What Is Talent Management? A Guide for 2025

Finding the right workforce—and then keeping it—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. One 2024 survey found that 51% of Gen Z and 47% of millennials would find a new job if they weren’t given a raise going into 2025, with only 20% of baby boomers saying the same. Another survey suggests that different generations have different preferences, with the youngest employees prioritizing paid time off and the oldest prioritizing earnings that reflect the cost of living.

Some human resources (HR) teams face economic challenges. Between the cost of healthcare 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, and poor workforce planning are among a number of other “gotchas” that can trip up talent management teams.

And, when you do successfully hire your dream workforce, you have to retain it. Yet there’s often a mismatch between what leadership thinks will retain talent and what actually will. Fortunately, proven talent management strategies paired with following a successful model can help businesses of any size find the right people—be they full-time employees, temps, interns, or contractors—and develop their skills for future success.

What Is Talent Management?

Talent management is the process of building and maintaining the optimal workforce to meet business needs. It involves attracting, developing, and retaining employees by continually assessing their motivations and addressing their needs. The goal is not only to get employees to stay but to make sure they remain engaged, productive, and keen to advance within the organization.

Key Takeaways

• Talent management involves attracting, developing, and retaining employees with the necessary skills and aptitude to meet a business’s 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.
• Though the process falls under the HR 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.

Talent Management Explained

Successful talent management aligns individual employees’ goals with a business’s broader objectives. It also involves identifying and developing the talents of people with leadership and technical potential to support succession planning and workforce stability.

A key component of talent management is investing in “early talent,” a term many HR teams now use instead of “entry level” to emphasize a strategic approach to developing individuals at the beginning of their careers. The new terminology helps shift the focus away from simply filling roles and toward building skills, nourishing potential, and fostering long-term growth (both for the business and the individual).

Talent Management vs. HR

Talent management is a specialized function within HR. It focuses on attracting, developing, and retaining employees over time. HR encompasses a broader range of responsibilities, from compliance and employee relations to payroll and benefits administration. A talent management lead reports to the chief HR officer, and the function sits within HR. However, talent management isn’t solely the responsibility of HR; it also requires close collaboration among all departments, including leadership, operations, and team managers.

Many organizations use human capital management (HCM) software to support their HR and talent management efforts. HCM is often used synonymously with HRMS (human resource management system) to describe the technology, practices, and processes HR professionals use to record, manage, and analyze a workforce.

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. However, while talent acquisition focuses on finding and hiring the right people, talent management is there to help make sure they remain engaged, develop and grow over time, and align with broader business goals.

Most of the legwork around talent acquisition falls to the recruiting team, which works closely with departmental hiring managers and other stakeholders. Recruiting is the process of attracting candidates via ads or actively searching for the right person for a role, vetting applicants, and handing off the best ones to begin the formal interview process.

Talent Management vs. Talent Development

Talent development is another subset of talent management. Whereas talent management works to establish the support and structure needed to attract, engage, and retain employees, talent development focuses on skill-building and internal career growth. Talent management includes acquisition, for instance, as well as onboarding and retention, while talent development primarily sticks to training, coaching, and mentoring to help employees prepare for long-term success within the company.

Why Is Talent Management Important?

Any manager who has made a bad hire knows the cost—in time, money, and productivity—of terminating a worker and having to start again from scratch with a new hire. And the costs of poor talent management extend far beyond fixing mistakes. Research from McKinsey & Co. shows what HR pros know instinctively: There’s a clear relationship between talent management and organizational performance. Firms with effective talent management practices stand a good chance of outperforming competitors. And for publicly owned companies, McKinsey finds they’re likelier to outpace their peers (opens in new tab) 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.

Key Components of Talent Management Programs

Successful talent management strategies drive business success through a holistic approach that manages people throughout their entire employment life cycle, from workforce planning to succession management. To build a strong talent management program, consider these nine areas.

