Talent management empowers businesses to attract, develop and retain a workforce tuned to achieve business success. Here’s how to excel.
Finding the right workforce—and then keeping them—is an ongoing challenge for most businesses. There are many reasons why.
Some are demographic: Millennial and Gen Z workers tend to be more mobile than older employees. In fact, the average tenure of a worker in the 25-to-34 age group is just three years, according to the 2020 HR Systems Survey by consultancy Sierra-Cedar.
Some HR teams face economic challenges: Between the cost of health care and rising salaries for skilled workers, smaller firms may lose out to larger competitors with deeper pockets and more clout in the benefits department. Geography, the “cool” factor of your company or industry, inefficient recruiting, poor workforce planning—there are a number of gotchas that may trip up talent management teams.
And when you do successfully hire your dream workforce, you have to retain them. Fortunately, there are top talent management strategies and a model for success to help any-size business find the right people—employees, temps, interns and contractors—and develop them for future success.
What Is Talent?
The answer is unique to each company. A manufacturer might define its talent as a few key employees with specialized skills, such as the know-how to keep complex machinery running. An auto dealership might value salespeople with that certain something that enables them to connect with customers. Other firms might use the term to refer to the entire labor force.
Whatever the definition, companies that take a process-oriented, data-driven approach to their workforces throughout the employee lifecycle are more apt to derive value from their people investments.
What Is Talent Management?
Talent management is the process by which a company assembles the optimal workforce for its business needs and continually assesses the motivations, and addresses the needs of its people so that they not only stay, but remain engaged, productive and keen to advance within the organization.
For instance, many HR teams now use the term “early talent” in place of “entry level” to denote a focus on identifying, refining and perfecting skills.
The Society for Human Resources Management (SHRM) says formal talent management programs are designed to attract, develop, retain and deploy employees with the necessary skills and aptitude to meet a specific business’ current and future needs.
Broadly speaking, this process includes:
- Attracting people who are a good fit for the company culture and possess the skills required to succeed in the role.
- Developing the skills of those workers through continued education and training, as well as deploying employees in such a way as to ensure their skills are best utilized to advance business goals.
- Retaining high performers through not only compensation and total rewards packages, but by understanding what motivates them so that they become more deeply engaged in their jobs.
A successful talent management practice aligns individual employees’ goals with the goals of the business and identifies and develops people with leadership and technical potential, thus enabling succession and workforce planning.
- Talent management involves attracting, developing and retaining employees with the necessary skills and aptitude to meet a business’ current and future needs.
- Half the battle is finding the right candidates. When recruiters lack the data to define expectations and attract qualified applicants, the result is often expensive voluntary turnover.
- While the process falls under the human resources domain, responsibility for talent management success extends across recruiting, front-line departmental managers and executive leadership.
- Talent management experts help identify the individual motivators that encourage high performers to stay with the company.
Why Is Talent Management Important?
Any manager who’s made a bad hire and must deal with terminating a worker and starting from scratch knows how costly in time, money and productivity that process is.
And the costs of poor talent management extend far beyond fixing mistakes. Research from McKinsey & Co. shows what HR pros know instinctively: There is a straight-line relationship between talent management and organizational performance. Firms with effective talent management practices stand a good chance of outperforming competitors. For publicly owned companies, McKinsey finds they are likelier to outpace their peers in terms of shareholder returns.
It isn’t hard to understand why. Talent management helps bring in candidates with the right attitudes, skills and experience, who mesh from the get-go with the organization’s vision and culture.
Talent management strategies then ensure that these people have the tools and support to grow in their careers and the guidance to align job performance goals with business objectives. And, with deeper engagement, people stay and grow in their roles providing long-term value to the business. They may even help shape the culture of the company outside their job roles in tangible ways—by mentoring colleagues, serving as brand ambassadors and actively referring great candidates like themselves.
What Does a Talent Management Team Do?
While talent management is primarily a human resources function, the team doesn’t sit in one business domain. A typical large-company talent management team will operate under a VP- or director-level leader tasked with balancing support for the employee experience with customer priorities, business goals and financial realities.
On the HR side, the team will include specialists in workforce planning, recruiting and acquisition, onboarding, succession planning, performance management, talent development, and employee engagement and training.
