The Importance of Talent Management - Essay Example

?Introduction “People are our organisation’s greatest asset.” This is undoubtedly true. That this particular phrase is a truism is illustrated by thefollowing example. According to Handfield-Jones et al. (2001), The Limited was having problems with falling stock prices in the early 1990s. At this time, the CEO of The Limited, Les Wexner, decided to talk to CEOs of other top companies, including GE CEO Jack Welch and PepsiCo CEO Wayne Callaway, along with Steven Spielberg. At this time, Wexner was spending the bulk of his time checking sales, reviewing new ads and creating new product concepts. As he talked to each of these men, he realized that they were not spending hardly any time on reviewing advertising, checking sales and creating new product concepts. Rather, the CEOs that he talked to, as well as Steven Spielberg, each told Wexner that they spent about 50% of their time on talent management – recruiting, developing and retaining talented people. This led Wexner to concentrate more on talent management himself, which led to profits growing from $285 million to $445 million, and to the stock for The Limited almost doubling. Although Wexner also implemented other restructuring – closing some divisions, purchasing others, spinning off still others – Wexner states that his newfound emphasis on talent managing was the core of The Limited’s turnaround (Handfield-Jones et al., 2006). Therefore, understanding talent management is critical in today’s world, because, as Wexner understands, talented people is really the core of a business. Recruiting, developing and retaining the right talent for the job is critical to whether a business succeeds or fails. This paper therefore will examine the nature of talent management, what is talent management, how does it differ from human resources, and why it is true that talent is, indeed, an organisation’s greatest asset. Discussion Talent To understand the concept of talent management, the first concept which should be examined is that of talent itself. According to van Dijk (2008), talent has many definitions which usually comprise the skills, abilities, aptitude, attitude and disposition of the individual. This is coupled with motivation and opportunity. Van Dijk (2008) further states that there are eight elements that comprise talented people – 1) a passion for learning; 2) responsiveness to mentors and other influences in ones’ life; 3) striving for achievement; 4) ambition; 5) iconoclasm; 6) self-sufficiency; 7) physical vulnerability and 8) personal branding (Van Dijk, 2008, p. 388). Iles et al. (2009) states that, although different organisations use a standard definition of talent, within their own organisation, no two companies use the same definition of talent. This would mean that talent definitions need to be tailored for the individual organisations. Other scholars cited by Iles et al. (2009) state that talent does not necessarily have to be defined, as organisations just know who their talented personnel are. Other scholars that Iles et al. (2009) alludes to states that talent must be defined, but broadly – for instance, when defining talent for leaders and managers, a person is considered talented if they have a mind which is sharp and strategic, the ability to be a leader, is mature emotionally, has good communication skills and can attract and inspire other talented people. The Importance of Talent Management O’Neal & Gebauer (2006) states that talent management is the act of attracting, engaging and retaining talented employees. Iles et al. (2009) adds that talent management is strategic management of talent, so that the right talent goes to the right people at the opportune time to help the organisation achieve its business objectives. Bhatnagar (2007) agrees that attracting, engaging and retaining employees makes up the crux of talent management, but states that engagement of employees is the most important of these aspects, because it is seen as the key to the retention of talented employees. This means, among other factors, that employees not only know what is expected of them from work, but that they have an opportunity to do what they do best every day (Bhatnagar, 2007). O’Neal & Gebauer (2006) state that talent management is rapidly becoming crucial for companies in the age of globalization and outsourcing and other demographic changes. The demographic changes referenced by O’Neal & Gebauer (2006) include the fact that there are increasing retirements in developed nations, and, in developing nations, there are inceasing numbers of young people. This has created a situation where there are global movements of populations and jobs, which, in turn, contributes to some professions seeing a lack of talented personnel. These changes, coupled with other changes, such as the nature of work (more people work in a non-traditional fashion, such as through telecommuting, and less people are working the standard 8 hour day), show that companies need to be increasingly adaptable and will not be able to rely on past business models (O’Neal & Gebauer, 2006). Ashton & Morton (2005) agree with O’Neal & Gebauer (2006) that the changing nature of the workforce demands an increased focus on talent management. This is because there is a talent squeeze, due to changing