human resource management
CHAPTER 1
STRATEGIC TALENT MANAGEMENT MATTERS
Rob Silzer, Ben E. Dowell
Why do organizations succeed or fail? Ultimately it comes down to talent.
Did the organization have the talent to make the right decisions regarding
where to invest financial and human resources, how to innovate and
compete, and how to energize and direct the organization to achieve the
business strategy? For good or ill, people make the decisions and take the
actions that result in the success or failure of their organization. Many
times CEOs (chief executive officers) get all the credit or all the blame, but
in our experience, it is the quality of talent throughout the organization
that ultimately leads to the creation and effective execution of successful
strategy. Gary Hamel argues that “people are all there is to an
organization” (cited in Sears, 2003). Collins (2001) suggests that having
the right people comes before having the right strategies.
Have you ever asked a CEO or senior executive what issues he or she
spends the most time on and worries about the most? Based on our sixty
years of combined business experience across many corporations, our
answer is that the most effective CEOs and senior executives focus as
much on talent issues as they do on financial issues. Jack Welch (2006)
made the point that talent management deserves as much focus as
financial capital management in corporations. Larry Bossidy (2001)
concludes that “there is no way to spend too much time on obtaining and
developing the best people.” Other CEOs in a recent interview study seem
to agree, suggesting that talent management takes as much as 50 percent
of their time (Economist Intelligence Unit & Development Dimensions
International, 2006; Silzer, 2002a). Similar conclusions are reached on
the critical importance of talent and talent management by other
professionals and thinkers in the field and by various executive and
corporate surveys (Bernthal & Wellins, 2005; Hewitt Associates, 2005;
Michaels, Handfield-Jones, & Axelrod, 2001; Corporate Leadership
Council, 2006; Morton, 2004; Lawler, 2008; American Productivity and
Quality Center, 2004).
Financial resources may be the lifeblood of a company, but human
resources are the brains. It has long been accepted that sound financial
management is critical to business survival. This is especially true in
challenging economic times. However, having strong talent and sound
talent management is equally critical to business survival.
There has been some agreement that having strong talent in the company
has a positive impact on business outcomes (Lawler, 2008; Michaels et
al., 2001). A McKinsey survey of 4,500 senior managers and officers at 56
U.S. companies (Axelrod, Handfield-Jones, & Welsh, 2001) found that
senior executives report that “A” players, (defined as the best 20 percent
of managers) who are in operational roles raise productivity by 40 percent
over average performers; those who are in general management roles
raise profitability by 49 percent over average performers; and those who
are in sales roles raise sales revenues 67 percent more than average
performers.
One manufacturing company found that the best plant managers
increased profits by 130 percent, while the worst managers brought no
improvement. It should be noted that the productivity ratings were survey
estimates by senior executives, so the estimates may include some
subjective bias.
Business executives have suggested that talent management practices
need to lead to measurable financial business results. Gubman (1998, p.
294) reviews the “large and growing body of evidence from a variety of
sources that shows being an employer that values its workforce,
demonstrates it, and tries to improve talent management practices tied to
business strategy pays off with better long term financial performance.”
He suggests that “more than 100 pieces of research have been conducted
in the last 10 to 15 years trying to connect management practices with
financial success.”
Some studies connect having a people-oriented culture with financial
gains. For example, Collins and Porras (1994) found that the cumulative
stock return since 1926 for visionary companies, defined as “role models
for management practices around the globe,” outperformed the general
stock market by more than 15 times. However companies matched to the
visionary companies on other factors outperformed the general market by
only two times. When they investigated how these visionary companies
“construct their culture,” they found differentiating criteria that include
these talent management practices:
• Extensive new employee orientation
• Use of selection and rewards to align employees with company values
• Formal management development programs
• Careful succession planning and CEO selection
• Investment in human capabilities through recruiting, training, and
development
Pfeffer (1994) first identified companies with the highest total return to
shareholders (stock appreciation plus dividend yield) and discovered that
they differ from other companies on the way they managed people, with
some specific distinctions in selection, training, labor relations, or
staffing.
A number of studies looked at how the number of talent management
practices used might relate to financial performance. Huselid (1995) rank-
ordered 700 companies and grouped them by quintiles based on the
number of basic talent management practices (such as recruiting,
selection, training, performance appraisal, and pay practices) they used in
their company. He demonstrated a significant and progressive increase in
annual shareholder return and gross return on capital, with higher-
quintile companies showing progressively larger returns. A follow-up
study on 986 companies with a more refined list of management practices
found a significant increase in sales per employee, market value per
employee, and cash flow per employee and a decrease in turnover for
companies that used more of the human resource (HR) practices
(Huselid, 1995).