1. Workforce planning: Companies need to guarantee that the right skills are in the right place for both current and future success. Workforce planning analyzes workforce trends, forecasts talent needs, and identifies skills gaps to make sure new hires’ skills and goals are aligned with the needs of the business.
2. Talent acquisition and recruitment: Once it’s clear what roles a business needs to fill, talent management teams can focus on how to best source, attract, and select the optimal candidates for open positions. Methods include using social media and professional platforms, creating compelling job postings, and soliciting employee referrals.
3. Onboarding: Anytime employees are hired, they need to be onboarded. This includes giving them the tools and resources they need to succeed, as well as helping them integrate into the company’s culture. Structured onboarding programs not only help workers get up and running quickly but also improve retention.
4. Core competency development: Talent management involves helping employees build the essential skills they need to support overall business objectives and succeed in their roles, including technical, communication, and leadership skills. Creating a blueprint for defining and developing these abilities can help employees progress in their careers and support the business as a whole.
5. Performance management: Regular feedback, performance evaluations, and goal setting can help employees meet both individual and organizational objectives. Performance management should be more than a one-sided review; it should incorporate steady coaching that allows for feedback and exchanges of ideas between employees and those engaged in talent development.
6. Learning and development: Ongoing training, upskilling, and reskilling help keep employees competitive and engaged. Investment in continuous learning and development can facilitate innovation and support retention.
7. Employee experience and engagement: Employee experience refers to workplace culture, well-being, career development, and recognition—all of which bolster engagement and retention. A strong employee experience can increaseproductivity and job satisfaction and reduce turnover.
8. Compensation and benefits: To attract and retain top talent, consider offering competitive compensation and benefits packages that consider not only salary but health benefits, retirement plans, and other incentives, such as flexible work arrangements.
9. Succession planning: Business continuity depends on a strong pipeline of future leaders. To minimize organizational disruption, identify high-potential employees and help them develop their leadership skills.

Benefits of Talent Management

Effective talent management can improve business performance and workforce stability. Companies that invest in strategic talent practices are likely to attract best-fit candidates while experiencing greater retention and engagement, higher productivity, and happier customers. Here’s a look at some common talent management benefits in a greater detail.

• More top talent: Talent management strengthens employer brand, compensation strategies, and career growth opportunities to position the company as a desirable workplace. A thoughtful, strategic approach to talent management helps attract high-quality candidates who complement the business’s long-term goals.
• Enhanced employee retention: Disengagement and lack of career development are two top forces behind turnover. Talent management proactively addresses attrition by keeping employees engaged, genuinely supporting their needs and desires, and laying out clear career paths—rather than just dangling a carrot.
• Higher employee productivity: Companies lose millions annually due to skill gaps, disengagement, and employees wasting time on low-value tasks. Talent management programs can reduce these inefficiencies by helping employees develop the right skillsto perform at their best and stay motivated and focused.
• Improved customer satisfaction: Research shows that employee engagement directly correlates with customer satisfaction and sales. Talent management helps foster the kind of workplace involvement and enthusiasm that organically delivers better service and builds stronger relationships.

Challenges of Talent Management

Talent management is essential for building a strong workforce, yet many companies face significant difficulties in hiring, developing, and retaining employees.As their workplaces continue to evolve, businesses must navigate the following challenges to maintain a strong workforce.

• Skills gaps and workforce planning: Developing employees for future roles is essential, yet many companies fail to proactively invest in the training and development required to future-proof their workforce. Nearly half of employees say that upskilling opportunities are a prerequisite for their decision to stay with their employer.
• Employee retention and morale: Retaining top talent is a persistent challenge, with engagement and morale often suffering. In 2023, a Gallup survey revealed that a mere 33% of U.S. employees say they feel engaged, accounting for nearly $2 trillion in lost productivity. According to the same research, many employees say they feel detached from their companies and lack a sense that someone at work cares about them as a person.
• Leadership development and succession planning: Global CEO departures hit a record high in 2024, often attributed to the high pressure of navigating rapid change. Yet only about one-quarter of those departures resulted from planned succession processes. At the same time, more and more baby boomers are retiring, increasing the pressure to develop future leaders.
• Competition for talent: Employers face ongoing labor shortages as they create new jobs amidst the fallout from an aging workforce. According to the U.S. Chamber of Commerce, this challenge is expected to persist for decades. To stay competitive, companies need to attract younger generations, who increasingly seek workplaces that reflect their own values, social impact, and ethical commitments.

Talent Management Process

Talent management is a never-ending 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. Repeat. HR, leadership, and technology industry analyst Josh Bersin defines the talent management process as the integrated steps involved in recruiting, training, managing, supporting, and compensating employees—i.e., the people who create value through their work and enable the company to meet its business goals.

Similarly, research firm Hudson Research & Consulting recommends this four-step talent management cycle:

1. Acquire: Brand your company, then recruit to find the right people and onboard them effectively.
2. Deploy: Make sure employees have the right training to meet business needs. Continually track performance.
3. Develop: Identify talent and help future leaders progress within the company. Foster an inclusive and positive culture and incorporate workforce planning.
4. Assess: Continually map employee growth to succession plans. Use analytics to assess how well talent management strategies are achieving business goals.

Here’s a more detailed, structured look at the talent management process, based on the ideas of both Bersin and Hudson Research & Consulting.

