There is no doubt that we are in exceptionally pressurized commercial conditions and there is nothing on the horizon to suggest this will change, particularly in the short to medium term. For many organisations, therefore, finding and keeping the best staff will be of paramount importance to ensure their continued success.

The concept of “talent management” feels like it has been around in HR and Executive Circles for a long time, but the term is relatively new. A concentration on finding key staff members as a discrete area of HR expertise became fashionable in the 1970s, but the term “talent management” was first defined in 1997 in research by McKinsey[1] and then more widely in a 2001 book called “The War for Talent”.[2]

 

What does it mean, both academically and practically for organisations committed to finding and nurturing it?

In the academic world, it appears that there is no single definition of “talent management”, and that there is a dearth of research since 2001.

By 2007 Professor Carole Tansey, professor of HR Innovation at the Nottingham Business School, Nottingham Trent University was commenting: “There is no single or universal contemporary definition of “talent” in any one language; there are different organisational perspectives of talent.  Current meanings of talent tend to be specific to an organisation and highly influenced by the nature of the work undertaken.”[3]

Since then there have been some academic papers on the subject, but nothing has led to a universally agreed upon definition of the subject matter.

A 2014 article by the Journal of World Business[4] suggested that the lack of a consistent definition has led to three different ways of interpreting Talent Management (TM) in practice:

“(1) TM is often used simply as a new term for common HR practices (old wine in new bottles);

(2) it can allude to succession planning practices, or;

(3) it can refer more generically to the management of talented employees (Lewis & Heckman 2006)”.

In short there is neither a uniform understanding of the term “talent management” nor of its aims and scope.  There are, for example, ongoing controversies about whether TM is about managing the talent of all employees (inclusive or strengths-based approach to TM) or whether it is about the talents of high potential or high performing employees only (exclusive approach to TM).

 

What does this mean for Organisations? 

To answer the first question in the Journal’s view, how does Talent Management differ from HR?

One frequently quoted explanation of Talent Management is that it is “the anticipation of required human capital for an organisation and the planning to meet those needs”.  But part of HR standard practice is the employment of people well suited to an organisation and ensuring that there are processes in place to review and manage staff performance for the greatest benefit of the organisation.

Block with leader in red at the top

A major difference, and a way to understand Talent Management, is that HR’s approach to staff is largely transactional, in that it is responsible for recruiting staff for specific roles, overseeing the process of review and development of those staff and ensuring that the process is carried out fairly and objectively.  In comparison, Talent Management is entirely strategic.  It devolves from the organisation’s strategic plan and looks at the human capital needs of the organisation over a period of time, then sets up a plan for finding those individuals who will bring about a competitive advantage.  It does not concern itself with specifics in terms of a particular role but looks at the needs of the organisation as a whole.  For example, it will not be concerned with filling the role of a Finance Director but instead will take a helicopter view of what is needed to deliver the strategic financial plan for the next 3-5 years and ask itself what will be needed to ensure that the plan succeeds.  This may well include the recruitment of a new Finance Director but will also include what support that individual might need, what breadth and depth of experience they might have, and also what other roles in the organisation need to be well-aligned with this role to better achieve the strategic goals and outcomes. It might also ask itself whether it wants all managers to be more financially “savvy” so as to place more emphasis on financial management throughout the organisation in order to achieve its 5-year strategic financial plan.

 

Next – Is Talent Management about Succession Planning? 

The answer is yes, in part. Succession Planning is about the identification of future leaders.  Again, this is an area in which HR is closely involved as a specialist skill and will advise and lead on the process to identify individuals with leadership qualities, sometimes just at the executive levels, sometimes throughout the whole organisation.

In order to plan for succession there must be a talent pool, identified through a specific process.  This process can form part of a linear plan that begins with monthly and annual review, evaluates employees on performance and has the capability to identify and select those who show signs of emerging leadership skills.

Again, the organisation needs to think strategically before launching a succession planning process.

