human resource management
CHAPTER 2
BUILDING COMPETITIVE ADVANTAGE THROUGH
INTEGRATED TALENT MANAGEMENT
Marcia J. Avedon, Gillian Scholes
The business world is more dynamic today than ever before with an
accelerating pace of new technologies, increasing globalization of markets
and competition, changing regulatory requirements, and increasingly
commonplace mergers, acquisitions, and divestitures. In this tumultuous
environment, organizations must continually renew their organizational
capability to achieve competitive advantage. However, it is increasingly
challenging to find the talent needed to compete in this dynamic business
environment.
The availability of educated, working-age talent is shrinking in many of
the world’s labor markets (Zolli, 2007). Multinational companies are
moving work to developing lower-cost countries, only to find the talent
wars and wages subsequently escalating in those countries (Qihan &
Denmat, 2006). Skilled leaders and other professionals, with the
capabilities to enter new markets, create new business models, and
innovate new technologies, are highly sought after (Michaels, Handfield-
Jones, & Axelrod, 2001). Consequently, the demand for talent is
outstripping the supply. As a result, top performers in key talent pools
typically have multiple employment opportunities at any point in time. In
addition, senior leaders, including CEOs, are in their jobs for shorter
periods of time (Lucier, Kocourek, & Habbel, 2006), and employees
generally no longer expect lifetime employment with one company.
Leadership and employee development, through experience and
education, still takes considerable time and effort and will never be a
quick fix. This set of complex, changing business and talent realities
creates the imperative for companies to focus on talent in a strategic,
systemic, and customized manner.
The ability for a firm to create an integrated system that yields a continual
flow of talent ready to address specific strategic and operational
opportunities may be the single-most enduring competitive advantage.
While organizations often find that their strategies, products, services, or
markets require change, the need to have relevant, differentiated talent to
achieve these business goals remains constant. However, the specific
talent strategies need to adapt accordingly. Several recent surveys of both
chief executive officers and chief human resource officers confirm that
attracting, developing, and retaining talent is a top concern (Donlon,
2007; HR Policy Association, 2007). One CEO identified the point well
(Donlon, 2007): “We are the most highly regulated industry in the world,
and we have the most compliance issues in the world. So, those are risks,
but our single biggest issue is human capital. We are losing it really fast
and that is really scary.”
This chapter provides definitions, models, and examples for creating a
dynamic, customized, and integrated talent management system. We do
not provide a set of absolute “best practices” or optimal solutions that will
work for all companies. The focus is on creating a framework and the
inherent logic of a talent management system for the particular company
at a certain point in time. Also, approaches are presented to ensure that
the talent management processes are sustainable but adaptable and, most
importantly, are integrated into the business management system and
organizational culture. Specifically the integration of talent management
is discussed at three levels: (1) integration with business strategy,
including human resource (HR) strategy; (2) integration of the talent
management system; and (3) integration with the culture of the
organization. Also provided are “learnings” and examples of how to make
these connections in the talent management framework in order to
achieve the greatest impact on business outcomes.
Only in the last several years has the term talent management become
popular, although it is defined in a variety of ways (Lewis & Heckman,
2006). These talent management definitions include:
• “Rebranded human resource management,” that is, taking the
traditional HR functions and doing them better
• Human resource planning and succession planning
• Talent as an attribute—either focusing on developing the inherent
talents in all employees or focusing on “highly talented” individuals in
general, usually high-performing or high-potential individuals
In this chapter we use the term talent to mean those individuals or groups
that are strategically important to the purpose and goals of the
organization. Specifically, talent refers to those individuals and groups
with the strategic competencies that enable a company to achieve its
short- and long-term goals. They exhibit the competencies that will add
the most value to customers and in doing so, help to differentiate the
organization from its competition. We define talent management as a
subset of human resource (HR) processes, programs, and tools designed
to identify, assess, develop, and retain talent.
Boudreau and Ramstad (2002) have proposed focusing on what they call
pivotal talent, that is, the pools of talent where improvements in
capabilities will make the most significant impact on competitive
advantage. Business strategy involves making choices about resources and
investments to create competitive advantage. When talent management is
integrated into strategic business planning, there is an opportunity to
discuss the capabilities and skills needed to execute the plan. This helps
leaders create proactive plans to ensure that they have the talent they
need to achieve the strategy.
Zuboff (1988) further defines talent in terms of the value that the talent
segment brings to satisfy the needs of the customer and the degree of
difficulty to replace the talent. This concept can be extended to segmented
pools of talent by considering their strategic value to the organization and
by their internal or external availability. This approach leads to the
conclusion that given limited resources, the investment in people needs to
be skewed toward the pools of talent that will provide the biggest value to
the enterprise. Although all employees should be developed and engaged
in order to achieve a sustainable organization, some groups of talent
should be identified for additional focus. Therefore, the primary purpose
of talent management is to define which groups and individuals are key to
the organization’s future, and then design and deliver processes,
programs, and tools that grow this talent base.
Taking a targeted approach can be disconcerting to those who believe that
organizations should invest in all employees. This does not mean that
development is only confined to the strategic talent pools, but that
additional investment should be made in strategic talent. This is really no
different from a classic market segmentation approach, where
investments in markets and brands vary depending on the strategic
importance to the organization. This is captured in the philosophy of one
large financial services company that advocates providing “good
development for all, great development for some.”
Making decisions about which talent pools are strategic is the first step in
creating an integrated talent management strategy. We have identified
four broad categories of
• Leadership talent
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• Talent for strategic functions
• Talent for strategic technologies
• Talent for strategic geographies
Leadership talent is generally an area of strategic importance for most
organizations. As business becomes increasingly complex, the leadership
competencies that are necessary for success have become harder to find
and develop. In an environment where leaders no longer stay with one
company for their entire career, it is critical to ensure leadership
continuity and a flow of leaders through all career stages (Charan,
Drotter, & Noel, 2001).
Executives must look not only at their current leadership teams to assess
whether they have the performance levels and competencies needed for
the short term, but also to the future needs of the organization. It is
important for them to ask the questions:
• Where will the next generation of leaders come from?
• Are we grooming leaders early in their career and facilitating their career
progression?
• Do we have talent shortages in early career, midcareer, or senior
leadership talent?
Once these questions have been answered, then targeted programs can be
created to grow leadership at the different stages within the pipeline.
Leadership capability is a key differentiator between companies with
sustained success and other less successful companies (Holstein, 2005).
Therefore, identifying and developing employees with leadership
potential is a major area of focus and investment in leading companies.
Also, attracting and retaining leadership talent is a priority in top-
performing companies.
Every organization has key functions that are of critical importance to the
organization’s strategy at a given time. Typically these functions become
dominant in the culture, while other functions play a secondary or
supporting role (Hewitt, 2000). For example, in technology companies,
the hardware and software engineers fuel product development and
innovation (the core goal of the company), while marketing, finance, and
operations are essentially supportive functions. As their markets mature,
some technology companies may find that they need to shift their focus to
marketing and field service, in which case their talent strategy needs to be
adjusted to increase the attention given to those functions.