workforce demographics which reduce labour pools. Moreover, as enterprises and industries diversify, with new entities popping up to compete for talent, talent tends to get sucked out of larger organizations. DiRumualdo et al. (2009) states that another change which occurred, which makes talent management more crucial than ever, was the financial market crash of 2008 and the subsequent recessions. DiRumualdo et al. (2009) states that organisations in the wake of the financial crash reacted in the precisely opposite way that they should have reacted – namely, these organisations focused more on layoffs, pay cuts and hiring freezes, and put talent management on the backburner. DiRumualdo et al. (2009) contrasts these companies with other companies who retained their talent and managed to weather the economic downturn much better than the companies who slashed and burned their own payroll and banished talent management. This is because talent management gave these organisations the competitive edge over the organisations who were more short-sighted when it came to the retention of talent after the economic downturn. Perhaps one of the reasons why so many organisations cut their talent first when dealing with the economic recession is because, according to Handfield-Jones et al. (2001), so many organisations do not really see the need for talent management. These organisations feel that human resource management is solely responsible for the recruitment, development and retention of talented employees, and that their jobs as managers should be focused on business decisions, not people-related decisions. This mind-set is reflected by the survey cited by Handfield-Jones et al. (2001), which indicates that, at that time, only 18% of respondents in their research felt that it was the job of the senior executive to manage talent. According to Handfield-Jones et al. (2001), the old mind-set was exemplified by the ideas that HR is responsible for people management, that a two-day succession planning exercise once a year is sufficient to manage talent, and that senior executives merely inherit people to work with. The new mind-set regarding talent management, according to Handfield-Jones et al. (2001) is that all managers are accountable for strengthening the talent pool, that all managers should be proactive in building their talent pool, and that talent management should be central to the way the company is ran. Talent Management v. Human Resource Management There is some confusion between talent management and the traditional human resources management. Lewis & Heckman (2006) note that these two terms are often used interchangeably. They also note that talent management is related to human resources, doing the tasks which have been traditionally been the province of human resources, yet doing these tasks faster. Iles et al. (2009) give more of a differentiation between talent management and human resource management, although they acknowledge that there are still many in the industry who do not see talent management as being appreciably different than human resource management. Included in Iles et al. (2009)’s analysis is that observance that “Talent management is an idea that has been around for a long time. It’s been re-labelled, and that enables wise oganisations to review what they are doing” (Iles et al.. 2009, p. 2). This is because, according to Iles et al. (2009), both human resource management and talent management essentially focus on the same goal – getting the right people for the right job and the right time, through recruitment, selection, training and appraisal. That said, other definitions cited by Iles et al. (2009), do focus on slightly different definitions for both talent management and human resource management. The main difference is that talent management focuses on talented people, who have been identified as talented. Therefore, the focus is on getting employees who are critically valuable to the organisation, by working through talent pools. On the other hand, Iles et al. (2009) states that human resource management is not as focused as talent management, as the people recruited, selected, trained and appraised by the HR Department are not necessarily always going to be talented people who are critical to the organisations’ success. Rather, the individuals recruited etc. by HR are all the employees, not just the best and the brightest of the organisation. In other words, Iles et al. (2009) states that, by at least one definition, talent management focuses only on the top performance and the employees with the most potential. HR is focused upon all employees, and HR manages all employees. Talent management focuses on managing these key players, and is not concerned with the “common employees.” The HR is concerned with the “common employees,” as well as being concerned with the top performers. In this way, according to Iles et al. (2009), the talent management may overcome some of the HR weaknesses by differentiating employees. Individuals who have potential are targeted, and their skills, behaviours and competencies are focused upon, and they are treated special and different from the other employees whose potential is not as limitless. The particular HR weakness that talent management addresses is that talented employees who are not given special treatment