Companies are starting to recognize the value of talent management systems. Among companies that planned to increase spending on HR-related technology, more than 50% planned to invest in talent management applications.
It’s not difficult to see why this software is a priority. Businesses are putting a greater emphasis on having a positive impact on the lives of their workers. They are becoming more empathetic and focused on ways to keep employees happy and fulfilled. And they are incorporating employee-centric processes with an end goal of recruiting the best talent and retaining that talent, ensuring employees are productive and helping their organizations achieve their goals.
Talent management software is crucial to supporting such initiatives. These systems help drive a consistent employee experience that encourages people to stay with the company, mentor others within the organization and become long-term assets.
What Is a Talent Management System?
The primary functions of talent management applications are to help companies hire, measure performance, develop, reward and establish succession plans for their workforce. Talent management systems can include applications for recruiting and talent acquisition, onboarding, performance management, learning management, compensation and succession management.
Talent management software gives companies the tools they need to bring in candidates with the right attitude, skills and experience, validating from the start that they are a good fit with the organization’s vision and culture. It helps facilitate opportunities for those hired to learn and grow over the course of their career, as well as align job performance goals with business performance goals. Additionally, this can assist in identifying the individual motivations that will encourage someone to stay with the company.
Top 10 Benefits of Talent Management
Talent management strives to ensure companies recruit the best employees for the job (internally and externally), then onboard, develop, challenge and compensate them properly. Software should gather information to guide improvements and reinforce what makes employees feel good about working for their company.
Research from McKinsey & Company shows a correlation between between strong talent management and better organizational performance. Businesses with effective talent management are more likely to beat out competitors, and public companies with a proven talent management initiative even deliver higher shareholder returns than others.
5 Benefits of Talent Management for Companies
- Better recruiting. For certain roles and across some industries, there is still significant competition for qualified talent. Lapses in communication with qualified candidates—and a lack of tools to push the top applicants through the process—impact your ability to hire the best people. Processes and technology that help with workforce planning, sourcing, applicant tracking and analytics are important to an agile recruiting process. Recruiting software enables companies to track and organize applicants and provide an easy way to see where they are in the hiring pipeline. It lets recruiters to source and track the applicants who applied through different hiring platforms and provides an easy way for feedback on those applicants to be collected.
- Increased diversity, equity and inclusion (DE&I). DE&I offers businesses a strategic and financial advantage, and it’s becoming a priority for candidates as they job hunt. For instance, employer review site Glassdoor now lets current and former employees rate their satisfaction with DE&I at companies. In one study, more than 70% of companies that classified their talent programs as “world-class” expect to focus more on gender issues and global diversity. That compares to just 43% that plan to concentrate on gender issues and 61% on diversity at businesses that don’t rate their talent programs as highly. Diverse workforces increase employee learning, creativity, sense of belonging and pride in work, and that brings positive business results—highly inclusive organizations bring in 1.4x more revenue per employee and are 120% more capable of meeting financial targets, per Gartner.
- Deeper employee engagement. Good processes around onboarding, learning and development drive deeper employee engagement. Companies with great experiences outperform the S&P 500 by 122%, and those with highly engaged workforces have 21% higher profits than those with poor engagement. Talent management functionality such as innovative performance management is essential to more deeply engage employees. Related technology such as delivering quick pulse and annual employee engagement surveys and collecting that data to easily connect it with other data to link employee engagement KPIs to financial metrics helps ensure efforts around employee engagement are working.
- Minimize attrition. Turnover metrics are hugely important because they provide so many clues about weaknesses across the talent management process. The average turnover rate across all industries is around 10%, and turnover is expensive—the cost of replacing an individual employee can range from one-half to two times the employee’s annual salary. It estimates that a 100-person organization that provides an average salary of $50,000 could have turnover and replacement costs of $660,000 to $2.6 million per year. Talent management systems help collect and make it easy to track and analyze data that will point to causes of attrition by being able to see, for instance, turnover by manager, demographic trends and more.