When a company embarks on a new business strategy it is particularly
important to identify which functions need to be strengthened and
supported by the talent strategy. Treacy and Wiersema (1995) proposed
that although companies need to be good at three fundamental business
strategies—product innovation, operational excellence, and customer
intimacy—they should aim to excel at only one, in which case, the
company’s focus will be reflected in the dominance of certain functions in
the organization (see Table 2.1). For example, when one diversified
manufacturing conglomerate moved toward a strategy of accelerated
revenue growth from developing existing products and markets as well as
acquiring new companies, it started to hire and develop business
presidents from different functional backgrounds. Traditionally all
business presidents in this company had come from either the finance or
operations functions, but seven years later, over a third of these roles had
leaders with sales, service, or marketing backgrounds. This represented a
significant shift in the general management capabilities inside the
company, and one that was more in line with their new market
orientation and growth strategy.
Table 2.1. Identifying Talent Needs to Achieve Business Strategy
Source: Treacy & Wiersema (1995).
In many instances, products or services rely on a particular technology for
a competitive advantage in the marketplace. As technologies develop and
change, it may be necessary to recruit or develop talent with different
experience. This can be a challenge, particularly if a company has built its
culture around one technology and now needs to incorporate new
approaches. In the energy industry, for example, large petroleum
companies are investing in new technologies such as geothermal energy
and biofuels in order to meet society’s demand for renewable energies.
They are partnering with different universities and researchers, and
finding ways to attract talent who can commercialize the new technologies
in new areas of the world. Often this creates tension between the
traditional parts of the organization and the new start-up businesses
because the expectations of the new talent for compensation, benefits,
and work environment may be very different from the prevailing norms.
The organization will have to develop new strategies to attract and retain
talent with different skills and aspirations in order to be successful with
the next generation of product and solutions.
A growth strategy often requires geographic expansion, either within the
domestic market or into other countries of the world. It is particularly
hard to build organizational capability in rapidly developing economies
(Boston Consulting Group, 2005) and requires a targeted talent strategy
to build success. The emphasis for talent management will likely be very
different when the organization is attempting to build a strong talent pool
in these economies than when it is entering a more economically mature
country.
Starting up in a new geography can be an expensive undertaking, and so a
well-planned talent strategy, along with the right level of investment, is
crucial. Identifying which geographies are the top priorities and then
developing the appropriate talent strategy for each particular market is an
essential first step toward business expansion. Without a targeted
approach, it is likely that the business strategies will not be implemented
as quickly or as successfully as envisioned. When foreign companies enter
a new geography, they are competing for talent against each other,
sometimes in markets where there is a lack of an educated workforce or
an existing workforce that has developed under very different political or
economic models, such as communism versus capitalism. This requires
tailored hiring and development plans in order to have the skills that are
needed to grow the business.
For example, in China some companies found that although they were
able to find manufacturing and business managers to start up their
operations, they were unable to find a distribution channel for sales and
marketing to effectively bring their products to market. Since midcareer
managers typically came from government-owned enterprises in a
communist system, they had no experience in the use of dealers and other
channels that could market products and services to end customers.
Companies that wanted to grow through product distribution had to find
ways to identify, educate, and support independent dealers in order to
create a channel. This took time and investment before they could achieve
their growth plans.
The model of talent management that we propose integrates business and
human resources strategy, talent management processes, and
organizational culture; provides a systemic approach; and results in
having talented leaders and individuals available to accomplish the
mission of the organization.
Most of the published literature on talent management refers to the
integration of talent management processes relative to other elements of
human resource management or within the talent management system
itself (Corporate Leadership Council, 2005; Morton, 2004). While these
definitions may be of in
of integration alone wil
organization. The only w
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being in support of, and part of, the business strategic plan and ultimately
part of the culture or mindset of the organization. This is supported by
recent research by Gubman and Green (2007) for Executive Networks on
their members’ experience with the evolution of talent management in
their organizations. In their model, described in Figure 2.1, talent
management evolves from a programmatic approach, where the focus is
on the alignment of initiatives and activities, to a culture where managing
talent is “an unquestioned, top-of-mind priority that becomes second
nature to executives (and line managers)” (p. 1).
Figure 2.1. The Stages of Talent Management
Source: Based on Gubman & Green (2007).
The discussion of approaches to integrated talent management should
consider integration with strategy—both business strategy and human
resource strategy—as the starting point. This is consistent with Lewis and
Heckman’s (2006) talent management decision architecture and
Boudreau and Ramstad’s (2007) human capital bridge decision
framework. Both models start with strategy, or sustainable competitive
advantage for the enterprise, as the critical input into the design of the
talent management system.
Most organizations have a strategic planning process, but many do not
explicitly incorporate organization and talent strategy development into
their strategic planning. Organizations that have embedded the talent
strategy into their strategic planning process on a recurring, systematic
basis ensure that they have the talent to execute the strategic plan. Ulrich
and Lake (1990) discuss organizational capability as one of four ways an
organization differentiates itself in the eyes of the customer. For a
company to succeed, it must be capable (that is, have the capacity and
competence) in four areas:
• Economic and financial
• Strategic and marketing
• Technological
• Organizational
Their model asserts that building organizational capability must be given
the same level of attention as the other three.
Specifically, the integration of talent management plans into strategic
plans answers the key question, “How do we ensure that the organization
has the competencies and capacity to achieve its goals?” This question
needs to be asked at the time of strategy development, not left until it is
time to implement the business plans. The availability and readiness of
talent, internally or externally, will have an impact on the feasibility of a
strategy and can make the difference between success and failure.
A number of companies have incorporated talent planning into their
strategic planning cycle as a formal business subprocess. For example,
many have written about and tried to emulate General Electric’s “Session
C,” GE’s well-established process of talent review that is integrated into
the annual management planning processes (Corporate Leadership
Council, 2001). These approaches are successful only to the extent that
the strategic priorities or themes are consistent across the long-range
strategy, the annual operating plan, and the talent and organization plan.
To be truly integrated, the talent and organization plans must support the
requirements of the strategic plans (three- to five-year plans for the
business including financial goals) and annual operating plans (one-year
goals and objectives).
Charan and Bossidy (2002) describe the talent process as critical to
successful execution of business strategy. They specifically emphasize the
talent process as “making the link with strategy and operations” (p. 141).
Some companies prepare the strategic plans and talent plans
simultaneously to ensure integration. Regardless of whether the talent
planning is a component of the strategic plan or a direct outgrowth of it,
an integrated talent management system must be focused on determining
the specific talent needs critical to achieving the business goals and on
identifying the actions that will have the greatest impact on gaining
strategic competitive advantage.
In addition to alignment with the business planning processes, an
effective talent management process must include an honest, critical
analysis of how well the company is currently achieving its talent goals to
meet the business needs. Sophisticated, evolved talent management
systems have both strong “look-forward” and “look-back” components to
learn from mistakes or gaps and to build on successes. This approach also
allows thoughtful decisions to be made about investments in strategic
hiring, training, or other talent development activities.
When the talent management system is not well integrated with the
business plan, there is often an excessive focus on the forms, programs,
and process. For talent management to be truly integrated into the
business planning and review system, the focus must be on achieving the
strategic talent goals and on candid talent conversations at both the
strategic and operational levels. Once the business strategy is translated
into a talent strategy with measurable actions and goals, then there must
be a process to follow up on commitments just as with other aspects of the
business plan.
