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An organization’s talent is not just employees who are expected to do a job. Talent comprises individuals who differ in what they can do and can learn, and what they want to do. To be effective, organizations need to manage talent in ways that makes it a major contributor to their success.
The Changing World of Work, Workers, and Organizations
What used to be good or best practice—or at least good enough practice—with respect to how people are recruited, selected, trained, developed, rewarded, and evaluated simply does not fit today’s workforce and workplaces.
There is considerable evidence that the HR functions in most organizations are not strategy driven and are not changing as fast as they need to. One study measured change in HR practices on a global basis. The results show that between 1995 and 2016 there were no significant changes in how HR spent its time.
Talent management should become increasingly strategy driven, skills based, performance focused, agile, segmented, and evidence based.
The globalization of business makes talent a global resource, and that raises many talent management issues. Perhaps the greatest impact the global business environment will have will be on the need for organizations to consistently improve their performance. What is good enough today will not be good enough tomorrow.
Technology—particularly in the form of information technology and intelligent computing—will increasingly be a major disruptive force when it comes to how, when, and where work is done and how it should be managed. Many individuals can already work anywhere, at any time and, in many cases, with anyone.
Accelerating Change
The changes noted thus far in globalization, diversity, technology, and sustainability point to a very strong and important point: the rate of change is likely to continue to be rapid and increasingly disruptive with respect to traditional models of how organizations are designed and how they manage their talent.
For most organizations, talent has always been a major expense. In developed countries, a common estimate is that 70 percent of the costs of a typical organization goes to pay and benefits. If you add to that the cost of recruiting and managing talent, the total cost of labor often exceeds 70 percent by a significant amount. Thus, it has always made sense to do a reasonable job of managing wages, benefits, staffing levels, and work performance.
There is an increasingly high probability that yesterday’s talent is not the right talent for tomorrow. As a result, organizations need to have agile talent management practices that allow them to continuously and frequently change the skill sets of their workforces.
Strategic Talent Management
Six talent management principles need to be the basis of all talent management practices and systems that an organization uses.
1. Talent Management should be Strategy Driven.
Every strategy is only as good as an organization’s ability to implement it, and its implementation is only as good as its talent’s ability to execute it. Talent management needs to be influenced by an organization’s strategy, but its strategy needs to be driven by the talent that is available to it and how it can be managed.
There are a number of questions that every organization must ask when it develops its strategy: What is the right talent, and do we have it? If we do not have it, can we recruit and/or develop the talent we need to implement this strategy? Can we structure and design talent management practices that will lead to the type of talent we need to be motivated and willing to commit to the effectiveness of the organization?
Organizations increasingly need to think of themselves as being made up of constantly changing teams that assemble talent to meet the performance demands of a changing market.
Simply adopting a series of best practices with respect to rewards, performance management, recruiting, selection, and development is rarely the right answer to creating strategically appropriate talent management systems. Different strategies require different systems. Organizations must start with an understanding of what the talent management options are and an understanding of how the many options that exist impact the behavior of individuals and organizations.
2. Talent Management should be based on Skills and Competencies
Traditional organizations are built with a job-oriented, hierarchical mind-set. The management of talent needs to be designed to focus on the needs, skills, and competencies of individuals. This is the single most important thing that the talent management system of an organization can do to ensure that the organization will perform effectively and be prepared to deal with a dynamic environment.
3. Talent Management should be Performance Focused
4. Talent Management should be Agile
What does talent agility require? It takes having talent management systems that are able to respond quickly and strategically to constantly changing labor markets and business strategy conditions.
What an organization can promise is information about what its current business and talent needs are and updated timely information about how those needs are changing. Organizations must create talent management practices that do not over-promise with respect to the future and underdeliver with respect to the present.
5. Talent Management should be Segmented and Individualized
Standardization needs to be replaced by a reasonable approach to segmentation and individualization when it comes to how talent is managed.
It is increasingly important that organizations develop and implement segmented, individualized management practices in all areas concerned with how they manage talent.
6. Talent Management should be Evidence Based
Attracting Talent
The staffing process begins with the recruiting process; it needs to be structured and operated in a way that attracts talent that is aligned with the organization’s strategy and to do so in a way that prepares recruits to be effective employees. Accomplishing this requires integrated recruitment, selection, and onboarding processes that are targeted to attract, retain, and motivate individuals who can execute the business strategy.
Working in a traditional hierarchical bureaucratic organization is very different from working in an agile, high-involvement organization. Thus, it is important that organizations develop employer brands that reflect how they are managed and not just what they sell or how well they pay. Employer brands have always been segmented and should continue to be. The employer brand for executives has always been different from that of hourly employees.
The nature of the work, the culture and management style of the organization, and how talent management should operate in the future should determine the segmentation.
Increasingly, organizations are creating social media recruiting teams in their human resources departments that, among other things, have targeted interactions with potential job candidates and job applicants.