A representative from finance will weigh in on budgetary realities; some firms will have human capital management (HCM) specialists with feet in both specialties. Finance teams will often help collect and analyze data on workforce metrics.
On the IT team, an HRIS analyst may put the information systems in place to help all stakeholders understand their workforce in ways that help them improve talent management processes and practices.
Business leaders from all departments weigh in on their talent needs and provide customer insights. Some companies may even bring in marketing to help develop materials to attract top candidates.
Some team-building best practices: Include someone who understands and can communicate the company culture. Survey employees who represent various demographics to learn what might attract, for example, Gen Z workers. Ensure that departmental leaders buy into the concept that employees should have the ability to apply for open positions to move up or even laterally within the company without fear of reprisals.
Talent Management vs. HR
Top HR Evaluation Priorities
Source: Deloitte Talent Edge 2020 Survey
A talent management lead reports to the chief human resources officer, and the function sits within HR.
Talent management software falls within the HCM category. The terms “HCM” and “HRMS” (human resource management system) are often used synonymously to describe the technology, practices and processes HR professionals use to record, manage and analyze a workforce. If differences are to be had, HCM tends to lean more toward the strategic nature of quantifying a workforce into business value to help non-HR leaders make important decisions about the current employee base.
But talent management is only one part of the HCM function—and it isn’t solely the responsibility of human resources. To define how talent management is different from HR, it helps to think of it in the context of a full HCM software suite.
- Service delivery functions include an HR help desk and employee and manager self-service.
- Workforce management functions include time clocks, time-off and absence management and scheduling.
- Human resources management system functionality collects and stores personnel information, payroll and benefits data. HRMS software is invaluable in centralizing this information for analysis.
- Talent management functions include recruiting, onboarding, career planning, performance, training, compensation and succession.
Talent Management vs. Talent Acquisition
Talent acquisition is an intrinsic part of talent management—after all, if you can’t acquire the right people, there’s no one to manage.
Most of the legwork around talent acquisition falls to the recruiting team, working closely with departmental hiring managers and other stakeholders. Recruiting is the process of attracting via ads or actively searching for the right person for a role, vetting applicants and handing the best candidates off to begin the formal interview process. Additionally, you can create an attractive referral program for workers who refer candidates to recruiters to fill jobs faster and help manage talent.
Talent Management Strategies
While talent management starts with hiring the right people, the strategic goal extends to keeping them, and keeping them productive.
McKinsey’s research shows that the best talent managers move people to the most strategic projects as the need arises; the HR function ensures a positive experience across the employee lifecycle. All stakeholders work to ensure that the workforce aligns with the business’s goals.
When it comes to talent management priorities, performance management, developing leaders and retaining experienced talent rank high. World-class organizations take a strategic approach here, Deloitte Talent Edge research shows. They have retention plans, they align talent priorities with business strategy, they have KPIs in place to measure program effectiveness, they focus on generational issues as well as increasing diversity and inclusion and they leverage technology to enable it all.
Talent Management Challenges
A key facet of talent management is developing employees to fill future roles; that ties into a workforce planning function. Retention and the company’s financial outlook are linked. But PWC’s June 2020 Pulse Survey shows that fewer than half of CFOs feel very confident that their companies can build skills for the future.
One twist is the precipitous move to remote work driven by the pandemic. For many companies, culture and morale have been the tradeoff for flexibility. Nearly two-thirds of organizations surveyed by SHRM say that maintaining employee morale has been a challenge. A full one-third are struggling to maintain company culture while managing employees who can’t telework and shifting communications to meet the needs of remote workers.
Still, many talent management challenges are perennial.
In a global survey of 334 senior executives and talent managers at large companies across a range of major industries, Deloitte found the most pressing talent concerns: Competing for talent globally, developing leaders and succession planning and retaining employees at all levels of the organization. When it comes to where respondents are concerned about talent shortages, R&D, executive leadership and sales were the most pronounced.
And, given a complex business environment and the pending retirement of Baby Boomers, succession planning has shifted into sharp focus.
Talent Management Process
Talent management is a continuous process: Evaluate the company’s workforce needs. Attract and hire the right people to advance the company’s strategy. Manage the workforce so people stay engaged and productive. Rinse and repeat.