A current example of the integration of the talent planning into the
strategic business plans is in Ingersoll Rand’s security technologies
business. Traditionally this business created value from the design,
manufacturing, and marketing of mechanical locks primarily in North
America under the Schlage brand. The strategic planning process a few
years ago identified growth opportunities and goals through acquisitions
and market expansion into electronic access control and electronic
security. It was clear that this strategic shift required new skills in
electronics and electrical engineering, software development, and global
market development. The new talent requirements demanded a shift in
how talent was sourced, recruited, assessed, and assimilated. Through the
strategic plan, it was determined that many of the new hires will come
from “high-tech companies with human resource practices and work
environments different from those at Ingersoll Rand.”
The strategic plan defined the specific business opportunities in electronic
locking and security by geographic market segment over the next five
years. In addition, the business leaders identified the numbers and
expertise levels of software, electronics, and electrical engineers needed;
the sources of this talent; and the strategies for recruitment. New leaders
with experience in global markets and the new technologies were also
identified, as well as plans for developing internal high potentials. The
plan also identified the potential retention risk if the cultural issues,
including differing work environment expectations, were not addressed
with the change in the talent base. Interestingly, the company was not
abandoning the mechanical locking segments, so while there was a
disproportionate investment in the new strategies, it was important to
also keep the current, traditional talent pools engaged. Once the strategic
plan was approved, including the talent goals, detailed action plans were
established and reviewed quarterly.
Companies that have their talent management system highly integrated
into their strategic management system will evaluate leaders’
effectiveness based on their ability to develop and implement
organizational and talent strategies to achieve sustainable performance.
Leaders in these companies understand that achieving their talent plans is
as important as achieving their financial plans. For example, Ingersoll
Rand Security Technologies has the highest profit margins in the
company and outperforms competitors in many markets, success that can
be partially attributed to its talent strategy.
An organization’s huma
accomplishment of the
such as employee relati
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development in order to create an HR environment that is aligned with
organizational goals. In addition to the need to integrate talent
management into the business strategy, it must be integrated with the rest
of the HR strategy. The integration of talent management within the HR
strategy may be accomplished in a number of ways, including through
using common HR principles, philosophy, mindset, and HR systems and
data, or by having shared competency models as an integrating
framework. Once the requirements for talent are identified from the
business strategy, strategic human resources programs should be
designed with flexibility to differentiate strategic talent. For example,
within an overall budget for annual merit raises in pay, leaders need to be
able to give significantly higher increases to deserving individuals who
meet the criteria for strategic talent.
Companies have implied or explicit philosophies or principles underlying
their HR strategy. For example, one company may have a principle to
strive to have top talent in all positions or talent pools. This is similar to
the philosophy that Smart (2005) describes in his book Topgrading. He
defines an “A” player as one who qualifies among the top 10 percent of
those available for a position. This talent principle could be inconsistent
with the HR philosophy if the compensation approach is always to bring
people into the organization at or below the median pay level in the
market. Although they may be among the top 10 percent of those willing
to accept that level of pay, they may not be getting the true top 10 percent
of those qualified, since others may have been available if the pay was
higher.
On the other hand, if the overriding principle in a company is top pay for
top talent or pay for performance, with a focus on distinguishing
individual contributions, then the topgrading philosophy for talent
management may fit very well. This philosophy also requires a strong
performance management system and training for managers in order for
them to distinguish performance levels. Again, alignment across HR
processes or functions is essential so that the principles are consistently
applied. Otherwise HR processes may be working at cross-purposes from
the talent management goals.
The connection between leadership potential and equity compensation is
another opportunity for integration within the HR strategy. Often the
principle is that annual incentives such as bonuses should tie directly to
an employee’s performance in the prior year (assuming consistent
business performance). Whereas the overriding principle for long-term
incentives, such as stock options or restricted stock awards, is often to
have the awards linked to employees’ potential for future contributions.
Employees who are seen as the future leaders of the company and critical
to the long-term success of the company are given larger grants of equity
than those who do not have as much potential, even if their performance
levels are the same. This type of linkage sends a powerful message to the
high-potential talent about their value to the organization for the long
term. Also, this approach assists with retention since equity grants
typically vest several years into the future. These linkages between long-
term incentives and talent management practices of performance
management and succession planning are good examples of an integrated
HR strategy.
Another HR principle that illustrates integration with the HR functions is
in the area of benefits, specifically health and welfare and retirement
programs. Some companies view benefits simply as a cost of doing
business, almost like keeping the lights on. These companies want to be
on par with their competition but not highly differentiated. Often this is
not explicit but is the result of their investment in and positioning of their
benefits offerings relative to benefits of other employers. In contrast,
other companies view benefits as a key part of the HR strategy, not just
from a cost management standpoint but also as a component of the value
proposition for attracting and retaining talent.
In addition, the approach to integration of benefits and talent
management may be segmented by career stages. For example, after
identifying the critical talent issues, benefits changes may be made that
will help attract early career talent or retain experienced talent. Given the
demographic shifts in the workforce, with baby boomers retiring in large
numbers, some companies are reexamining the early retirement
provisions in their pension programs. Adjustments can be made to the
formulas and credits to ensure they do not provide too great an incentive
for experienced critical talent to retire early. Other companies have
created “phased retirement” programs that allow experienced workers
with key knowledge or skills to move from full-time to part-time status in
lieu of full retirement without penalties to their pension calculations.
These approaches allow better planning for transfer of knowledge to other
workers, prolong key talent contributions, and may reduce recruitment
costs.
Another area of integrated talent management within HR is in the health
benefits arena. This has become a more critical part of the HR strategy for
many companies as the workforce ages and the cost of health care
escalates for employers and employees. Some organizations have
developed creative “wellness” programs to keep employees healthy and
productive. These initiatives may include on-site fitness centers or
reimbursements for private fitness center memberships, health
diagnostics and resources and free physicals and screenings, or even
incentives for healthy behavior such as not smoking. Companies with a
well-integrated HR strategy use such investments to improve the
company’s employment brand by promoting these benefits during the
recruitment process and strongly linking benefits with talent acquisition.
In addition to philosophical or principle-based linkages between the
components of the HR strategy, technology can help to align decision
making and ensure the philosophy is executed as planned. For example,
with well-designed information systems, managers can access individual
performance and potential data at the same time they are allocating
rewards, such as bonuses and equity grants. Decision makers can look at
the differences between the average awards for top performers and
average performers to ensure they achieved the desired differentiation.
Such reports can be predesigned and user friendly, allowing the talent
logic to be embedded into the work of every line manager as they manage
their talent. In the initial years, the system can teach and reinforce the
talent principles.
Another example of information systems that facilitate integration is
when a company expects its leaders to create a positive work environment
and measures employee engagement. Employee engagement survey
scores can be included in the database as an additional planning tool for
managers when evaluating annual performance of their own managers.
Many companies state that performance evaluations, promotions, and
rewards are a function of both results and leadership behaviors. Well-
designed HR systems, data, and analytical tools can help managers
reinforce these connections by making both leadership information, such
as engagement scores or leadership competency ratings, and traditional
results on financial or other business metrics readily available for talent
management decision making.
Competency models can be effective tools to define the critical skill
requirements for the business strategy and to align the various talent
management and HR processes accordingly. Such models can also help to
transform the culture of a company to the extent that new competencies
are defined and valued for future success. For example, if a company
wants to become more customer focused and emphasize innovation to a
greater extent, these competencies should be part of the competency
model. Then selection systems, performance management processes,
succession and talent reviews, training, and development programs can
all be linked to the same critical competency needs.