McKinsey followed up their original research, The War for Talent
(Michaels et al., 2001), with several more extensive survey studies. In a
2000 McKinsey survey of 6,900 managers, including 4,500 senior
managers and officers at 56 U.S. companies, Axelrod et al. (2001)
concluded that the companies doing the best job of managing talent (in
the top 20 percent on self-identified talent management practices)
outperform their industry’s mean return to shareholders by 22 percent.
McKinsey also looked at the impact of global talent management
practices. In a study of 22 global companies and 450 CEOs, senior
managers, and HR professionals, Guthridge and Komm (2008) sorted the
companies into three groups based on their combined company score on
ten dimensions of global talent management practices. The research
found a significant relationship between a company’s global talent
management score and financial performance. Companies scoring in the
top third based on a com
average profit per empl
companies. The followin
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the companies in the top and the bottom thirds on the combined talent
scores:
1. Creating globally consistent talent evaluation processes
2. Achieving cultural diversity in global setting and
3. Developing and managing global leaders
Companies achieving top third scores for any one of these three practice
areas had “a 70 percent chance of achieving top third financial
performance” (p. 4). In other words, doing any one of these practices
seemed to relate to higher financial performance. Other talent practice
areas that also distinguished the top third from the bottom third were
translating human resources information into action, creating internal
talent pools, and sourcing and recruiting global talent.
Several researchers have looked at the link between a specific talent
practice and financial measures. Danielle McDonald at Hewitt Associates
studied 432 companies (cited in Gubman, 1998) and looked at the impact
of having a formal performance management process versus having no
process, or a simple informal one, on financial measures. She found a
significant link to higher return on equity (ROE), return on assets (ROA),
return on investment (ROI), total shareholder return, sales per employee,
and income per employee over a three-year period. The study concluded
that companies with a formal performance management process had
higher profits, better cash flows, stronger market performance, and
greater stock value. In addition, McDonald looked at financial indicators
before and after performance management process implementation and
found statistically significant improvements after implementation in total
shareholder return (24.8 percent increase) and sales per employee (94.2
percent increase) over a three-year period.
Other studies found similar links to financial results for other practices.
Bernthal and Wellins (2005) showed a relationship between having
stronger leadership development systems and higher ROE and profit for
companies when compared to competitors. A 1999 study by the Sibson &
Company and McKinsey Associates (cited in Wellins, Smith, & McGee,
2006) showed a link between the quality of the company’s succession
management program and increased shareholder returns. And studies by
Lawler, Mohrman, and Ledford (1995) found a significant relationship
between the use of employee involvement programs in a company and
larger ROA, ROI, ROE, and return on sales, but the use of the programs
had only a modest impact on employee productivity measures and no
impact on total return to investors. However, one study by Watson Wyatt
Worldwide (2001) found that the use of a multirater feedback survey had
a negative correlation with organizational performance. Perhaps poorer
performing companies saw a greater need to improve management
performance by giving competency ratings feedback to managers.
In general, the relationship between the implementation of talent
management practices and an impact on business results is a difficult area
to study because of the confounding list of other variables that might also
have an impact on these financial outcomes. From our perspective, there
does seem to be a link between talent practices and financial outcome
measures, but it would be premature to conclude that it is causal.
In many successful business corporations, talent management receives
attention similar to that given to financial management. It is a leadership
imperative for them. For many years, leading companies have seen
effective talent management as a competitive advantage over other
companies that give limited attention to their talent. Leading
corporations, among them, PepsiCo, Microsoft, Home Depot, Ingersoll
Rand, Cargill, and Allstate (all explored in individual chapters in this
book), understand that talent management is more than just a
competitive advantage; it is a fundamental requirement for business
success. These corporations tend to have talent management systems and
processes that are both integrated and strategic—focused on achieving
specific business objectives. A frequent and comprehensive talent review
is now often seen as one of the core business processes in the corporation,
along with operational reviews and financial reviews.
Talent management is now more than a desirable HR program: it is a
leadership imperative. It is difficult for any business corporation to
succeed in the long term without making talent central to the business
model. This is particularly true because of the complex business
challenges that need to be addressed.
The business environment since the early 1990s has gone through a
significant expansion with falling trade barriers and the globalization of
business. For many companies, growth has come through global
expansion, particularly into China and India. This expansion has put a
premium on having the global talent needed to support these initiatives
(McCall & Hollenbeck, 2002; Sloan, Hazucha, & Van Katwyk, 2003) and
has provided great visibility to successful global leaders (Kets DeVries &
Florent-Treacy, 1999). This has resulted in greater competition for the
best talent (Michaels et al., 2001). The growing worldwide demand for
talent, along with the shrinking availability of exceptional talent, has
made talent acquisition, development, and retention a major strategic
challenge in many companies.
