Is talent management really as important as reports suggest? Phil Rice at PA Consulting Group explains why the implementation of the programme is more important than its design.

Eighty percent of respondents to a recent CIPD (UK) survey said they had no formal definition of talent management, and more than half had no formal strategy. Yet, three-quarters of senior human-resources managers in a recent Corporate Executive Board (CEB) international poll said that “attracting and retaining” talent was their number one priority.

Is talent management really that important? Can talent even be managed? After all, most blue-chip organisations have had high-potential programmes and succession planning initiatives in place for at least the last 15 years, if not longer. To add to which, good talent will always shine and over zealous talent management processes merely reduce the individual responsibility for successfully managing their career and progression.

Change in the labour market is now significant and inevitable

Organisations can no longer take for granted that supply of local talent in key skills or leadership will meet demand, remain efficient in a global market or remain loyal to mediocre employers. The active management of talent is, therefore, not optional but an imperative for organisations that wish to stay competitive. At an individual level aging workforces and changing employee expectations are challenging the ability of many organisations to retain and exploit talent. At an economic level the shift to knowledge-based industries is highlighting the scarcity of skilled talent, while the integration of global labour markets is opening up vast new talent sources.

The most dramatic macro economic effect on the labour market is the advancing age of workforces. By 2025 the number of people aged 15-64 is projected to fall by seven percent in Germany, nine percent in Italy and 14 percent in Japan. But it will also make a difference to China, thanks to its one-child policy. And even in America, increase in population size has dropped from 13 percent to five percent in just 15 years.

Competition for young workers, those under 35, will make the task of attracting and retaining them increasingly difficult. Maintaining the energy and commitment of workers between 35 and 54 will become imperative to success. A recent HBR article cites research that 71 percent of this band employee is disengaged. One must ask if the talent of this group is being effectively leveraged or wasted in most organisations. Loosing the skills of older workers on retirement is no longer acceptable practise in many industries and programmes to reengage retirees are becoming common place.

At a micro economic level, increases in the average standard of living, mean people have a choice as to where they work and are demanding greater flexibility from employers. In the UK, The Work Foundation (2005) reports that 80 percent of the 300,000 growth in the workforce between 2004 and 2010 will be women, many of whom will be seeking other than full-time work as a means of balancing their work and family commitments. In the US, A Families and Work Institute study found that only 43 percent of prime candidates for promotion wanted to move into jobs with greater responsibility.

Definition of talent is not as important as implementation

So, is there a recommended approach to talent management, an emerging best practise that organisations are flocking to emulate, an exemplar case study that the business school professors are referencing?

Our insight into talent management programmes in B&Q, BP, the Department for Work and Pensions, Tomkins, Ernst & Young, Cargill, Alliance Cornhill and others, from both practise and case studies, indicates that definition of talent is far less important than clarity of objectives and sound implementation. Some organisations advocate an approach that creates a pool by taking a ‘top-slice’ at a certain grade. Others repeat this for different levels creating emerging, early and senior talent pools. Some choose to adopt a functional view of talent pools and still others focus on scarce technical skills. There are those who express concerns about the elitist nature of high-potential pools and adopt a whole workforce approach. Others look at mapping value impact against cost impact of employees to define their talent pool.

Our view is that it is important to recognise that, by its definition, talent management will identify managed and non-managed talent. Managed talent is actively (as opposed to passively) managed; it is tracked and acted upon differently from non-managed talent. However, these two groups need to have a permeable and dynamic boundary. To ensure that talent is exploited to maximum potential, good practise applied in one should be readily transferable to the other.

The commonality that links all successful talent management programmes together is that they are clear on their objectives, and these are largely consistent.

1. Know which roles in the organisation are critical (either by virtue of leadership or technical skill)
2. Know what capability you currently have in those key roles
3. Know the supply of future talent to proactively recruit or develop to fill gaps
4. Provide opportunities for those in line for key roles to:

If your talent management programme meets these objectives then it is likely to be designed to deliver value to the organisation. But it is in the implementation of the programme that most organisations experience difficulty.

Differentiators of successful implementation are largely common sense

In addition to having clearly stated objectives as a starting point, there are a number of attributes that distinguish successful talent management programmes from traditional succession and workforce planning activity.

In our experience, successful programmes are planned and systematically executed. Fifty-four percent of executives interviewed for a 2006 McKinsey survey felt that senior managers did not spend enough time on talent management activity. Successful programmes create this time by ensuring that senior managers are engaged in key talent planning conversations.

Ensuring that these interactions are value adding requires talent management to be quantitative in nature. Discussions around pipeline health, retention rates, net inflows and outflows from key geographies, cost of development versus strategic hires, etc. are no longer based on gut-feel but detailed analysis to workforce data.

A related differentiator is that this data and the programmes are organisation-wide. Silo thinking – focusing on the interests of one part of the organisation rather than the whole – not only hinders the mobility of talent but also undermines the sharing of knowledge and development of interpersonal networks.

Successful programmes recognise the systemic nature of talent management in the organisation. Defining the dynamics of the talent pool; movements in, movements out, careful tracking of individuals’ progress, is vital to ensure that employee expectations are managed and it is not seen as a ‘valueless’ label.

Finally, successful programmes are applied. Thirty-nine percent of respondents in the McKinsey survey cited above blamed an inability to exploit the data that they produce as one of the key barriers to talent management. Activities are seen as another tick in the HR box.

The pivotal role of the line manager

Despite the investment of time and effort in talent management programmes, the importance of the role of the line manager is often overlooked. Line managers represent the front line of where talent is identified, coached and retained. Yet 52 percent of respondents in the McKinsey (2006) study identify insufficient commitment of line managers as a critical barrier to talent management. Moreover, 50 percent of respondents observed that line managers were unwilling to categorise their people. At its simplest level, line managers need to be proficient in three things to enable the management of talent: assessing performance, assessing potential and assess competence.

We can conclude that aging workforces, changing employee expectations, the shift to knowledge-based industries and the integration of global labour markets are placing increasing emphasis on the talent agenda. Most large organisations are investing in or exploring talent management as either a direct or precautionary response to the issues relating the managing talent. There are numerous and diverse ways of defining talent, which will be specific to each organisation. The challenge lies in the implementation.

The role of HR is moving from a focus on strategic HR to being the custodian of effective talent and capability management. The unique nature of talent demand a supply in each organisation means that there is no single approach that emerges as best practise. However, establishing clear objectives of what the programme seeks to achieve, following common sense differentiators and focusing on the role of the line manager, in the process, are the most effective ways of ensuring that a talent management programme will deliver value to the organisation.