Many companies have also found that a well-defined competency
framework is helpful to give managers a new language to describe and
communicate expectations. For example, in the 1990s when Larry Bossidy
was CEO of Allied Signal, the company had a competency labeled “bias for
action,” and it became clear that this was one of the attributes that was
highly valued in leaders. Action orientation and drive were preferred over
being methodical and highly analytical. Bias for action was a well-
articulated, discussed, and understood competency. It became a defining
aspect of the company culture and helped fuel the rapid transformation of
the corporation.
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One global company had grown through acquisition over the years and
had been managed as a holding company. While some product lines and
business processes were integrated, several HR processes were allowed to
remain disparate, including the core compensation structure that differed
across businesses and within the same geographic locations. Talent
movement for development and succession was relatively rare across
businesses and countries.
When a change in business strategy required moving talent across the
company, the inconsistencies in pay grades became a barrier to
movement and development. The corporate HR group was charged with
developing a global grading system to ensure a consistent pay
classification structure for all professional jobs around the world. The
structure was implemented over several months by evaluating jobs using
a common methodology. This standard structure laid the foundation for
easier movement and succession of talent across the entire company. This
was an example of the need for integration between the HR processes of
compensation and talent management to achieve the business strategy.
Once the business and talent strategy has been determined and the
human resources strategy has been aligned, a talent management process
needs to be in place that integrates programs and initiatives to drive the
desired outcomes. Talent management is most effective when it is a
system, where the process itself is integrated so that activities form a
logical flow, and the output from one step becomes the input to the next.
Talent management activities need to follow a cycle just like any other
business process. This ensures that strategic and tactical decisions are
addressed every year and that they are timed to have the most impact on
the success of the business plan. Functional talent management and other
HR initiatives are then selected to close gaps between the current state of
talent capability and the desired state. Establishing these linkages is a
critical step in designing a talent management system because it ensures
that the gathered information gives a complete picture of the strengths
and weaknesses of talent at both the individual and the organizational
level.
We propose a model of talent management that aligns programs and
operates as a core business management process and is driven by a
process around four steps:
1. Identify strategic talent requirements.
2. Assess individuals against required competencies.
3. Develop their capabilities.
4. Retain key talent.
After talent pools have been identified, they are assessed, and the results
of the assessment lead to development actions, including career moves for
individuals. At the enterprise level, succession plans are created for key
functional roles or talent pools, and the assessments are used to validate
and develop succession candidates. Also, strategies for internal and
external staffing are developed based on the availability of qualified
internal candidates.
In our experience, the value from the talent management system comes
from the integration and alignment of the whole process rather than in
the design of any particular program or initiative. Even if an organization
cannot afford sophisticated programs and tools, having an integrated
system around a few core programs will have a tremendous impact on the
ability to create a culture where the value of the talent is fully realized.
Ultimately, as a Conference Board study proposed (Morton, 2004), the
primary integrating mechanism “is truly a merging of the hearts and
minds around the power of talent and the importance of connecting the
talent mindset to all aspects of the business” (p. 5).
During the long-range plan, the senior team of a multinational company
realized that they needed to reduce their time to market for new products
in order to achieve their growth and innovation goals. They decided to
evaluate how product engineering was being managed and determine
whether their engineering center in India, which had been used mainly for
routine engineering work, could do some of the new product development
process.
Their initial assessment of the capabilities of the India engineering group
led them to recruit a new leader for that group from outside the company
—someone who had led new product development for a peer company. In
his first six months with the company, he developed a proposal for how
the India engineering center could participate in the design and
development of certain new products for global markets. He and his talent
management specialist then used a third-party firm to conduct in-depth
assessments of the senior engineering leaders, using interviews, testing,
and simulations, built on the competencies that were identified as critical
to success for the center as a global innovator. Each leader received a
detailed report of the findings from the assessment, along with
developmental suggestions. One-on-one development discussions were
held between each participant and her manager to review the assessment
findings and to consider the participant’s career interests. Development
plans were created, and a process was outlined for monitoring the
completion of specific development actions.
During the course of this process, new product development roles were
designed, and the company moved individuals into these roles based on
the assessment results. The assessments ensured that leaders were placed
based on their fit for new product development work and their ability to
manage and motivate teams of newly hired engineering graduates.
Because of the competitive market for engineers in India, some changes
were made to compensation programs and the work environment. The
company invested in a major new design center with the latest
technologies in order to support new product development, but also to
attract and retain the best new engineers. By offering them a state-of-the-
art environment, the company was able to assure engineers that they
would have exciting work and would continue to learn and develop as
engineers.
By the time of the next long-range plan review, the company was feeling
confident that a significant piece of the new product development process
could be managed from India, and the domestic group felt confident
about the capabilities of their colleagues in India. As a result, they were
able to manage more projects, improve their time to market, and reduce
the cost of development.
Schein (1985) proposes that culture and leadership are “two sides of the
same coin” in that the behavior of leaders creates and reinforces the basic
assumptions and beliefs of the organization. Often without realizing it,
leaders communicate what they consider important through the issues
and activities that they spend time on. Members of the organization
observe this behavior and draw conclusions about what is important.
Schein identifies five ways in which the behaviors of leaders embed and
reinforce the underlying culture of the organization:
1. What they pay attention to, measure, and control
2. Their reactions to critical incidents and organizational crises
3. Their deliberate role modeling, teaching, and coaching
4. Their criteria for allocating rewards and status
5. Their criteria for recruitment, selection, promotion, retirement, and
excommunication
In lay terms, the culture of an organization is “how things are done
around here.” Nothing defines success better than when the talent
management practices are so ingrained in the organization that they are
part of the management culture. For example, a benchmarking team
evaluated the talent management metrics of companies who had been
identified as having the best talent management practices. In many cases,
the team could not find any elaborate scorecards or dashboards. When
these benchmark companies were asked how they knew that their talent
management practices were working, they replied that employee
development and talent management were just part of the culture.
This resonates with our experience working in several large companies.
The talent management tools and processes were not too different across
companies, but the success of talent management differed considerably.
As others have observed (Hewitt Associates, 2005; RBL Group, 2007),
what seems to have the
commitment, ownershi
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talent management. So a key learning about talent and culture is that
while mindset, methods, and metrics all matter, mindset matters most.
The focus initially must be on creating a talent mindset in all leaders,
starting at the top. Before any discussion on programs and processes, the
senior leadership of the organization must come to believe in the value of
talent and their role in the creation of a culture where strategic talent is
identified and actively managed for the long-term success of the
organization.
At Ingersoll Rand, after nearly three years of focus on talent management
by the chief executive and the senior management team, it was clearly
time to make talent management a business accountability for all
managers. Although the human resources and talent organization was
driving a comprehensive talent management process, it was not going to
achieve full impact until all managers understood their role and acted as
stewards of talent. The senior team decided to ask a group of high-
potential leaders enrolled in the company-sponsored M.B.A. program to
create a way of assessing the current management culture and providing
an action plan for creating a culture of talent stewardship.
