What is talent management?

Given how important employees are to helping an organization meet its business goals, talent management is an increasingly key component of business strategy. Organizations that put talent first are building what McKinsey calls a “talent-first culture”.  This approach involves prioritizing the entire lifecycle of human capital management from new employees to current employees. This prioritization helps ensure that every employee receives the training, support and mentorship they need to succeed.

Many organizations have adopted comprehensive talent management strategies to attract new hires and retain existing employees. These talent strategies ensure that an organization stays competitive in times of economic growth or uncertainty.

Effective talent management requires a comprehensive strategy and upfront work to develop, but it more than pays for itself by creating happy and effective employees.

Talent management and talent development both factor into the discipline of employee relations.

Talent development is primarily focused on how organizations address skills gaps to ensure that employees have the right tools to achieve their jobs and stay on the desired career path or transition to another field.

The talent management process is sometimes treated as a parent of talent development because it relates to many human resources and employee performance disciplines, including recruitment, onboarding, retention and compensation.

The era of quiet quitting has led employees to hold more power when it comes to which organizations they join and when. As such, they are much more vocal about requiring strong talent management initiatives in any organization with which they interview.

HR teams face more competition for their ideal candidates while conducting talent acquisition, as candidates can be more selective in the organizations they choose to join. Therefore, ensuring there is a robust talent pipeline requires a comprehensive strategy.

Smart organizations, therefore, highlight their talent management system to the public and to prospects as a way to build a positive employer brand. The aim is to attract more high-quality, discerning prospects and increase their talent pool by demonstrating their dedication to managing and supporting talent.

HR professionals have several key areas of talent management at which they must excel to create meaningful change in their organization.

Talent acquisition and retention: The HR departments' biggest responsibility is identifying and securing new talent while keeping their existing employees' content and productive. McKinsey research has found that 20 to 30% of critical roles aren’t filled by the most appropriate people in many organizations.

Onboarding: Organizations have a huge responsibility to set up their new employees to succeed by giving them the tools that will help them do their jobs from day one. Organizations should invest in their new employees at the beginning of the engagement by teaching them valuable skills for longevity and demonstrating how they can grow in the organization.

Core competencies development: Organizations that prioritize talent management invest heavily in employee development to ensure that their workforce has the right skill sets to perform their jobs—now and in the future. Talent management practices that allow organizations to focus on career development initiatives, such as reskilling (where employees learn advanced ways to do their existing jobs) or upskilling help employees in roles being diminished by technology.

Performance management: This component is concerned with maximizing the impact of employees’ work while ensuring that they have a good work-life balance. It involves improving an employee’s performance through coaching and performance enhancement tools.

Employee experience: Humans spend many of their waking hours working, which can lead to undue stress, burnout and mental health issues. Talent-management-driven organizations look at the entire employee experience to ensure that employees are not only good workers, but happy at their organizations and fulfilled with their jobs. While many employee experience perks have long been things like free lunches, happy hours and other activities, organizations are now listening to employees who want more on-the-job training, better work-life balance, hybrid working situations and better health benefits. The employee experience also involves finding ways to make the organization’s mission or purpose resonate with employees. Gallup has found that improving the number of people in an organization who agree with the phrase, "The mission or purpose of my organization makes me feel my job is important,” leads to significant reductions in absenteeism and an increase in work quality.

Workforce planning and succession planning: While many talent management initiatives require organizations to look directly at individual employees, they also need to view the entire human capital landscape and ensure a chain of continuity for senior leadership. Ideally, a healthy talent management program makes sure that when an executive leaves, they have several internal candidates in mind. These candidates are the ones who are interested in the role and have proven the requisite skills to succeed in the new position. Organizations can improve their succession planning by creating comprehensive mentoring programs, identifying top talent early on and providing them with leadership development opportunities.

Talent management helps organizations achieve several important goals, many of which align with specific business objectives.

Prospective employees who have several opportunities are increasingly likely to join an organization that has a strong talent management approach. To attract the best talent, organizations must share their talent management philosophy with prospects.

Organizations are incentivized to retain top talent because it often costs a lot of money to replace them. There’s also no guarantee that the organization will find a worthy replacement on the open market. Prioritizing retention, especially for high-performing talent, minimizes disruptions and ensures that an organization keeps HR costs at bay.

Knowledgeable, motivated employees are more likely to be productive. Employees receiving adequate training are more confident in their decision-making and can more efficiently and effectively complete tasks that help the organization achieve its goals.

An organization’s employees are often the front-line communicators to clients, partners and other stakeholders. They also have the ability to go beyond the status quo to make these stakeholders’ experiences exemplary. But to do that, they need to have the right skills, understand the organization’s objectives and be motivated to improve their overall performance.

Talent management is a holistic discipline, where every component ultimately leads to a major organizational end goal: happy customers. An organization that attracts and retains exemplary talent benefits in many ways. By teaching employees the skills they need to succeed, treating them well and encouraging them to satisfy customers, the organization will gain loyal customers.

While talent management programs produce several significant benefits, they also produce challenges that organizations must be aware of and overcome to maximize their potential.

Organizations looking to create robust talent management programs from scratch will likely have to invest in several key components:

• Learning and development programs.
• More HR professionals to manage the entire talent lifecycle.
• Changes, as needed, in their current approach to talent management.
• Changes to employee engagement procedures.

These investments are well worth the initial costs, as they can help save significant recruitment and retention costs in the future. Additionally, satisfied employees are more likely to create happy customer experiences, which add to business profitability.

Any organization that develops a new talent management model may need to reskill its HR team members so they can use new techniques, tools and tactics in their workflows

It can be a challenge to select the right metrics to ensure an organization’s talent management approach is on the right path. Organizations need to know what to measure—and how to measure it—to justify the investment required to improve their talent output.

Some organizations are reluctant to adopt new working methods, especially if the C-suite hasn't bought in on the new approach. Embracing a refreshed talent management approach may require potential reorganizations, hiring of new staff and learning new ways of working. It can be a heavy lift for organizations used to working a certain way.

Organizations must track the success of their talent management practices to ensure success. These key performance indicators (KPIs) should ladder up or align with an organization’s needs and business goals.

HR departments should track how long it took to fill an open role (and the aggregate time) to determine if they need to change their approach. The longer it takes to fill a particular role, the more expensive their overall recruitment program. In addition, a prolonged vacancy in a key role could lead an organization to miss out on opportunities.

Investing in talent management should influence how employees feel about their jobs and the organization that employs them. An organization that provides clear job training, caters to their employees’ needs and offers reasons to grow within the organization. Employee satisfaction helps improve employees’ sense of pride in their jobs and their interest in staying with their employer.

Organizations prioritizing talent management are likely to keep employees at the company for more years, thereby decreasing turnover margins. Like time-to-fill, it is imperative to track turnover margins over time.

Organizations invest in talent management because it leads to better-prepared and motivated employees. In turn, they can help the company meet key business goals like sales targets and customer satisfaction scores. Organizations should track hard business metrics to see if their talent management approach is leading to real business impact.

Organizations are increasingly looking to create a more diverse workforce by finding talented employees in underrepresented communities. Identifying a more diverse talent pool and equipping them with the tools to succeed is a hallmark of any modern talent management strategy.