- Better succession planning. People in senior roles often hold specialized knowledge that’s critical to completing key business processes. Without a formalized structure for transferring this knowledge, the business can find itself in a bad spot, so succession planning is crucial. Every single company will have people retire or leave the company, but only 35% of organizations have a formalized succession planning process. A talent management system can help with succession planning by using data to visualize bench strength (employees ready and willing to take on advanced roles), map skills to open positions, identify areas where needs will surface and more.
5 Benefits of Talent Management for Employees
- Better onboarding experience. Onboarding is the employee’s first real impression of life with that company, and it shouldn’t begin and end with a PowerPoint deck. Organizations that view onboarding as a crucial part of the talent management process make onboarding personalized and interactive by including mentors and introducing the new hire to key people in other departments. It makes a big difference for employees. Automation is of course crucial in the onboarding process to streamline benefits enrollment. But the best talent management systems look beyond simply automating paperwork in the process to really personalize the onboarding experience—making it easy for employees to match with mentors, training and more.
- More opportunities for training and reskilling. Strong training programs help attract the best candidates. Gen Z job applicants rank training as a top factor when considering a new job. Once hired, training programs provide a way to help advance employees’ careers, so this can be particularly important for more experienced workers. Talent management systems make it easy to see where there are skills gaps—and allow the organization to identify people and connect them with training opportunities to enable business continuity.
- Career advancement. When companies tie training and development opportunities to performance goals, employees are more engaged in their work and stay with the company longer. Talent management systems make it easy to track goals and match employees with the right opportunities to help them progress in their careers. One interesting example is Schneider Electric, a global technology company that’s earned much praise for providing career growth opportunities. The company offers, “Schneider Electric University,” which has programs for executive development, leadership, customer education and functional skills.
- Improved performance management. Only about one-quarter of workers say the feedback they’re given improves their work. Talent management software can help organizations shift to dynamic performance management, in which feedback is more open and continuous between a manager and an employee. It recognizes that employees want feedback, but that much of what they receive isn’t all that helpful, and tries to give them information that will help them improve their weaknesses and further develop their strengths.
- Employee experience. All of these practices work together to enhance the overall employee experience, which is an employee’s overall feelings toward a company that determines whether they decide to enter into a deeper relationship with the company. Companies with great employee experiences attract and retain great employees because the mission of their business is echoed across every part of their business universal—from the benefits and rewards they offer employees, to the way day-to-day operations are run to the way they recognize milestones and important events. This isn’t something reserved to startups and newer companies. More than a century old, Whirlpool has a process that allows any employee to submit ideas for innovation and new products, and provides the collaboration tools to track and develop them. The company won five CES Innovation Awards in 2019 for products ranging from smart ovens to smart dishwashers.
Maximize the Benefits of Talent Management with Software
A lot is changing in the talent management space, and technology helps companies keep up with and navigate these trends. Recruiting processes, one report says, are shifting to passive candidate tracking (looking for people who are employed, but not necessarily actively looking for new roles), including talent pool management, social outreach and marketing campaigns. Performance management is no longer a once-a-year activity but continuous. And learning programs need to accommodate the trend toward personalization.
Talent management software can help the company best respond to changes and trends, as well as continue to collect and analyze data so it’s ready for what’s next. For instance, Aberdeen Group found that companies with “best-in-class” talent management programs are more likely to use performance management software. When performance management is limited to spreadsheets reviewed one or twice a year, performance management is a chore for both the manager and the employee that can do more harm than good. But when it’s continuous and data-based, it becomes an effective, two-way feedback mechanism that enables employees to accomplish goals and grow in their roles while helping managers become more effective in developing the people they manage.
Great talent management processes are agile. Having the right human resource systems in place gives companies the ability to quickly adjust to the workforce’s shifting needs, and in the process play an important role in building talented and resilient businesses.