HR, leadership and technology industry analyst Josh Bersin defines the talent management process as the integrated steps for recruiting, training, managing, supporting and compensating the people who create value through their work and enable the organization to meet its business goal.
Bersin recommends that companies use a specific process that includes:
Planning your talent strategy, taking into account numerous factors to anticipate labor needs, such voluntary turnover rate, workforce demographics and succession planning, business priorities and budget. A workforce planning strategy involves identifying the skills needed now and pending changes in the organization’s structure, the strengths of the current staff and what it takes to nurture good performers for future roles.Attracting or actively seeking the right people for open positions is the role of recruiting specialists who advertise on various job boards, encourage current employees to make referrals and work with headhunters to find good candidates. Recruiters then vet candidates, gather key information and pass the best applicants to the hiring manager.
Selecting and hiring the right person involves careful coordination among recruiting, human resources, finance and the business function to develop attractive rewards packages. Once an offer is extended and accepted, onboarding (typically an HR function) and training (a business function) begin.
Developing the people you hire begins at onboarding, includes immediate, job-specific training, goal setting and performance reviews and extends to developing competencies that advance individuals in a way that’s aligned with business objectives.
Retaining and engaging employees is about more than compensation. Companies need to encourage managers to give employees feedback that their work is forwarding business goals—a great way to boost morale. Compensation should be tied to performance and aligned with business success.
Transitioning involves proactive succession planning and leadership development. Promising leaders are identified, shuttled into management tracks and given the development opportunities necessary to progress and meet the needs of the organization long-term.
Talent Management Model
Research firm Hudson Research & Consulting recommends a four-step talent management cycle, also illustrated:
Acquire: Brand your company and recruit so you find the right people, then onboard them effectively.
Deploy: Make sure they have the right training to meet business needs, and continually track performance.
Develop: Identify talent and help future leaders progress within the organization. Foster an inclusive and positive culture. Incorporate workforce planning.
Assess: Continually map employee growth to succession plans, and use analytics to assess how well talent management strategies are achieving business goals.
Examples of Talent Management
Let’s take a look at a simple talent management process. An early-talent candidate, Chris, answers a job ad for a laborer role in an excavating and paving business, Pave the Way. The candidate is hired, onboarded and trained in the necessary job skills needed to carry out the immediate role.
Once Chris is on the job, his manager, Ann, observes that he is a hard worker and conscientious about being on time and customer service. Ann regularly communicates with Chris about his performance and career goals. She learns he’d like to move up to an equipment operator role.
This position requires a CDL license, so Ann enrolls Chris in a program in which the company pays for the CDL licensing process for promising workers. Once Chris completes that, he earns a compensation increase and health benefits.
Over the next year, he excels in his new role and earns the respect of his team. His manager intends to retire in the next year and starts development training for Chris to take over her role. His compensation is increased again as he takes on the additional training and development. When Ann retires, there is no interruption in the business process, and service quality remains high.
At a business with hundreds of employees, this talent management process can become incredibly challenging when completed manually. This is where software kicks in to automate many of these steps—as well as to make sure the organization is tracking to its own goals for key performance areas such as retention and promotions from within.
When considering HR software, ensure that training and development content can be linked to employee milestones, and that performance reviews are not conducted in a vacuum but linked to business and financial KPIs. Talent management software should also allow HR and direct managers to easily track all of this information.
Finally, talent management and employee engagement are closely linked. Look for capabilities that help managers find out what motivates employees and makes them feel more connected to their work, an important factor in retention.
7 Steps of Talent Management Processes
Talent management, at its core, is about finding and keeping the best people to achieve business goals. There are steps every company—whether a 20-person paving firm or an enterprise with 2,000 employees—can take to make sure employees start out on the right foot and become more deeply engaged as they progress.
- Ensure recruiters have the right information to identify candidates who are a good fit for both the organization and the role. Voluntary turnover is often linked to unclear expectations of the role and an improper fit in the talent sourced to fill it.
- Don’t overlook the importance of the onboarding process. For most employees, this is their first impression of the company’s culture. Don’t leave it to a day-long PowerPoint presentation, after which employees are handed badges and computers and sent on their way. Expand onboarding to help employees immerse themselves in the culture and strategy of the business. Help new employees connect with mentors, design workshops or shadowing days so they can get to know other departments and how their roles relate and, above all, make it extremely easy to get questions answered.
