrate and review Conduct regular engagement surveys to assess impact of various talent management levers. Other surveys could be external branding surveys, best employer to work for, etc. Design, implement and maintain a robust performance management process Constantly calculate talent management metrics and take corrective or enhancing actions where needed Create the relevant divisional and organisational structures to do regular talent reviews to get a holistic picture of talent in the company, as well as to ensure total alignment of all talent levers. Design and implement Talent Acquisition Strategy Design and implement a robust onboarding process Design and implement an optimal compensation and benefits strategy Ensure proper job-person fit Design and implement a business-strategy aligned learning and development framework Design and implement a succession development strategy to ensure business continuity through adequate bench strength Design and implement best-in-class career development practices Design and implement formal and informal programmes Ensure that when a person leaves, that process is building on employer brand Obtain senior management and line manager buy-in, train line managers and build enforcement systems. Implement an effective internal communication plan Ensure that systems are in place to facilitate implementation of Talent Strategy Determine what competencies are needed to achieve business strategy. Do workforce planning: determine talent supply, talent demand and talent gaps and formalise Talent Management Strategy. Develop and implement Employer Branding Strategy as part of overall Talent Strategy. Include engagement and retention plans in strategy. Design business case for Talent Management, Determine, differentiate and leverage effective EVP(s), determine retention issues and calculate cost of turnover, as well as reasons for turnover Author: Lydia Cillie-Schmidt Page 2

3 retention objectives, any baseline data from surveys and studies in the organisation Inputs Several inputs shape the nature and format of a talent framework for a company. The most important input is the business strategy. The business strategy determines what type of talent is needed today and in the future and therefore informs the objectives of talent management for the company. If the company for example is planning to expand or introduce new technology, it has very definite implications for talent management. The company culture and values also impact on the talent framework. For example, if the culture does not value transparency, it has a major impact on the type of feedback processes that will be put in place. Internal influences could include the skills of the HR fraternity to implement talent management initiatives, as well as the relationship between HR and business leaders. Generational theory is an important consideration in talent management. According to Fortune Magazine (May 2007), Generation Y (people born after 1980) is the most high maintenance workforce ever in history, but they could also be the most productive. Generation Y is now entering the workforce and they demand more flexibility, meaningful jobs, professional freedom, higher rewards and a better work-life balance than previous generations. This has implications for talent management in terms of all its components. Another crucial input in shaping the talent management framework is the company s definition of talent. According to the survey by Talent Management Magazine there is no single definition of talent and talent management across all respondents. Only 53% of organizations include all employees in their talent management programmes. In some companies only the top 15% of staff is viewed as talent, in other companies only executives are viewed as talent. Some companies only view critical and scarce categories of staff as talent, while other companies only view the best performers as talent. There is no prescription to companies, but the conversation on this issue before the company embarks on any talent management initiative is crucial, as the definition will determine the nature and objectives of the intervention. Although there is no prescription on how talent is defined within a company, it is important to note the research by McKinsey that indicates that companies should address the needs of talent at all levels of the organization. A more inclusive approach where the workforce is viewed as a collection of talent segments that actively create or apply knowledge is advocated. The employment Value Proposition (EVP) is the set of attributes that the labour market and current employees perceive as the value they gain through employment at an organisation. Research by the Corporate Leadership Council indicates that the effective management of the EVP allows organisations to source more deeply within the labour market and reduces compensation costs. It is also an important factor in ensuring employee engagement and commitment. Companies often do not leverage and manage their EVP well and the talent management initiative should include a step where the EVP and differentiated EVP are defined. Companies can hardly afford that all their talent management efforts get undone by high and uncontrolled staff turnover. Unacceptable staff turnover makes it difficult for companies to sustain employee productivity, mostly because of additional hiring and training costs. The process of re-hiring also places unnecessary pressure on management and employees, perpetuating a cycle of negativity. A comprehensive and multi-faceted retention strategy will assist in mitigating these risks and assist in sustaining a competitive advantage. A thorough analysis of all the retention factors in the company should inform the overall talent management strategy. Foundation There are certain elements that form the foundation of any talent management effort. A robust competency framework guides the identification of potential, development needs and also informs most of the talent functions like talent acquisition, succession development, etc. Author: Lydia Cillie-Schmidt Page 3