may leave the organisation. With HR treating all employees the same, regardless of their potential, retention of top talent would be a problem. However, with directed management systems aimed at maximizing the potential or high performers, this is less of a problem (Iles et al., 2009). Collings & Mellahi (2009) concur with this analysis. They note that traditional thought regarding HRM is that all employees would be managed with singular HR practices. However, talent management differentiates HR architecture, acknowledging that some worker groups are more central to organisational performance than other worker groups. Collings & Mellahi (2009) break down these groups still further, explaining which worker groups would require talent management and which groups which simply require the more broad-based human resources management. The first group, which is the only group which should be targeted by talent management, according to Collings & Mellahi (2009) are the knowledge based employees. These employees are valuable and unique, and they are central to the success of the organisation. The next group are the job based employees. These employees are also valuable to the organisation and central to its success, but these employees are not unique, and their skills are widely transferable. The third group are contract employees, and these workers are not strategically important nor unique, and their jobs are often outsourced. The fourth group are the alliances/partnerships, who are unique but are not strategically important. The first group would be the target of differentiated talent management. The other categories would be under the aegis of ordinary human resource management. Perhaps this seems unfair, that certain employees would be subjected to more special treatment than other employees. The old, more egalitarian approach would dictate that all employees are special and have potential, and the organisation would do well to maximize the potential of all employees, not just a select few. However, according to Lewis & Heckman (2006), this approach would be short-sighted. This is because this approach does not offer guidance on how to allocate resources to uncovering employees’ talents, and assumes, incorrectly, that all employees are important to the firm on an economic and developmental level. Therefore, this is not an efficient allocation of resources. Principles of Talent Management According to Cappelli (2008), there are four basic principles that undergird talent management. The first is that the organisation needs to make and buy to manage risk. What this means is that organisations should focus not only on developing talent from within, but also hiring outside the organisation. This is because, if an organisation is too focused on developing their talent from within, the end result is that the organisation may wind up with a deep bench of talent, but that many of the talented people would be sidelined because they are not necessary at the moment. These talented people would be therefore waiting for their turn to become central to the organisation, and this would mean that they would get frustrated and leave. A better approach would be to fill necessary positions, wherever possible, with home grown talent, but not to fill up the reserve bench, so to speak. Then, if another need presents itself, the objective would be to hire somebody from a different organisation. Cappelli (2008) illustrates this concept by giving the scenario that an organisation forecasts that it needs 100 programmers, but that they might be overshooting. Therefore, the organisation might plan to develop, from within, 90 programmers, then if the organisation needs another 10 programmers, these programmers may be hired from outside. This is better, according to Cappelli (2008), then developing 100 programmers, only needing 90, thus leaving 10 programmers on reserve with little to do. The second principle advanced by Cappelli (2008) is that managers should adapt to the uncertainty in talent demand. Cappelli (2008) uses the analogy that organisations might buy components in bulk and store them away in a warehouse, and hope that there is a demand for these components in the future. However, a better way of managing inventory would be to buy smaller batches of components, which means that the demand for the components would not have to be forecast so far into the future. In the same way, organisations should hire small batches of employees, therefore the organisation does not have to forecast the demand for these employees far into the future. Cappelli (2008) states that the third principle is that the employees should share in the developmental costs. The reasoning behind this is that many business outlay large expenses developing employees, who turn around and leave the organisation for greener pastures. This means that the expensive developmental program does not benefit the organisation, only the employee his or herself. One of the ways to circumvent this, according to Cappelli (2008), is for the employee to share in the costs of development. For instance, employees may be required to learn projects on their own time, which means that these projects are in addition to normal work. Other organisations make their employees sign a contract which specifies that if the employee leaves before a