- Make sure managers buy in to talent management. If spending time with new employees, learning about their skills and career goals, is not a priority at the highest levels of the company, it will not be on top of the manager’s agenda, either. Providing space and time for managers to have authentic interactions with employees must be a priority—such that mentorship becomes linked to manager performance and bonus objectives. Conversations cannot occur only at predefined periods around performance reviews.
- Training and development are crucial, but they must be mapped to individual employee goals. The best companies leverage all training to improve the employee and the employee experience—whether the training is mandated companywide by law or unique to the individual’s career progression. Training is an exciting space in which technology can deliver higher competency levels and better business results. Among the training options in use by smart companies are massive open online courses (MOOCs), microlearning and gamification.
- Adopt a total rewards strategy. More money is nice, but it isn’t always the deciding factor in whether people choose to leave or stay. Leading companies look at compensation and benefits through the lens of “total rewards,” which SHRM says combine monetary, benefit and developmental rewards and personal growth opportunities. In addition, there’s an adage that people don’t quit jobs, they quit managers. If one department is seeing excessive employee churn, it may be that a poor manager is creating a toxic culture.
- Succession planning is absolutely crucial. People will retire, and people will resign. But many companies don’t plan for either. The Association for Talent Development, a professional trade organization, finds that only 35% of organizations have a formalized succession planning process. The group says mentoring and coaching is the most common way organizations develop succession candidates, but that “stretch assignments” that see whether an employee can achieve beyond expected skill levels are also popular.
- Treat the exit interview as equally important to the onboarding process. Part of talent management is more deeply understanding the reasons for voluntary turnover—and finding ways to fix problems that are addressable. Encourage employees to be honest in the exit interview by asking specific questions about their roles and the barriers and obstacles they faced and assuring them that their responses will be confidential and won’t affect how HR responds to requests to confirm employment.
Future of Talent Management
In a recent survey, Deloitte asked employees what would cause them to seek new employment. The top response was lack of career progress. Asked what an employer could do to get them to stay, financial incentives and job advancement topped the list, followed by flexible work arrangements.
Sierra-Cedar reports that organizations are currently rethinking recruiting, performance management and learning: Recruiting processes, the report says, are shifting to passive candidate tracking, including talent pool management, social outreach and marketing campaigns. Performance management is no longer a once-a-year activity but continuous. And learning technologies need to shift to accommodate personalization trends. The firm finds that 41% of companies plan to increase spending on technology, with close to 60% saying they’ll invest in talent management.
And, given technology advances and increased automation across the business, jobs will continue to change, so upskilling and reskilling the current workforce will be critical. Identifying people with the right competencies is a huge priority—including in the HR department itself. For instance, the SHRM Foundation—with a grant from the Department of Labor’s Apprenticeships: Closing the Skills Gap program—is developing a program to help employers develop the HR talent they need.
Work is changing. Flexibility is a priority in new roles and current ones. Younger employees have different expectations for work and the companies they work for. Remote work is becoming a necessity for many, and companies reluctant to embrace it will be at a disadvantage. Those that are open to hiring in any location widen the available talent pool but also face a host of challenges around keeping employees engaged. The answer is a smart mix of technology, process and attention to data.
Talent Management FAQ
What are the key components of talent management?
Talent management includes recruiting, selecting, onboarding and ongoing training, managing performance, identifying and supporting career-path goals, managing compensation and total rewards and succession planning.
What is the first step of the talent management process?
Successful talent management begins well before you post a position and start collecting resumes. How will you attract people who are a good fit for the company culture and possess the skills required to succeed in the role? That starts with branding your firm as a desirable place to work so you receive quality applicants and extends to thoughtfully mapping desired expertise and attributes to the role. A skills or cultural mismatch is a top contributor to early-hire churn.
Why is talent management important?
Talent management helps ensure the right people are recruited and hired and that they become invested in the company culture, understand business goals, are motivated to perform at their best and bring long-term value to the company.
What is talent management software?
Talent management software helps organizations manage the acquisition, performance, development, rewards and succession of their workforces. These applications, especially when they interface with finance systems, are strategic management tools in helping the organization achieve its business goals.