What has always been common in entertainment, construction, and seasonal employment situations has spread to many other types of work. Ongoing “not full-time” work arrangements vary from part-time and temporary employees to individuals who do work for an organization through arrangements managed by vendors, temporary agencies, and freelance talent websites such as TaskRabbit, Tongal, and Upwork.
It is very important that the attraction and recruiting process be segmented. This is the only way that it can attract a diverse, skills-based workforce.
Selecting Talent
The selection process says a great deal about what an organization stands for and how it operates; thus, it very much determines what kind of individuals will work for an organization and shapes its culture.
The major point that should be front and center when it comes to organizations making decisions about who to hire and what type of position to hire them for is that “past behavior is the best predictor of future behavior.”
The Work Record
Since past behavior is the best predictor of future behavior, there is no better predictor of how an individual will perform in the future than how they have performed in the past.
Therefore, the most obvious plan is to use temporary work programs, such as internships, contract hires, and temporary assignments. Internships have long been used as an effective selection device. Many companies use them as a way to attract, test, and ultimately select college and high school students as well as others who are interested in developing themselves. They combine a realistic job preview with a work sample, and thus can improve both the attraction and selection processes of an organization. They are an effective way to select and manage talent in the new world of work and workers.
Interviews should be structured in a way that informs job candidates about what will be expected of them and what it will be like to work in the organization. Giving the job candidate a good preview of what work will be like is a much more achievable goal than having the interviewer make a valid hiring decision based on information that is provided by the job applicant in response to interviewer-created questions.
When structured interviews are done, there is also much less chance that the interviewer will ask questions that are inappropriate, invalid, or inaccurately communicate what it is like to work for the organization.
Because organizations have become more talent dependent, there is less and less room for making bad selection decisions and for using selection practices and processes that do not attract the right talent.
Developing Talent
Simply stated, long-term company-wide career development programs like those that dominated the best practice literature in the last half century simply do not fit today; they fail to provide the talent motivation and agility that organizations need.
In the future, segmentation needs to be practiced by most organizations and be based not on hierarchy but on an organization’s strategy, the labor market, and its needs for agility.
Once individuals join the organization, it is time to further develop their understanding of what career options are available, make sure that they know how to get career advice and input, and provide an environment that has meaningful and appropriate development opportunities.
A lot of early turnover of talent is a result of individuals not making any social connections and thus not feeling they are a part of the organization’s social network and relationships. Finally, it is important for organizations to remember that development can be a great talent retention tool.
Job satisfaction is strongly related to turnover—unhappy employees leave, and happy employees stay. This raises the issue of what makes employees happy. There is a large body of research on this that shows that there is no one thing that determines satisfaction, but it is possible to identify some key factors. These include the nature of the work employees are doing, the rewards they receive, and how they are treated by their supervisors. It also is influenced by the type of career and development opportunities that employees are offered.
In an era where talent is very important to organizations, it is increasingly critical that organizations measure the condition of their talent and report it both internally and to shareholders. At the very least, an organization should internally report on such obvious human capital indicators as turnover, absenteeism, satisfaction, engagement, and money spent on training and development, and the results should be made known to everyone in the organization.
Rewarding Talent
Pay for Skills, Not Jobs
A skills-and knowledge-based system is an excellent way to motivate talent to learn new, critical skills and to help attract and retain individuals with the right skill sets. Because talent, not a job, has value, it can provide a valuable tool for attracting and developing the kind of talent organizations need to be competitive in knowledge-based businesses.
Paying for skills is a big change, but it is the approach that is needed to move from a bureaucratic job description–based world to the skills-and competencies-based world of agile, effective organizations. It must happen if organizations hope to change and to motivate individuals to develop the right skills.
The evidence is clear: basing rewards on performance can be a powerful motivator of performance. Rewarding performance is not only an effective motivator of performance, it is a way to attract and retain the best performers.
What is needed for a pay plan to have a major impact on motivation is a bonus plan that has a level of funding and a measurement approach that allows it to make a difference of at least 9 percent between what good performance earns and what poor performance earns.
Overall, the most generally applicable approach to paying talent for performance is some combination of a budgeted bonus plan that rewards individual performance and a business unit or a corporate performance–funded bonus plan like profit sharing.
Individuals increasingly differ in what they value and what they want. As a result, choice is a winner.
Make pay public and administer it in a way that is defensible. Making pay public will improve performance if it shows a clear connection between pay and performance, since this will actually end up motivating individuals to improve their skills and perform better. Overall, making pay and reward practices public is potentially a win-win situation if an organization has reasonable, defensible, and strategically aligned pay policies and reward practices.
Surveys and performance measures should be used to determine how effective the reward systems in organizations are at leading to strategy implementation and organizational performance.
