Talent Management has broadly existed in various forms for many years with organisations using
such processes as succession planning and competency frameworks to identify and
develop their high potential performers.
The term itself wascoined in the late 1990s, gaining particular momentum as firms tuned into the
fact that having a consistent and focused approach to managing intellectual
capital within the organisation would have a positive impact on the
business.
Since then White Papers, surveys, reports and articles on the subject abound, each with perhaps
a slightly different definition of talent management and each taking their own
angle, but all with the same consistent message: there are clear bottom-line
benefits to having an effective, integrated talent management strategy which is
underpinned by the broader business imperatives and this enables current and
future success.
Various studies have focused on these
business benefits and the role of talent management practices and, with the EU backing a legislative initiative to
improve the gender balance in the boards of companies listed on stock
exchanges, there is a further argument for having a more inclusive and targeted
approach to talent management.
- Huselid and Becker (1995)
researched the HR practices of 740 companies and found that those using High
Performance Work Systems (HPWS) or integrated talent management practices had
significantly higher levels of organisational performance, measured by an
increase in market value per employee.
- Watson Wyatt’s European Human Capital Index study in
2002 suggested that there were 36 HR practices and policies which were
associated with an almost 90% increase in shareholder value.
- The Institute of Work at
Sheffield University conducted a study on manufacturing companies in 2001. Its research demonstrated that people
management practices were a better predictor of company performance
(productivity and profitability) than strategy, technology or research and
development, accounting for 20% of the variation in the financial performance
indicators.
- Ernst & Young in its report
titled ‘Managing Today's Global
Workforce: Elevating Talent Management to Improve Business’ found that
those companies which effectively manage talent consistently, deliver higher
shareholder value. They analysed results from a survey of 340 senior executives
conducted in 2009 to assess global talent management practices and evaluate their impact on
business. It was found that companies
which align talent management with business strategy deliver, on average, 20%
higher return on equity than those without alignment; those that integrated
their talent management programmes delivered 38% greater returns.
Another strong
argument for investing in a coherent talent management strategy is
engagement.
There is a growing wealth of data which suggests that an engaged workforce leads to a range of
organisational performance benefits. For
instance, the 2009 MacLeod report to Government cited a number of correlates of
high engagement levels, many which have been reported by the poll experts
Gallup in its studies of engagement.
Among its findings:
- In organisations with strong
talent and engagement practices, more employees were likely to recommend the
company to others, with 67% of employees in organisations who had strong Talent
Management practices advocating their company versus only 33% of employees in
the organisations which did not.
- When comparing business units,
those with engagement scores in the bottom quartile averaged 31 – 51% more
employee turnover, 51% more inventory shrinkage and 62% more accidents than
those in the top quartile. Looking at
the same business units, those with engagement scores in the top quartile
averaged 18% higher productivity and 12% higher profitability.
- In a study on the earnings per
share (EPS) growth of 89 organisations, they found that the EPS growth rate of
organisations with engagement scores in the top quartile was 2.6 times that of
organisations with below-average engagement scores.
Engagement is now
understood to be a major driver of individual and organisational performance,
and has therefore become a management imperative and an important aspect of
talent management.
An effective talent
management strategy will ensure that critical roles are understood and that key
people and your stars of tomorrow are identified, managed appropriately through
the organisation, engaged, motivated, empowered and retained. Effective talent management practices and
engagement are strongly linked.
If you would like to read more about developing the talent management strategy for your business - or updating the plans you already have,
contact us and we'll send you the first in our series of three White Papers.