Are the leaders of today the same as the desired leaders of the future? If so, then finding a way to exemplify the current leadership behaviours that work well for an organisation and building the measurement and assessment of them into HR review processes will serve an organisation well. However, if an organisation has strategic goals for the future that differ from the past, more thought will be needed about what specific characteristics will be valued more within the organisation in the future. Processes will need to be put into place to identify employees with these characteristics and talents.

Man Picking leader figure out of many

Given that the organisational strategy comes from the top, Talent Management will usually involve the CEO, who will have an overview of the strategic direction of the organisation and will be focused upon the future, holding a long-term view.  HR’s direction is more short term, and whilst it is in partly strategic, focusing on engagement, motivation, development etc, it has a lesser sphere of influence within the organisation as a whole. If you like, the CEO is commissioning or tasking the HR department to deliver a particular set of recruitment or retention operations in order to deliver the desired strategic aims of the organisation. In the example above, HR will be the ones who put in place the recruitment processes to check the financial experience and orientation of potential managers and the training that might be needed for those already in place. The driving force and instructions will come from the high-level strategic thinking that has gone on about the forthcoming needs of the organisation in respect to financial planning for the future.

 

Further thought may be needed about identifying early signs of the required characteristics for succession planning so that individuals can be identified and selected for assessment and training opportunities to “bring on” or nurture that potential talent for the organisation.

To be able to identify employees for succession planning and to identify the specific skills required, a clear procedure to develop the talent required is needed.  This is a whole new discipline.  An organisation that goes down this route will need to be clear about what it is committing to, in terms of budget, opportunity and equality.

The management of talented employees leans more towards the individual than to the organisation, although it follows that if the individual is talented and given opportunity to practice and engage in the areas in which their talent best shows itself, this will benefit the organisation in terms of its achievement of growth and sustainability.  Nevertheless there must be a remuneration and reward process that delivers to these individuals and keeps them within the organisation when there will be outside organisations and head hunters trying to entice them away. Of course, as with any retention and reward strategy, this is not necessarily about money alone. But the point is that succession planning, as a part of talent management is not a quick fix, but something that needs considerable strategic thinking and for the HR processes and procedures to be aligned for effective delivery.

 

The next issue in terms of lack of definition:  What is Talent?  Is it a learnable skill, or an innate ability?  Does it only exist within its given context or is it transferable?  Does it mean the entire workforce or those individuals with skills and potential whose roles will always have greater impact?

Again, this is a question that continues to hold the attention of academia.  And the truth is, as always likely to be somewhere in between the two.  It’s an uncomfortable truth, too, that defining a meaning which works for an organisation isn’t easy. However, it’s crucial!

Until an organisation understands what it means by Talent, how can it go about looking for it?  The term is tossed about in HR circles as if it’s a given, but when time is taken to understand what it means, this will inform many aspects of the organisation’s strategy as described in the succession planning example above.

For example, if it means the filling of critical roles with exceptional people, then the strategy will be based around the development of potential internally alongside external recruitment, probably through head hunters, to bring new people into the organisation.Celebrating staff in office behind a woman leader

If Talent means the whole workforce, then the emphasis will be entirely internal, with the need for HR to promote and manage meaningful review processes, good organisational structure and well-designed roles.

Once the organisation has decided what it means by and how it views ‘Talent’, it must make sure that this is understood throughout the organisation and referred to and applied consistently.

Although this lack of theoretical definition does make the area of Talent Management more difficult to follow, this can also be viewed as an advantage.

In every organisation there is a need for talented individuals.  Imagine for a moment a Company in which no-one stands out.  Where staff are all in the average bracket.  They turn up to work each day, carry out the allotted role, and then leave at the end of their allotted shift.  There are no interesting discussions about how to advance the aims of the organisation.  No-one is interested.  No creative thoughts, no challenging ideas.  How long would such an organisation last? There is no need to answer that question.

But equally, a company that trumpets itself as being the home of only creative, talented people, where there is little structure and to which only original, inventive people should apply, will quickly fall off its own self-created pedestal.  Facebook would seem to be such an organisation, once much envied, now in freefall.

 

How does all of this affect an aspiring organisation?

The smaller organisation, once it has decided what it means by Talent, can create its own version of Talent Management, to suit its own strategic agenda for growth, sustainability and success.