Drawing from their experience in business operations, the team used a
methodology from lean manufacturing called the maturity path. This
approach defines specific behaviors that will lead to process excellence at
four levels of performance: from beginning through improving,
succeeding, and leading. By creating a simple grid of behaviors, they could
score the effectiveness of a plant on inventory management, for example,
and show what concrete steps they can take to achieve best-in-class
performance in that area over time. The team took the five elements of
Ingersoll Rand’s talent management model—identify, assess, develop,
move, and engage—with the nine subprocesses associated with those
elements and placed them on the vertical axis of a grid. They placed the
four generic stages of process excellence—beginning, improving,
succeeding, and leading—on the horizontal axis. This tool became known
as the “leader/manager index” (LMI) (Ingersoll-Rand Company Limited,
2007).
The next step was to identify the specific behaviors at each stage of the
maturity path as a manager demonstrated process excellence in talent
management. Working with the talent organization, they completed the
cells of the grid with behavioral descriptions of effectiveness at each stage.
This tool allowed managers to clearly determine what they need to do to
be effective in the specific talent management processes. Figure 2.2 shows
excerpts of the progression in behaviors in the LMI to assess talent
stewardship.
LMI scoring is either 0 or 1 in each subcategory, and it is not possible to
score 1 unless all the behaviors in that cell can be verified. The total LMI
score indicates the stage the manager has reached in the execution of the
processes and gives the person a clear guideline on how to improve.
Scores across managers can be aggregated to determine a total LMI score
at the group or organizational level.
Figure 2.2. Excerpt from the Ingersoll Rand Leader/Manager
Index
During the annual goal-setting and performance management process,
managers assess themselves using the LMI tool and then review their self-
assessment with their managers. They establish a score and an
improvement goal for the year, which is then linked to 10 percent of their
annual incentive. Ultimately employee feedback from the employee
engagement survey will also be incorporated into the process. Since the
LMI tool is a device for continuous improvement and managers are
measured on improvement rather than by an absolute score, it has
become an effective way of teaching Ingersoll Rand managers how to
excel at talent management.
The LMI has become accepted across the company as a way to make
progress toward the company’s goal of creating a culture of exceptional
global leadership. The expectation is that by building talent management
into the measurement and reward system for leaders in this way, talent
stewardship will soon become an integral part of the management culture.
The need to proactively build strategic capabilities has led to the
emergence of talent management as a function within HR organizations.
This function focuses human resource processes, programs, and tools on
the critical groups of talent that are required for organizational success
—perhaps no more than 20 percent of the workforce at any point in time.
From reviewing current literature and from our own experience in a
variety of businesses, we have identified six generic components common
to any integrated talent management model, which are depicted in Figure
2.3. Starting with strategy, the core talent management processes are
identification, assessment, development, and retention, all supported by a
culture of talent stewardship. These components all need to be in place
and reinforcing of each other for talent management to add the highest
value and impact to the business.
Figure 2.3. Talent Stewardship Model
This is a generic model that can be customized to suit specific
organizations. Although the generic components will be present, the
implementation of the model may look very different from one company
to another as one or mo
component of the mode
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For a talent management system to be of value it must be driven by the
short- and long-term needs of the business. Linking the talent
management process to the business planning processes of the
organization ensures that the talent strategy stays aligned, and is
monitored and measured throughout the annual planning cycle.
Business strategies have a tendency to be aspirational and not take into
account the realities of implementation that depend on the capabilities
and capacities of the people of the organization. While leaders usually
think in terms of whether they have the physical and financial assets to
execute a new strategy, they often forget to assess their leadership
capabilities. For example, it is not unusual to find a leadership team
talking excitedly about venturing into developing markets, but without
recognizing that neither they, nor their teams, have any experience in the
new geography.
A review of organizational and talent capability during the discussion of
long-term strategy provides an important opportunity to assess the
feasibility of strategy implementation. For example, one company uses a
tool (see Table 2.2) that asks business leaders to translate their top three
strategic business priorities into the specific organizational competencies
that will be needed in order to implement each priority successfully. They
then identify their current gaps and the actions that they need to take to
close the gaps. These actions become business initiatives that are
monitored and measured throughout the year. The power of this tool is in
creating a thought process that forces leaders to develop the capabilities
that will ensure that they can achieve their business aspirations.
After having determined the talent requirements that are strategically
important to the organization, the next step is to consider whether there is
a sufficient internal pipeline for the short- and long-term talent needs.
Inevitably the talent strategy will require some mix of external hiring and
internal promotion. Even in organizations that have a philosophy of
promoting from within, there still is some percentage of talent that needs
to be brought in from the outside to meet strategic needs. This could be at
the executive level, or it could be in a relatively obscure technical
discipline, such as writing architectural specifications, which is crucial to
how the products are sold.
Depending on the business strategy and the competencies required, the
organization needs to determine the ratio of internal to external hires.
The “make versus buy” decision will vary by strategic talent pool. For
strategic technologies, such as a bench scientist for new pharmaceutical
research, the only answer may be to acquire those skills externally,
whereas it may be feasible to develop general management talent from
within the organization.
Table 2.2. Strategic Business Priorities and Organizational
Implications
Being in a position to promote from within for the majority of openings
requires strong succession planning, career planning, and talent
movement processes. Overcoming barriers to moving talent across
organizational boundaries, such as business sectors or functions, can be
difficult, but with the right level of leadership commitment, it will reap
benefits. It may mean creating a culture where jobs are posted and
individuals are encouraged to apply for positions outside their current
organization and where moving to another part of the enterprise is viewed
positively rather than as a lack of loyalty to their current group.
This process may need to be actively managed at certain levels, using the
succession plan to develop qualified slates of candidates from across the
company. At these levels, individuals are invited to interview for new roles
after obtaining the support of their manager. The match between
individual development needs and career plans can also be used to
proactively drive movement, where time in position is tracked and talent
is declared available for a cross-business or cross-functional move. In this
way, it may be possible to create an opportunity that will be
developmental for the individual. This requires a culture of talent
movement, where managers are willing to “offer up” talent, knowing that
this will build bench strength for the whole company and that they will
receive talent in return.
Choosing to hire externally because you want to, rather than because you
have to, is an aspiration that many companies have in today’s talent wars.
But this will be a reality only if all the components of the talent
management system are working together to create a pipeline of available
internal talent for critical positions.
The external sourcing and recruitment strategy will have to be adjusted to
source talent that might not have been considered before. This is an
opportunity to integrate diversity and inclusion into the talent
management agenda by making the business case that the company
cannot afford to be missing out on any talent sources in today’s
competitive talent market. This requires examining the aspects of the
culture or work environment that support or create barriers to inclusion.
For a multinational company or one planning to expand internationally,
the mix of local hires and expatriate hires is an important decision.
Decisions should be made regarding the aspects of talent management
that are global, that are regional, and those that can be unique to a local
market or specific business need.
Whenever possible, it is advisable to hire ahead of the need, and certainly
hire for future, not just for present job requirements. This may be easier
to do in businesses where profit margins or business growth are high. For
example, one high-growth computer technology company was known for
hiring talented individuals whenever it found them, knowing that the
growth in the business would ensure productive roles for them within a
matter of months. In this way, they were able to keep up with the growth
of the business; however, as the industry slowed, this talent strategy
needed to change. Even a highly cost-controlled organization can identify
creative ways to do anticipatory hiring. In industrial companies, where
costs are tightly managed, many companies have adopted an approach
where the bottom 10 percent of performers are managed out of the
organization and the resulting vacancies are used to hire strategic talent
(Smart, 2005).