1. Your Talent Strategy

Workforce planning involves identifying immediate and future skills needs, including the strengths of current staff, pending changes in the organization’s structure, and what it takes to nurture good performers for future roles. Companies must also anticipate labor needs based on voluntary turnover, workforce demographics, succession planning, business priorities, and budget constraints. This step also includes defining key roles, forecasting skills shortages, and creating targeted development plans to close gaps.

2. Attract and Recruit the Right Talent

Recruiting specialists actively seek the right people for open positions by advertising on various job boards and working with headhunters to find good candidates. Another common recruitment tactic is to encourage current employees to make referrals. Once candidates are identified, recruiters vet them and pass the best applicants to the hiring manager. Success, however, depends on providing clear job expectations, as well as a recruiter’s ability to identify candidates who are a good fit for both the company and the role.

3. Hire the Right Person

Hiring is a collaborative effort that requires recruiting, HR, finance, and business leaders to develop competitive and sustainable employee compensation and benefits packages. Beyond salary, companies should consider a total rewards approach that factors in career development opportunities and flexible work arrangements. Candidates should also be a good fit for company culture, meaning that their values, work style, and expectations align with the business’s mission and team dynamics.Once an offer is extended and accepted, onboarding (typically an HR function) and training (a business function) begin.

4. Onboard and Develop Early

The onboarding process is typically a new hire’s first impression of the company. Don’t relegate 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 business through workshops and opportunities to connect with mentors via shadowing days. Job-specific training is also key, and should involve goal-setting conversations that can be used to advance competencies down the line.

5. Offer Ongoing Employee Development and Training

Though talent development begins at onboarding, it extends throughout an employee’s tenure. Training programs should be mapped to meet both business needs and individual career goals. Modern approaches, such as massive, open online courses, microlearning, and gamification, as well as traditional mentorship programs and job rotations can all be exciting ways to accelerate skills development. Stretch assignments are another option, where employees take on projects beyond their customary scope.

6. Encourage Retention and Employee Engagement

Retention and engagement involve more than compensation. Employees stay when they feel valued, supported, and connected to meaningful work. Managers can facilitate engagement through frequent feedback that sparks dialogue and ensures that goals remain aligned. For example, when onboarding new employees, managers should make it a point to learn about their skills and career goals and create opportunities for authentic interactions beyond structured performance reviews. Don’t forget the old truism: People don’t quit jobs, they quit managers. If a department is seeing excessive employee churn, poor management may be contributing to a toxic culture.

7. Undergo Leadership Development and Succession Planning

People will retire, and people will resign. But many companies don’t plan for either—a critical mistake that can hurt long-term business stability.Succession planning creates a pipeline of qualified, diverse leaders who are prepared to step into key roles. Future leaders should be assessed based on their tenure, problem-solving skills, adaptability, and even digital fluency. Formal leadership training, mentorship programs, and exposure to high-impact projects—such as product launches or internal process improvement initiatives—can help accelerate readiness.

8. Provide Transitioning

The final stage of the talent management cycle examines planned transitions, retirements, and employee exits—each of which requires careful handling to protect business continuity. Whether an employee is leaving for a new opportunity, retiring, or stepping down from leadership, organizations should focus on knowledge transfer and maintaining positive relationships.

Regardless of why employees leave or move to a new position in the company, treat exit interviews as equally important to the onboarding process. Part of talent management is developing a deeper understanding of why voluntary turnover is happening and finding ways to fix addressable problems. Encourage honesty by asking specific questions about roles and obstacles encountered and assuring that responses will remain confidential and have no bearing on future references or professional relationships.

Talent Management Model

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, meanwhile, works to provide a positive experience across the employee life cycle. All stakeholders work to ensure that the workforce aligns with the business’s goals.

When it comes to talent management priorities, performance management, leadership development, and the retention of experienced talent should rank high. Companies that take a strategic approach prioritize retention plans, align talent priorities with business strategy, have key performance indicators (KPIs) in place to measure program effectiveness, and leverage technology to enable it all.

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 a fictional excavating and paving business, Pave the Way. Chris is hired, onboarded, and trained in the job skills needed to carry out the immediate role.

Once Chris is on the job, his manager, Ann, observes that he’s a hard worker and always on time. He’s also conscientious about 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 commercial driver’s license, so Ann enrolls Chris in a program in which the company pays for the licensing process for promising workers. Once he completes that, he earns a compensation increase and health benefits.

Over the next year, Chris excels in his new role and earns the respect of his team. Ann intends to retire in the coming 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’s no interruption in the business process, and service quality remains high.