There are 3 key decisions:

  1. Is Talent to be concentrated exclusively in in roles at the top or higher end of the organisation?
  2. Or does it encompass the whole organisation, to include both strategic and non-strategic employees?
  3. Is the search for Talent to be invested separately or is it part of the HR function?

If it is the top/executive end, then the first step is for the organisation to systematically identify those roles that contribute to creating a sustainable competitive advantage. Once these have been identified, is there a pipeline of staff within the structure available to fill these roles, through a set of discrete HR policies and practices?

It is unlikely that this recognition of differentiation will be achieved by the standard processes of role creation and job evaluation.  These have traditionally focused on skills, efforts, abilities, working conditions, etc.  i.e. the inputs.  To distinguish the key roles will require a focus on the outputs that will contribute to strategic direction.

As these key positions are likely to be few and far between, how to create a talent pool that stays relevant over a period of time is the next challenge.  Looking internally, the standard review process may well discover candidates with the potential to fill the roles at some point in the future (succession planning) but there is also the option of looking externally and recruiting ahead of the curve.  Bringing in someone with external experience and a fresh outlook could give a fresh impetus for the strategic growth plan.  Nonetheless in a smaller organisation, in order to bring in such a person or people could require inventing a new position.  The caveat with this approach is that these are likely to be high achievers and if they cannot expand and grow quickly or cannot see immediate opportunity for growth and development into a key strategic role, they may become bored and disillusioned.  A new environment and more complex work will only satisfy for so long, if the scope is limited.

For those staff occupying the non-key, non-strategic roles, development is still important to gain their commitment and engagement, but only within the narrower context of their own role.

If the decision is to view the whole organisation as potential talent, then the HR function will be a key driver in ensuring that there is a process in place that, in the first instance, can work fairly and proportionately throughout.  It is incumbent on the organisation, before such a process is even put in place, to decide how it will position its intent and approach all of its staff. In many ways this is a much larger endeavour than focusing talent management on the top management of an organisation. An organisation, even a small one, may need a range of different types of talent to grow and thrive. Great senior managers with strong leadership skills, financial whiz kids, good sales staff and great IT systems and HR procedures. All of these different types of talent will need to be identified and characterized in a way that is reflected in the recruitment, retention and development of each “talent group”. In other words, in a strategically well thought out and aligned set of HR processes.

Thought will also need to be given to how to nurture valuable staff, essential to the business, but not identified as high flyers within their particular talent set. Annual reviews are the traditional way to review all staff, allocating them to a grade or rating, sectioning off the highest performers into a talent pool, for more concentrated development.  But there is an innate flaw in this approach.  This involves the psychological contract between the organisation and its employees.  How much engagement is there likely to be from employees who know that they have not been identified as talent? All this can be managed effectively, but only if it is properly thought through by senior management and a cohesive set of arrangements put in place to both grow and retain talent while also motivating those who may be undertaking essential but more routine tasks for an organisation.

 

Talent Compass pointing at 'Talent'

Thinking through all of this can be assisted by the fact that there is new thinking about the most effective way to manage staff.  In the last few years there has been a move away from the annual review process and more emphasis put on ongoing, real-time reviews of performance, expectation and achievement. An article on Forbes’ website in January 2018 described annual appraisals as pointless and insulting, quoting many reasons why they add nothing to the sum of organisational effectiveness and that they are more likely to disengage than engage employees, adding:

“Performance reviews are not effective at improving performance. They have never shown their value as leadership tools – but they make excellent power-and-control mechanisms, and that is one reason some companies have trouble giving up on them. It doesn’t help an employee move forward for a manager to tell them what they did well and did badly last year. If a manager needs to give someone feedback, they should do that in the moment — not months later.”

 

Nevertheless, people need feedback and there is also the issue of good practice.  HR practitioners will know that if there is no written record of performance review in some consistent format, this can and will lead to difficulties in the cases where performance is below standard and formal action may be required.

The HR function will therefore always need to ensure that there is a policy that describes the process of review, together with the intent and strategic purpose of Talent Management whatever form that takes.