Setting aside a budget to invest in even a handful of strategic positions
will create a buffer of talent and enable the organization to be more agile.
Traditionally companies have used graduate rotational programs to build
their leadership pipelines, with the intention that the majority of those
hired will spend their en
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career rotational programs can be an excellent source of talent. These
hires may be used for enterprisewide initiatives and can be particularly
useful in strategic geographies as a way of attracting and developing a
local pipeline of talent for the midterm. What is critical is that the
retention of these early-career hires is long enough to provide a return on
the investment.
Implementing selection systems that are built on the organization’s
strategic competencies and used for both external and internal selection is
a critical component to the talent management system. Teaching
managers to use behavior-based interviews is a valuable first step toward
building an understanding of the science of talent management. If
managers can learn to assess competencies during the selection process,
they will start to use these skills when assessing their employees for
development and potential.
Once individuals have been placed, there is still a need for a formal
assessment process to indicate their current and future capabilities
against business performance, strategic competencies, and career
potential. A good performance management system, one that assesses
individuals not just on what they do but also on how they do it and also on
their development of strategic competencies, is an important foundation.
However, the performance management system is truly effective only if
managers are objective and are skilled in the assessment of results,
behaviors, and competencies. Often there is a lack of calibration across
the organization, making it extremely difficult to get a true sense of the
capability of the organization as a whole.
Incorporating the use of validated instruments for particular job families
provides additional objective assessments of individuals for both
development and selection into high-potential talent pools or into new
roles. The management of these data becomes extremely critical, and
organizations need to establish which data are to be “owned” and used by
the organization and which data are “owned” by the individual for
developmental purposes and not shared for decision making by
management. Some companies have implemented policies that essentially
create a “firewall” between the assessments used in learning programs
and the assessments used for validation of potential or for internal
selection. This gives the individual the safety to experiment and take risks
in a learning environment without worrying that the data may be used in
the selection process. Ultimately organizations strive to have an open
environment where strengths and development needs can be discussed
without defensiveness, but this is hard to achieve.
Formal leadership assessments that are designed and conducted by
qualified individuals, either internal or external to the organization, are
invaluable when evaluating the capabilities of strategic talent. These
assessments are time intensive and typically include in-depth background
and career history, cognitive and personality tests, and peer and manager
interviews. They can be particularly helpful when assessing high
performers for their potential to be successful at the next level in the
organization. Such assessments will lead to a “three-way” discussion with
the individual, his manager, and the assessor, to validate the findings and
agree on the priorities for a development plan. This type of assessment
may be used as part of selection for promotional opportunities, and in this
case, the data are owned by the organization. A critical element that can
be captured by this approach is in the “fit” of the individual with the role
the person is being considered for. Silzer (2002) notes that the question of
fit is too often ignored, leading to a mismatch between the capabilities of
the individual and the needs of the environment. Ignoring the question of
fit can lead to costly mistakes that damage the individual, the
organization, and the business.
Development planning for both current and future roles is one of the most
important activities that managers can do to accelerate the growth of
capabilities in their organization. The Corporate Leadership Council
(2004) found that development planning was one of the strongest drivers
of employee engagement. By having an effective development plan—one
that is challenging but allows sufficient time to complete the plan—
managers can significantly improve the engagement of their employees.
Leaders need to engage all employees in development but need to be
especially focused on targeted development for strategic talent.
To be effective, development requires a three-way partnership focused on
creating development actions tied to business needs and competency
requirements (Kaye, 2002). As Figure 2.4 shows, the individual, the
manager, and the organization each have specific accountabilities to make
development successful. First, the organization’s role is to provide
processes, tools, and investment and encourage a culture of continuous
development. Next, managers need to be skilled in identifying areas for
development, helping to find the appropriate resources and opportunities
and providing coaching and feedback on an ongoing basis. Third,
individuals must take responsibility for their own development by
following through on development suggestions and committing to
improving their skills and developing new competencies. Finally, the
development actions and plans must be linked to the needs of the
organization and the opportunities inherent in the business plan.
Figure 2.4. Development as a Three-Way Partnership
Source: Adapted from Kaye (2002).
Development plans must include the appropriate mix of activities and the
appropriate level of challenge for the individual. The Center for Creative
Leadership (McCall, Lombardo, & Morrison, 1988) asked executives,
“What has had the greatest impact on your development in your career?”
The results were that 70 percent of their responses described experiences,
20 percent described relationships, and 10 percent described formal
training. Many practitioners have used this research to suggest that
development plans should include activities from all three areas, with
roughly 70 percent of the development plan geared toward experience
(projects and assignments), 20 percent to relationships (learning from
managers and peers), and 10 percent to formal training programs. We
also propose that managers should determine the appropriate degree of
challenge for the individual when identifying a developmental activity.
Managers have a tendency to think that formal training programs are the
most appropriate development solutions, but they need to be made aware
of the ways in which individuals could broaden their learning through on-
the-job experiential activities, which may have an even stronger
developmental impact. Ideally, the development plan will use all three
types of activities for one development goal: for example, providing
training on strategic pricing, coaching by a pricing expert, and the
opportunity to develop a pricing proposal for a product or service that is
then presented to the marketing team.
Another common pitfall is identifying development actions that have too
little or too much challenge or risk. What must be evaluated is both the
importance of the assignment or job to the organization and the degree of
“stretch” or previous experience required for success (see Figure 2.5).
Sometimes organizations are reluctant to take a risk in providing an
individual with an assignment that is a first-time learning and repeatedly
rely on those who are proven in a given area. This is not developmental
for either the person who has done the role many times or for the person
never given the opportunity. What is critical is to find an opportunity that
is not of the highest importance level to allow the first-timer to develop
skills or to provide support from the more experienced person.
Conversely, a person who is given a highly important role with many
“firsts” and little support is being set up for failure. For example, moving
someone to a new business and a different country as a promotion will
have a lower probability of success than promoting this person in a
business that he knows Figure 2.5 is a useful
tool to find the optimal
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or moves. This optimal level, or “sweet spot,” encompasses the
development actions or moves that provide sufficient challenge for growth
without undue risk to the individual or the organization. The tool can also
be used to determine which person is best for an open role from a
development standpoint.
Figure 2.5. Planning Optimal Development Assignments
Broad functional and business experience is essential in today’s business
world. Companies need leaders who have the ability to make sound
decisions in a rapidly changing environment, and so the experience of
having been in diverse business situations can build the confidence and
judgment necessary for the challenges of the future. Herb Henkel,
Chairman and Chief Executive Officer of Ingersoll Rand Company,
captured his expectations for development as “2 X 2 X 2 + 5” (Ingersoll-
Rand Company Limited, 2004), which is company shorthand for
experience in:
• Two businesses
• Two functions
• Two geographies
and with the five stages of a business life cycle:
• Starting up a business
• Turning a business around
• Growing a mature business
• Implementing an enterprise initiative
• Leading a large acquisition or divestiture
Herb Henkel’s belief is that general managers and functional leaders who
have experienced these varied challenges will be best prepared to lead
complex, multinational organizations to sustainable success over the long
term. This is in keeping with the findings of McCall et al. (1988) on the
importance of varied challenges and development experiences. Taking
this approach necessitates having an effective succession management
process that identifies high-potential talent from across the organization
and proactively moves them for developmental purposes considering the
specific learning opportunities in the assignments and the experiential
needs of candidates. This approach to development through experiences,
including cross-business, cross-function, and cross-geographies, has
become a well-understood part of the talent management model in his
company.