Performance Management
The execution of an organization’s strategy depends on people understanding what needs to be achieved (goals that fit with strategy), ongoing conversations that provide feedback, holding people accountable, helping them develop the skills to reach challenging goals, and providing meaningful and nuanced evaluations of the impact of what they do. This is what good performance management will accomplish.
All too often an organization’s human resources (HR) function is given the task of designing, implementing, advocating for, and operating the performance management system of the organization. HR representatives become policemen and policewomen as well as the designers of and the major advocates for the process.
The perception that develops in organizations is that the appraisal process is both an HR process and a dysfunctional, bureaucratic one. It is not seen as a strategic driver that is intended to support the business strategy, motivate performance, and enable individuals to develop the right skill sets and careers.
Changes need to be made in how frequently performance discussions take place and feedback is given to individuals about their goal accomplishments.
Appraisals should as a general rule take place at least every quarter to fit the rate of change that exists today in most organizations and to support organizational agility.
It is important to reward managers for how effectively they do performance management.
There should be no ratings. In traditional appraisal systems, the performance of individuals is judged and a score or set of scores given to each individual. Not surprisingly, research has shown that ratings and rankings are subject to all kinds of rater error: some raters are too liberal, some are too rigorous, some have trouble separating performers, some have racial and gender biases, and so on.
In many appraisal systems, individuals are rated or ranked on multiple personal traits (e.g., dependability, effort, honesty, etc.). Ratings that are based on traits are particularly likely to be defective as they are subject to multiple interpretations of what they mean and to biases.
As a result, such ratings often lead to charges of discrimination, and the net effect is to damage the credibility of the entire talent management process of an organization. The alternative to systems that rate and rank individuals is obvious: having performance discussions and feedback about goal accomplishment, but no scoring of individuals.
Use calibration meetings and to combine them with good feedback to individuals about achievement, success, skill levels, and competencies. The calibration method is used by a number of companies (an early user was General Electric). It brings together groups of managers who have oversight of and insights into performance of multiple individuals and has them discuss the performance and development needs of those individuals and assign pay changes and development opportunities. The results are then communicated to the individuals through their managers.
Do performance management discussions need to be face-to-face? For a long time it has been assumed that nothing can or should substitute for an in-person discussion between the appraiser and the appraisee.
Perhaps the best way to determine whether a performance review should take place in a face-to-face meeting, using visual tools, or by e-mail is to look at how the individuals normally interface in their work situation.
Having an effective performance management system is a key to implementing the strategy of an organization. When a system operates effectively, it can turn a strategy into organizational behavior.
Organizing for Talent Management
HR functions that are not strategically oriented, value standardization over individualization, and are not based on modern information technology simply cannot design, implement, and operate talent management principles and practices that fit the new world of work.
Talent needs to be managed strategically from top to bottom.
The CHRO, like the CFO, needs to be present at most board meetings, and board members are needed who are knowledgeable in talent management. Only with this combination will boards be able to intelligently discuss options and arrive at the right decisions with respect to the talent of an organization and its management systems.
How often should talent data be reviewed by boards? In most organizations this should happen at minimum on a quarterly basis.
One option here is to split the HR function into two functions: an administrative one and a strategic performance one. With the split, the operational side of HR will report to the COO while the strategic elements of HR and talent management will report to the CEO.
Some organizations may be best structured by having a chief organizational effectiveness officer (COEO) who is a member of the senior management team and reports directly to the CEO. This position should have reporting to it the traditional HR function, organization design, organization development, business strategy, and talent management. This person needs to understand talent management, and also the operation of an HR function, the basics of organization design, change management, and business strategy. It puts someone clearly in charge of the management systems of an organization.
Most organizations need to have a chief talent officer. This position should be the human capital counterpart to the financial capital part of an organization.
In all cases, however, simply having an HR function with the usual administrative departments of compensation and benefits, training, and selection and placement is no longer the right way to go.
Organizations need to have a talent analytics function. A talent analytics group should be staffed by individuals who can gather, analyze, and convert data into evidence-based talent management decisions and actions.
An organization has to have an effective organization development function that is paired with the talent analytics function. Left by themselves, groups that simply analyze talent data can be out of touch with the reality of an organization, and although they do good research, they do research that is not implementable or implemented. One key to gathering data that is useful is to have the users participate in determining which data are collected.
The traditional organization design of the HR function was never intended to have talent operate as a strategic driver of the business nor to respond to a rapidly changing world of work, workers, and organizations. Merely giving HR a “seat at the table” is not the answer; it must be a major force in developing and implementing talent management principles and practices that are major drivers of organizational effectiveness.
Talent Management Reinvented
For talent management to be a strategic advantage for an organization, integrated systems are required.
The critical role for HR to play is to be the expert resource and to be willing and eager to change its talent management systems when the time is right. What it cannot and should not try to do in a traditionally managed and structured organization is lead a talent management system change effort that is not part of a larger organizational change effort that is supported by senior management.