Starting from the standpoint of being clear about the desired attributes of its staff performance, organisations will continue to be likely to use monthly, bi-monthly or quarterly 1-1 meetings, with an annual overall review.  The output of this process is likely to be a grading or rating and this type of strategic policy is likely to be closely linked to an annual pay review.

As long as an organisation is clear that its assessment mechanisms capture the elements specified as identifying talent, the outcomes of its assessment policy and process can lead to the identification of a talent pool, using the 9-box grid or something similar.  This is a grid that places employees into a box that identifies groups according to their potential, depending on their performance in the previous twelve months. This will, of course, only work if the elements used in the assessment process are designed to differentiate staff on the basis of desired “talent” as specified by the organisational needs.

With the use of a 9-box grid system, the top right-hand box tends to be the place for those high performing employees seen also as having the highest potential for development.

 

But the question here is: Development for What?

This leads back to the critical point of an organisation needing to have clearly identified what talent they need, and which groups will be identified for a talent management programme. Is it developing for leadership, or is it just accelerated development of a certain set of skills they already have but which the organisation wants at a higher level?  And the next question:  are there development programmes in place or that can be quickly identified for the talent to be nurtured?  Is it essential that before any policy is introduced to the workforce, it must be thought through in terms of it achievability.  In this particular case, the development of identified individuals is going to be long term, probably over several years.  It has to have secure financial support as well as a sustainable programme of development.

The worst mistake an organisation can make is to set off with good intentions on talent management, but not deliver on what it has promised.  Sadly, this is not a rare occurrence.

Inter linked employees

Whatever form an organisation’s talent management strategy takes it is clear that it does not sit as a standalone entity, but rather one that needs to be thought through and agreed at a strategic level and then hard wired into an integrated set of HR policies and practices including:

  • Recruitment & Selection
  • Performance Review
  • Reward
  • Career Development / Career Paths
  • Succession Planning
  • Promotion

 

Defining how talent will be identified in each and all of these processes is in-built in the review system, beginning with the induction period following recruitment and following through to the review that provides the opportunity to identify the talent pool, commence succession planning and create a promotion process that uses solid information acquired through the review process and through the use of data from a good HR system.

The most recent information from the market suggests that many companies are reviewing and pro-actively refreshing their talent strategies, due to external market pressure.  A survey of 29 household names by KornFerry[5] found that a third of these companies were stripping out forced ranking. Almost half (47%) were reviewing and re-organising their talent strategies.  However, Korn Ferry Senior Client partner Lesley Uren warns “that disruption should not be an end in itself.  They need to be incredibly targeted, look at where they’re encountering commercial challenges and explore how flexing their people strategy can help them overcome these.”  This could mean diverting the majority of their attention to the individuals who possess the critical skills to catch up with a market disruptor, rather than paying attention to functional talent – such as finance – that you may be able to ‘buy’.

 

In 2019, the UK is facing unprecedented disruption with the potential effects of Brexit.  Talent is already in short supply.  There are currently many examples of what might happen, but for HR when it comes to assessing the impact of Brexit on HR and on the acquisition and maintenance of a talented workforce, Brexit is far more than a political issue.

Ultimately, how Talent is defined and how it is managed has no easy lead to follow.  It is in the hands of the organisation.  There is no right or wrong way, only what works.  But it starts from having some clear strategic thinking about where the organisation is going and what that means it needs in terms of talent to deliver. Just thinking through these issues and understanding how HR polices from recruitment and induction, through appraisal and development to reward and recognition sends signals to all employees about what the organisation is and what it wants from its staff and what opportunities there are for those with talent who want to shine. What is certain is that the future will be more challenging than ever before, and much strategic thinking and planning will be needed before putting plans are put into practice if organisations are to get the best out of their people.

 

 

[1] The War for Talent, McKinsey Quarterly 1997

[2] The War for Talent (2001) Michaels, Ed; Handfield-Jones Helen; Axelrod Beth

[3] Carole Tansley, Talent:  Strategy, Management, Measurement (2007)’

[4] Journal of World Business 49 (2014) 173-177

[5] Personnel Today.com March 2019