Role models, whether they are direct managers or peers, have a
significant impact on development. As the Center for Creative Leadership
research showed, we learn by observing the behavior of others who are
successful, so having effective leaders with the right values at all levels of
the organization is critically important.
The relationship with the direct manager is particularly significant as we
learn which behaviors to emulate and which not to emulate. Having a
relationship where the manager gives the appropriate balance of
challenge and support creates an environment where talented individuals
can learn and grow. Having the opportunity to discuss weaknesses
candidly and to have regular feedback and coaching can accelerate the
development of leaders at all stages in their career.
Learning from peers through cross-functional, cross-business teamwork
also gives developmental opportunities, as does membership in functional
councils, where specialists come together to share best practices. Other
networks, such as affinity groups, organized by gender, ethnicity, or
business interest, also provide opportunities to learn from role models.
Anecdotally we often get feedback from participants in training and
education programs indicating that they learned as much from their peers
as from the instructor. This suggests that selecting the optimal group of
peers for a class can have a significant impact on the quality of the
learning experience. Peer networks have been found to be critical in
retention of talent. Recently such networking has become virtual through
online groups or communities of practice (Wenger, McDermott, & Snyder,
2002).
Although formal training programs may have a relatively small
percentage of impact on development, the value can be increased by (1)
focusing training and development on the strategic competencies, (2)
having a widespread rollout of specific strategic programs, and (3) getting
leadership participation.
Having a curriculum and a delivery strategy that focuses on reaching
targeted groups with the strategic competencies that they need to drive
the business agenda can be highly effective. This means developing
programs that address the competency gaps that have been identified as
being critical to the organization’s strategy (Meister, 1998). Some
companies organize their programs around a core business curriculum,
with the addition of “colleges” that specialize in specific functional or
technical areas. Those “colleges” are selected based on the strategic
competencies and are targeted to the relevant segment of the population.
The delivery strategy for a particular program can affect the impact on
both the individual and the organization. One company wanted to build a
more entrepreneurial mindset in general managers, and developed a two-
week program that was cascaded through the organization. This meant
that concepts and behaviors were reinforced after the participant left the
classroom because the managers of the participants had also gone
through the program. In this way, the program had an impact on the
leadership capabilities across the company.
The corporate university can also provide learning opportunities through
participation in its own governance. Creating a strategy board consisting
of a cross-section of business leaders has the benefit of increasing
ownership for the university, ensuring alignment with business needs,
and providing a developmental experience for high-potential leaders.
Similarly involving line managers in design teams and having them teach
parts of the curriculum builds their competency and confidence as leaders
(Tichy, 1997).
Over the past few decades, the approach to retention in many
organizations has evolved from a focus on measuring overall turnover to
measuring voluntary versus involuntary turnover in order to get a better
sense of the reason for the losses. More recently, companies have
segmented this further by identifying the turnover of high-performing or
high-potential talent in order to address the specific issues for these
critical employees.
We believe that organizations should go beyond the macromeasures of
turnover to look at turnover within strategic talent pools. This is the talent
that is most important to the future of the organization and where
retention is the most critical. Cappelli (2000, p. 100) proposes “a market
driven retention strategy that begins with the assumption that long-term,
across-the-board employee loyalty is neither possible nor desirable. The
focus shifts from broad retention programs to highly targeted efforts
aimed at particular employees or groups of employees.”
Effective retention efforts require examining each strategic talent pool to
identify who is at risk and why, so that individualized retention plans can
be created. Sometimes this involves accelerating a career move or
providing a key individual with visibility to senior executives in other
parts of the business. The retention action could include the expansion of
current responsibilities or the invitation to participate in a significant
learning program. Invariably the retention strategy will go beyond
compensation and will
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Compensation and benefits strategies need to be monitored for external
competitiveness and internal equity, but as we know, compensation and
benefits alone will not solve retention issues. Targeted “stay bonuses” can
be effective but are not sufficient for long-term retention. Capelli (2000)
suggests that in addition to compensation, companies should consider
how job design, social ties, location, and hiring can be used in designing
effective retention strategies.
Developmental assignments or special projects are often given to the top
performers or high-potential talent as part of a retention or engagement
plan. Although this may generally be a good practice, it points to the need
for the manager to truly understand what is important to an individual
employee and customize the approach accordingly. The assignment could
be seen as highly valuable to meet the employee’s career goals or just
additional workload. If travel is required, the employee could see it as
either an interesting experience or personal sacrifice.
It is equally important for managers to recognize when adding special
projects or developmental assignments will be counterproductive. It is
usually the case that the very individuals whom we want to retain are the
ones who are under the most pressure, are given the most challenging
assignments, and are turned to for participation in activities that go
beyond the scope of their role. This can lead to stress and burnout, which
may make the individual more susceptible to calls from recruiters. It is
important for the manager to pay attention to overall workload and
challenge to make sure that the individual is supported and will be able to
sustain performance over long periods of time.
People are said to join companies and leave managers, which is why
effective management is so important to the development and retention of
strategic talent. Having an effective relationship means that the leader
knows what motivates and engages her employees and is able to assess
retention risk and develop a customized retention plan for key talent.
While the formal retention analyses and plans are important, the informal
leadership behaviors are equally important. Through the leader’s actions,
employees judge whether their contributions are valued and appreciated
or not, and to what degree the company is committed to their future. If
the manager understands the employee’s goals, aspirations, and personal
circumstances and builds a supportive relationship with a two-way
dialogue, then the specific retention action plans will be more effective.
Even if the retention strategy is ultimately ineffective, the best talent
stewards remain in contact even after the individual has left the
organization. Today we cannot interpret a resignation as an act of
disloyalty; it may very well be the best move for the development of that
individual. It is also true that the grass is not necessarily greener in other
pastures and sometimes it is possible to recruit and persuade talent to
return at a later date. This can send a very positive message to the
organization if those who were seen as great talent choose to return to the
company. All in all, there are many benefits to staying connected to
alumni, not least of which is to make them part of the organization’s
extended network of advocates.
The first five elements—strategy, identification, assessment, development,
and retention—enable the organization to put appropriate process and
programs in place and ensure integration across the enterprise. However,
at the heart of the model is talent mindset, or what we call “talent
stewardship”: a frame of mind, or a culture, where every manager feels
ownership and accountability for talent on behalf of the organization. This
means that the manager takes responsibility not only for managing
today’s talent, but also for strengthening the team or the organization for
the future. Once talent stewardship is engrained in the management
disciplines of the organization, it transforms the talent management
strategy from a functional initiative to a competitive business advantage.
This type of culture does not happen overnight. Some companies have
invested heavily in leadership development for decades and have built
supporting systems, processes, and programs that are embedded in the
fabric of the organization. For companies that are just embarking on this
journey, it may take time, but progress can be accelerated by clearly
establishing talent management expectations for line managers, by
providing them with development and support, and by evaluating and
rewarding their results.
In a best-in-class company, every manager must feel ownership for talent
within their own organization and for the larger enterprise. Constantly
scouting for talent internally and externally, coaching and mentoring
others, providing performance feedback, developing and teaching: these
are all part of the day-to-day accountabilities of today’s best managers.
