With the ongoing contraction of the labour market, it is surprising that less than half of UK companies have a planned strategy for identifying and developing their most talented employees. With no method of retaining and nurturing these high-potential individuals, how will firms cope should the unexpected occur? Matt Henkes explains how and why you should be thinking about long-term talent management.

Picture an unpleasant, hypothetical scenario where a senior board member of your firm is forced to resign immediately following a compromising incident captured on video that somehow found its way onto the internet. The boardroom is thrown into chaos and turns to HR, pleading to know who can step in as a replacement.

The difference between becoming a casualty of this lamentably sticky situation and being able to calmly present a list of internal candidates will be a fully functioning and well thought out talent management programme.

Recent research suggests less than half of UK companies have such a scheme in place. The rest, with no recognised way of identifying, developing and, most importantly, retaining the talented individuals that could be key to their future success, are leaving themselves open to a world of high-level recruiting headaches and missed opportunity.

The survey, conducted in June by outsourcing specialist Cranfield Consulting, showed that 60 per cent of respondents believed talent management was essential to their business’ bottom line. Although only 49 per cent claimed to be strategically managing their key talent.

However, Victoria Winkler, training, learning and development adviser at the Chartered Institute for Personnel and Development (CIPD), believes executives are beginning to cotton on to the need for an effective talent pipeline. “Organisations are increasingly realising that their competitive edge is coming from people within,” she says.

“There is a tightening labour market and firms increasingly have to compete to attract and retain individuals. Top level managers know that developing that internal labour market is increasingly important so that there is a pipeline of people within the organisation that can go into senior roles.”

And according to Trudi Ryan, a founding partner at executive talent management specialist firm Dawes Ryan Consulting, good talent management can translate directly to the bottom line for organisations that do it correctly.

“Managed properly, it will save them money,” she says. “External recruiting is more expensive and isn’t always successful because bringing in top level management from outside the organisation is a massive adjustment for everyone. It’s much more effective if we have developed them, rather than having to keep going back to the recruitment marketplace.”

Top level ownership

While recognising and nurturing talented individuals can be beneficial to business, it’s not something that rests solely on the shoulders of HR. Mark Auckland is responsible for the award-winning talent pool programme at Network Rail (NR), the owner and maintainer of Britain’s railway infrastructure. As head of leadership development and resourcing, his first and most important rule, he says, is that talent management should be owned at the very highest level, even if HR is heavily involved as the engine room of the process.

“If you don’t have true buy-in at the top, forget it,” remarks Auckland. “This means that they are willing to give up time to be coaches and they’re willing to give up time to do the selection and development work.”

NR employs over 30,000 people, guided by around 3800 managers. Over the last two years, 40 per cent of the company’s ‘business critical’ vacancies have been filled internally from its own talent pool. But how can you spot promising individuals lurking in your midst?

Line managers have a big role to play as, collectively, it is these people that know your workforce the best. In NR, it is the line managers that put their most talented people forward for consideration through its Learning Development Group (LDG), a panel chaired by deputy CEO Ian Coucher.

Also comprising a number of other key executives, the panel decides which candidates will be assessed and dropped into the talent pool to be given a development programme that should groom them for the top.

Together with the University of Warwick, NR’s centre of excellence, Westwood, devises a development plan that seeks to close the gap between the candidate’s current abilities and those they will require if they take on one of the top jobs. This plan may consist of a number of different components, including job moves and secondments, training and executive assignments.

“About 80 per cent of it is off their own backs,” Auckland explains. “My experience in other organisations is that if you do too much for them, you’re not actually honing that part of the leader which has the hunger and the drive to get on.”

In the case of NR, someone with talent is defined as anyone who would be capable of operating at two or more levels above their current role. Auckland cautions, however, that the definition of talent should depend on the culture and business requirements of your organisation. A fashion retailer, for instance, would call for different abilities from its top people than a massive engineering and maintenance firm.

Winkler believes this is one of the most crucial points. “It’s critically important that there’s a common language within the organisation,” she says. “Definitions vary from company to company, but what you don’t want are people at different levels inside your organisation thinking that talent and talent management mean different things. If people aren’t clear on that, there’s room for a lot of confusion.”

What’s in it for everyone else?

Another key part of talent management is engaging in and understanding the process at all levels. Auckland has worked for companies in the past where line managers would try to hide their talented individuals because they didn’t want to lose them. He has encouraged NR line managers to engage in the process by bringing them in on the task of creating development plans for the people within the talent pool.

Candidates are set modular assignments to show how they are applying what they have learned back in the work place. These are jointly agreed with the line managers, so that if they have a particular business problem or issue, the individual can act like a ‘mini consultant’, putting their talent to work on their various departmental problems.

NR’s programme took around two years to design and get up and running, which is why Auckland is keen to point out the importance of conveying to executives that their investment will not always turn out immediate results. “It’s not a ‘magic pixie dust’ fix over a year,” he emphasises. “They have to see it as a long game.”

This is a sentiment with which Ryan agrees wholeheartedly. “Sometimes HR will dive straight into what I call the ‘vision state’, the ideal of where they want to be,” she says. “But actually, the organisation is quite some way away from that.”

HR teams should acknowledge that their organisation will not necessarily be in the ideal place from the word go, she advises. They should have a plan over a couple of years to get there.