4 Workforce planning is crucial for effective talent management. Without workforce planning there is little direction for talent management. Workforce planning maximise the effectiveness of talent management initiatives in meeting current requirements, planning for new requirements and understanding the impact of growth and other initiatives. Workforce planning informs the acquisition, development and retention of talent. According to the State of the Talent Management Industry Report by Talent Management Magazine, slightly more than one-third of organizations have a formal talent management strategy. The research ascribes this finding to the lack of buy-in and collaboration across talent management, as well as the lack of a single executive responsible for decision making across all functions. For those organizations that reported having a talent management strategy, 56 percent have had a plan in place for two years or less. Only 25 percent of organizations reported having a strategy for five or more years. When asked how far into the future organizations plan for talent management needs, almost one-third of organizations plan only one year in advance and 46 percent plan at least two years into the future. Employer branding is in essence the packaging and marketing of the EVP. Through employer branding companies communicate and influence the labour market s perception of the company s EVP. How the company will do employer branding should be included in the overall talent management strategy. It is important that the Talent Management strategy is as integrated as possible and avoid the silo mentality. This will ensure a better return on investment and measurement of the initiative. Enabling processes Certain processes will act as enablers or inhibitors of the talent management initiatives in a company. McKinsey s research emphasized the importance of instilling a deep commitment to talent throughout the organisation, starting at the top and cascading through the ranks. What s needed is a deep-rooted conviction, amongst business unit heads and line leaders, that people really matter that leaders must develop the capabilities of employees, nurture their careers, and manage the performance of individuals and teams (McKinsey Quarterly January 2008). Senior management commitment is viewed by many as the single most important enabler of effective talent management. Talent Management Magazine found that senior executives determine whether or not the ability to attract, motivate and retain top talent is a top priority for the organization. If senior executives believe that talent management is a top-five organizational priority it increases talent management professionals ability to define and drive a talent management strategy, whether it be broadly or narrowly defined and executed within the organization. The Corporate Leadership Council found in recent research that two-thirds of the effectiveness of any talent management programme depends on the collaboration between HR and line management. The design of the programme only accounts for a third of its effectiveness. This implies that both GR and line management should have the necessary skills and tools to be able to implement talent management effectively. Internal communication should be a golden thread throughout the implementation of all talent management initiatives. Training and Development Magazine reported for example that 75%of managers were unaware of existing retention strategies in their companies clearly a lack of communication. In the State of the Industry Report by Talent Management Magazine, respondents reported that the level of automation is limited within each talent management process. Almost two out of five organizations stated that many manual processes still exist within each of their talent management functions. Furthermore, 55 percent of organizations reported having some automation, and only 6 percent reported having fully automated talent management processes. Process automation can be a time-consuming effort and as a result, many organizations often put it lower on the priority list. Although automation can assist in facilitating breakthrough processes like the integration of learning and performance or the Author: Lydia Cillie-Schmidt Page 4

5 integration of performance management and succession planning, the emphasis should first and foremost be on the underlying processes. Automation will just enhance these processes. Talent Levers The talent levers represent those interventions that ensure that the company attract, develop, retain and engage the right talent at the right time. Deloitte research recommends a break from the traditional focus on acquiring and retaining talent to a focus on the things that employees care about most: developing in ways that stretch their capabilities, deploying onto work that engages their heads and hearts and connecting them to the people who will help them achieve their objectives. According to Deloitte by focusing on these three things, attraction and retention largely take care of themselves. The talent levers drive these processes It might not be possible for a company to implement all talent levers at once, and some prioritization will have to take place. Bersin and Associates identified the top 22 talent levers (out of 62 studied) that drive the highest levels of business impact. These include coaching; development-based performance management; the use of strategic competencies in recruiting; performance management and leadership development; and creating personnel and organisational goals that align with current and strategic business goals. Monitoring mechanisms The success of any talent management programme hinges on the effectiveness of the monitoring mechanisms that are put in place. Making talent management reviews part of the daily conversations in the company is necessary to ensure that a talent mindset gets embedded in the culture of the company. These reviews can take many forms and should suit the nature of the business. Performance management stays and important gauge of how far the company has come in terms of making sure that all employees are top performers through the talent levers. Jack and Suzy Welch stated the following about engagement surveys Employee engagement first. [No] company, small or large, can win over the long run without energized employees who believe in the [firm's] mission and understand how to achieve it. That's why you need to take the measure of employee engagement at least once a year through anonymous surveys in which people feel completely safe to speak their minds. There is a myriad of talent management metrics available, from recruitment to exit and the company should decide which priority areas they would like to measure on a constant basis. Outcomes The reason why a company embarked on a talent management programme in the first place will determine the outcomes. The main objective is to achieve the business goals and to ensure sustainability. Other objectives and consequent outcomes would include the fact that the company will have an engaged and committed workforce, retain it staff and become an employer of choice. Many companies have all the components of an integrated approach to talent management already in place and the challenge is to align all the initiatives. It is however worthwhile. Hewitt and Associates found that a 10-point increase in an average Fortune 500 company s talent quotient score will add between 70 million to 160 million Dollars to the company s bottom line over the next two to three years. In today s climate that is not something to be sneezed at! Author: Lydia Cillie-Schmidt Page 5

6 Resources used in this article High-Impact Talent Management: Trends, Best Practices and Industry Solutions. Josh Bersin Principal Analyst, Bersin and Associates, May 2007 Making Talent a Strategic Priority. Guthridge, M. Komm, A.B. Lawson, E. McKinsey Quarterly, January 2008 Next-Generation Talent Management. Tucker, E. Kao, T. and Verma, N. Hewitt Associates Talent Management Magazine: State of the Industry Report, 2008 It is 2008: Do you know where your talent is? Deloitte research, 2004 Integrating Talent Management Systems Strategically. Levensaler, L. Talent Management Magazine, Feb Attracting and Retaining Critical Talent Segments: Building a Competitive Employment Value Proposition for In-Store Employees: A Special Supplement, Corporate Leadership Council, 2006 Ideas the Welch way: How healthy is your company? Welch, J., & Welch, S Business Week. May 8, The Hidden Talent Retention Strategy, Laff, M. T+D, December, 2007 New thinking on Talent Management: Emerging Trends and Practices. Nixon, K. and Wyatt, W Creating Talent Champions (Part I) Improving Business Leaders Talent Management Outcomes, Corporate Leadership Council, 2008 Author: Lydia Cillie-Schmidt Page 6