Managers who are talent stewards have a commitment to developing
others and supporting them for promotional opportunities.
A talent management system should be designed around the six
components described above (and presented in Figure 2.3), with strategy
being a critical input to the system and talent stewardship being the
cultural underpinning. However, within this model there is tremendous
opportunity for customization. The specific talent management strategies
will vary, depending on the business strategy, the stage in the life cycle of
the business, the level of leadership commitment, and the culture of the
organization. This will also vary by company, and so it is possible to see
two successful talent management strategies that are very different. In
Figure 2.6, company A is operating in an emerging market, with a talent
strategy that is focused on external hiring (identification) and retaining
talent (retention). Company B is focused on building an internal
leadership pipeline and is putting additional effort into formal
assessments (assessment) and talent movement (development). The key
point is that the talent management tactics of each company are fully
aligned with their business strategies and they are making the appropriate
decisions about investments in programs.
Figure 2.6. Customized Talent Management
Companies should select from a menu of programs that are designed to
work within the strategic framework of their organization. Most
companies cannot implement a talent management system all at once and
must pick strategically from the menu to create a system that will have the
most impact. Table 2.3 provides some examples of how specific programs
support the different components of a talent management system. This is
not an exhaustive list but illustrates that practitioners must make
strategic choices about program investment across all components,
starting with the areas that will have the most impact on the organization.
Table 2.3. Talent Management Menu
It typically takes many y
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management process, but once the basic architecture is established and
priorities are set, the system can be built out and adapted to meet the
changing needs of the organization. The work of alignment with strategy
and integration with culture is ongoing and cannot be overemphasized. It
is when these two elements are in place that the true power of talent
management can be realized.
Creating an integrated talent management system that is driven by
strategy and supported by a culture of talent stewardship takes a
partnership between three key stakeholders:
• Executive management, including the board of directors
• Line management
• Human resource and talent management practitioners
Chief executive officers and boards of directors must provide oversight
and direction to the talent management process. They set the tone and
signal the importance to the business success. The CEO demonstrates
talent stewardship behaviors for other leaders. A significant driver for
effective talent management is also the interest that boards of directors
take in the talent capabilities of the organization. For decades, boards
have reviewed executive succession plans focused primarily on the CEO
and the top officer positions. Increasingly they are asking questions about
the availability of talent to support strategies in new markets,
technologies, and geographies. Progressive boards—those that
understand the importance of effective talent management—are moving
from an annual to a semiannual review. Also, their topics for discussion in
these reviews are going beyond questions about executive retirements and
succession to a much deeper conversation with the chief executive officer
about strategic talent at multiple levels in the organization.
Talent stewardship is a line management accountability. Accountability
for attracting, developing, and retaining strategic talent is more than a
priority for the best leaders; it is the way they operate on a daily basis. The
best leaders know that they, and their organizations, cannot lead in the
marketplace without highly talented individuals, and so the cultivation of
talent is an essential aspect of being a line manager in business today.
Block (1993) defines stewardship as “the willingness to be accountable for
the well-being of the larger organization by operating in service, rather
than in control, of those around us” (p. xx). Another aspect of stewardship
is leaving a legacy: an organization or team stronger than it was initially,
“to hold something in trust for another” (p. xx). This is not merely an
altruistic notion. Talent stewards know from experience that they will
always be able to attract the best talent to their teams because of their
reputation for successfully developing others. Also, they understand that
their business performance will be stronger as a result of their personal
focus on talent management.
The human resources and talent management function is the enabler. In
an organization that has a talent stewardship culture, the role of the
human resources and talent function is to bring subject matter expertise
and consultation to address the talent needs of the organization. They
design and manage processes and programs, and provide advice and
counsel to managers and individuals, but managers personally make the
final talent decisions. The role of talent management is to help managers
make the best talent decisions in both the short and long terms. In this
way they use data from assessments, performance appraisals, behavioral
interviews, and observation to make recommendations on an individual’s
strengths, areas of development, and potential. As specialists in talent
management, HR should be able to provide insight and
recommendations, but managers have the responsibility to make the final
decisions for hiring, promotions, development, and retention.
Finally, we must always remember that talent management is a high-
touch activity. We cannot forget that talent is composed of individuals
who have their own unique aspirations and motivations. Although talent
management requires tremendous process discipline and the thoughtful
analysis of data, the reality is that we are working with individuals and
attempting to match their needs with the needs of the organization.
Effective talent management is about relationships and requires the
establishment of trust among all parties involved. The organization has to
trust the talent manager’s assessment of individuals and fit; individuals
have to trust that confidentiality will be maintained appropriately and
that the organization is vested in the fairest outcome for their career. Each
individual in the talent pool has a set of personal needs and aspirations.
Issues of mobility, family issues, work/life balance, and career aspirations
often come into play. It typically takes significant counseling and coaching
to orchestrate one succession move. Each situation has to be managed
with the individual, and often the family, in mind. Effective talent
management cannot be orchestrated purely from a database; it requires a
combination of process and relationship to achieve the best results.
We have presented a model of integrated talent management that is
driven by business and human resources strategy and fueled by a
pervasive culture of talent stewardship. The specific components of an
integrated talent management system are supportive and connected but
may vary in emphasis across companies. We believe that this model of
integrative talent management is compelling to achieve superior business
outcomes. These views are based primarily on our practical experience
across multiple businesses, companies, and industries. Currently there is
little research that demonstrates the benefits of a more integrated or
systemic approach to talent management.
One research effort attempted to link talent management to financial
outcomes (Holstein, 2005) and found that companies evaluated as the
“Best Companies for Leaders” had 22 percent greater return to
shareholders than the other companies studied. However, the results of
this study could have been contaminated because company financial
performance was known to the investigators and could have influenced
the choices as best companies for leaders. We challenge researchers and
practitioners to collaborate in order to empirically demonstrate that
companies with greater alignment between their business strategies and
talent management approach achieve stronger financial performance.
Also, we encourage researchers to better define and measure the stages of
talent management evolution in organizations. Such work could also more
rigorously specify the definitions, attributes, and signs that an
organization has moved its culture toward a talent stewardship model of
management.
In the field of talent management, we also know relatively little about why
certain organizations are able to sustain an effective integrated talent
management process over the long term while others falter. We
understand that the CEO and Board of Directors play key roles. However,
some organizations manage to maintain a focus on integrated talent
management even when top leaders and business strategies change.
Practitioners must focus more of their efforts on embedding the talent
management mindset into the management model in the organization
rather than on merely designing and implementing programs. Programs,
by their nature, come and go. We will be successful as a discipline when it
is no longer the exception, but common practice, to have sustainable
integrated talent management as a core aspect of effective management.
As Boudreau and Ramstad (2007) ask, how do we move to a true decision
science, like the evolution from accounting to finance? How do we create
organizations where managers could not imagine running their business
without the necessary data and processes to be effective talent stewards,
just as they could not run their business without strong financial data and
processes to be effective financial stewards?
Other chapters in this book provide in-depth reviews of specific aspects of
talent management. Our view is that the most promising new directions
for the field of talent management are less about specific components per
se, but in selecting the strategically relevant areas to pursue, in managing
and measuring the interconnections and business impact, and in evolving
to a talent stewardship culture.
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