At a larger business with hundreds of employees, scaling this kind of structured talent management becomes much more complex. Manually tracking individual career paths, training, and internal promotions can be overwhelming. This is where talent management software can be used to automate many of these steps and ensure that the company is on track to meet its goals in key performance areas, such as retention and promotions from within.

Talent Management Success Metrics

Talent management success metrics measure how well teams are able to attract, develop, retain, and deploy employees to meet business needs. These metrics and KPIs can help cut waste, improve processes, and identify where changes can be made to help hit targets more consistently. Talent management metrics and KPIs businesses should consider tracking include:

• Turnover rate, or how quickly employees leave the company, both voluntarily and involuntarily. This KPI can also help track high-performer turnover to get a sense of how many top employees are leaving.
• Retention, or the percentage of employees who stay with the company over a set period. Retention can also be tracked by manager, department, or location.
• Employee satisfaction, which is often a clear indicator of potential turnover or retention. Net Promoter Score surveys are an effective, standardized way to measure engagement and satisfaction.
• Employee performance, which can be measured in a number of ways. New-hire failure rate, for instance, looks at what percentage of new employees leave the company within a year (or other predefined period). Another option is work quality, which tracks how well employees meet objectives or the percentage of errors.
• Continuing education metrics, such as calculating training course and reskilling program completion rates and comparing them to other metrics, including profitability and customer satisfaction.

Future of Talent Management

In an early 2025 survey, Gallup asked employees what would cause them to seek new employment. The top responses were greater work-life balance and better personal well-being. Higher income, better benefits, greater job stability, and the ability to do what they do best were also factors.

To stay competitive, companies need to adapt their hiring, development, and retention strategies accordingly. The biggest challenges include addressing skills gaps, integrating artificial intelligence-driven hiring and talent management solutions, and shifting from transactional hiring approaches to long-term workforce planning that genuinely balances business needs with employee motivations and desires.

According to the Society for Human Resource Management, moving into 2025, recruiters are seeingtalent shortages and application overload, highlighting the need for skills-based hiring and better candidate evaluation tools. AI and automation are expected to play a larger role inhiring processes, potentially reducing the time it takes to fill positions and improving candidate assessments. Again, a core theme is balance: Companies must weigh efficiency gains against a strong candidate experience.

Beyond hiring, the future of talent management will likely focus on quality over quantity. Some companies are beginning to redefine success metrics, with an emphasis on employee growth, tenure, and skills development rather than simply hiring people as quickly as possible. To refine retention strategies, companies are also finding value in creating more opportunities for employee feedback, including exit interviews. Flexible, adaptable companies that genuinely invest in workforce development and can integrate AI talent management and HR solutions may be better positioned to attract and retain top talent.

Attract, Develop, and Retain Top Talent—Simplified With NetSuite

By integrating HR, payroll, and financial data into a single system, NetSuite SuitePeople HRMS gives businesses a holistic view of workforce performance and costs. Compensation, workforce planning, and performance tracking information can be connected and accessed in real time to fuel decisions about promotions, salary adjustments, and employee performance. This integration can also help HR and finance teams forecast hiring needs and align budgets with workforce goals.

To support employee development, SuitePeople provides structured goal-setting and progress-tracking features that help managers plan and conduct consistent, data-driven performance reviews. Customizable review templates, for instance, make it easier to evaluate employees on relevant skills and identify gaps that would benefit from additional training or development. Threaded conversations facilitate ongoing feedback and discussions so managers can track progress over time rather than only during the formal review process.

Talent management is a vital subset of HR that includes talent recruitment and acquisition, onboarding and offboarding, development, retention, performance management, and succession planning. Smart talent management strategies make sure employees have the tools and support they need to advance their careers while keeping their performance goals aligned with broader business objectives. Ideally, nurturing the desires and aims of employees will support their engagement through intrinsically valuable growth opportunities—all while contributing to long-term business value.

Talent Management FAQs

What are the key components of talent management?

Talent management includes recruiting, selecting, onboarding, 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 company as a desirable place to work so you draw quality applicants, and it 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 that 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 businesses manage the acquisition, performance, development, rewards, and succession of their workforces. These applications, especially when integrated with finance systems, are strategic management tools that help companies achieve their business goals.

What are examples of talent management?

Examples of talent management include recruiting and hiring top talent that gels with the business’s objectives and culture; cultivating a high-performance workplace culture that authentically supports employee goals and well-being; developing detailed succession plans and offering leadership training for high potential employees and future executives; and implementing performance management systems that track employee progress and provide meaningful feedback.

What does a talent management team do?

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. Talent management is cross-functional and usually includes HR specialists, business leaders, finance experts, and marketing executives.