specified time, that employee agrees to reimburse the company the costs of the development and training. The fourth principle stated by Capelli (2008) is that organisations should preserve the investment by balancing employee-employer interests. This refers to the practice of posting open positions to internal boards, which means that the current employees get the first chance to apply for a position within the firm, before outside sources have this chance. Applying this last principle means that, while the employee may rank their preferences for online projects posted, the principals running the projects also rank the associates who are vying for the project. The senior partner takes both rankings into account when deciding how to fill these positions. Conclusion Talent management is vital to the health and prosperity of any organisation. As was the experience of Les Wexner, The Limited CEO who was mentioned in the introduction of this paper, the key to a successful organisation is not necessarily focusing on business-related matters, such as advertising, sales and other bottom-line indices, but, rather, the key to success is making sure that the organisation has talented people in key positions. Wexner thought that the key to success was for him to focus on the business matters, and let the issues regarding talent be delegated to other entities in the organisation, such as Human Resources. His perspective was changed when he talked to other CEOs, and he realized that he needed to shift his focus away from the exclusive bottom line focus which previously occupied his time, and towards a focus on developing talent. This one change brought remarkable growth to his organisation, therefore this is proof positive of how important talent management is to an organisation. That said, talent management is not always recognized as being key to success. Many organisations, after the recession brought on by the collapse of the financial industries in America and Britain, in 2008, reacted by slashing their human capital. However, this was short-sighted, and organisations who understood that they needed to retain talented individuals, in order to weather the storm, are now more competitive than the companies who did not understand this basic premise. Moreover, other changes in the work force means that organisations must emphasize talent management more than ever. This includes globalisation, which means that employees have more of a choice of where they want to work, which means that the most talented of employees basically have their pick of organisations. The other problem with talent management is that there is always the danger if an organisation develops their talent, that these employees may leave the organisation for other organisations who offer them a better deal. However, some of the principles outlined by Capelli (2008) are good guidelines on how firms can prevent this kind of talent exodus. For instance, firms may stipulate that employees must pay them back for the costs of training if they leave within a certain period of time. Cappelli (2008) also states that there is a danger to an organisation in that it has to be able to forecast and fill the right talent in during the right time. Hiring in small batches, and only developing a smaller amount of talent than the most positive forecast are ways of circumventing this as well. The bottom line is that talent management is different from HR management, because HR management is not focused and pinpointed on top performers who are vying for top jobs. Talent management is what is focused upon this, so talent management, along with basic HR management, is vital for any organisation that wants to thrive in today’s world. Bibliography Ashton, C. & Morton, L. (2005) “Managing talent for competitive advantage,” Strategic Review, vol. 5, no. 5, pp. 28-31. Bhatnagar, J. (2007) “Talent management strategy of employee engagement in Indian ITES employees: Key to retention,” Employer Relations, vol. 29, no. 6, pp. 640-663. Cappelli, P. (2008) “Talent management for the twenty-first century,” Harvard Business Review, March 2008, pp. 1-9. Collings, D. & Mellahi, K. (2009) “Strategic talent management: A review and research agenda,” Human Resource Management Review, vol. 19, pp. 304-313. DiRumualdo, T., Joyce, S. & Bression, N. (2009) “Key findings from Hackett’s performance study on talent management maturity,” The Hackett Group Management Issue, October 2009, pp. 1-6. Handfield-Jones, H., Michaels, E. & Axelrod, B. (2001) “Talent management: A critical part of every leader’s job,” Ivey Business Journal, November/December 2001, pp. 1-8. Iles, P., Chuai, X. & Preece, D. (2009) “Talent management and HRM in multinational companies in Beijing: Definitions, differences and drivers,” Journal of World Business. doi: 10.1016/j.jwb.2009.09.014 Lewis, R. & Heckman, R. (2006) “Talent management: A critical review, “ Human Resource Management Review, vol. 16, pp. 139-154. O’Neal, S. & Gebauer, J. (2006) “Talent management in the 21st Century: Attracting, retaining and engaging employees of choice,” World At Work Journal, First Quarter 2006, pp. 1-17. Van Dijk, H.G. (2008) “The talent management approach to human resource management: Attracting and retaining the right people,” Journal of Public Administration, vol. 43, no. 3.1, pp. 385-395. Read More