The business world is changing in many ways and there are a number of
factors that have contributed to the critical significance of talent:
• An increasing worldwide demand for talented leaders and executives
with the growth of emerging markets in Asia and Latin America
• A shrinking pool of experienced and talented leaders in the Americas,
Europe, and Japan
• The complexity and faster pace of global business and the need to have
talent available to adapt quickly to changing business conditions
• The realization that within an industry there are specific organizational
capabilities necessary to achieve competitive advantage and a need to
recruit and retain the leading talent with specialized competence to build
that capability
• The difficulty of retaining critical talent due to a shift to self-managed
professional careers where talented individuals aggressively pursue their
careers and actively seek advancement by moving across different
companies and geographic boundaries
Corporations have gone through several business cycles since the 1980s
and have learned some lessons about being successful. One major trend
has been to look carefully at internal costs and expenses and identify as
many ways as they can to make sure the organization runs as efficiently
and lean as possible. For example, this has led to centralized shared
services, outsourced functions, and an ongoing expectation that a
compelling business case needs to be made to retain or invest in a
function, program, or initiative to determine if it continues to add value or
will add value in the future to the corporation. The strategic objectives of
the company are now central to most business decisions. Executives want
to clearly see how a function, program, or initiative contributes to
achieving their specific business strategies.
Most organizational functions and capabilities must now demonstrate
their strategic value to the company. The Human Resources function is
now under the same scrutiny. HR, like other corporate functions, has
increasingly been judged by its contributions to the company’s strategic
objectives (Guthridge, Komm, & Lawson, 2008; Hewitt, 1997; Ulrich,
1997; Beer, 1997). Some of the expectations of Human Resources include:
• Playing a critical role in identifying, developing, and protecting core
organizational capabilities, and the supporting individual competencies,
that enhance or establish competitive advantage
• Identifying and delivering the talented individuals who have the
competencies required to achieve competitive advantage
• Finding global talent and pursuing talent strategies that support
entering or surviving in other geographic markets
• Considering outsourcing to external vendors or handling by information
technology some traditional HR functions, particularly administrative
activities, that do not provide competitive advantage
• Ensuring that compensation, benefits, and other HR areas play
significant roles in making the challenging decisions involved in designing
systems to attract and retain talent while minimizing unnecessary costs
• Improving HR productivity by shifting to a more consultative role,
advising line managers on how to better align their management
approach, systems, and processes to achieve business objectives
As a result, senior executives are learning how to effectively leverage
Human Resources and talent management for greater strategic impact.
Programs and initiatives are increasingly expected to align with and be
driven by specific business objectives and strategies.
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One example of how human resource efforts have become more
strategically driven is in the selection of senior executives. Companies that
are having business problems or a lack of financial success often face
significant public scrutiny of the executives running the company.
Frequently these concerns lead to the termination of the CEO or other
associated executives. The 2008 financial industry crisis, although an
extreme example, shows that senior executives are increasingly held
personally accountable for poor company performance and are severed
from the company. Boards of directors are now more likely to step up to
their own accountability to various stakeholders by changing the senior
management. The actual rate of executive turnover is not precisely known
(Hollenbeck, 2009), but there is some general agreement that it is high.
There may be several reasons for executive turnover. Hollenbeck (2009)
suggests that executive selection techniques may be at fault. We have been
observing executives for many years, and it has become apparent to us
that executive failure can also be caused by poorly matching candidates to
the business situation and strategy. Few executives are equally effective in
dealing with different business environments and challenges, and
different business strategies may require different leadership approaches
(for example, high-growth versus restructuring and cost-control business
environments). Few would argue against the observation that executives
now face a constantly changing business environment. Simultaneously
financial analysts and stock-holders in public companies now insist on
faster organizational responses to changing business conditions in order
to maintain steady financial returns.
Our experience suggests that most individual senior executives are more
likely to be successful in some environments than others. A senior
executive who is hired specifically for the skills and abilities to drive
business growth may be less well matched for undertaking a major
corporate restructuring or cost-reduction effort. An executive with a
strong track record of financial management and analysis may be more
effective in a business cycle that requires strong financial control than one
that requires a focus on product or service innovation.
Increasingly we are getting more effective at identifying the type of talent
needed for different strategies. Talent management professionals are
becoming more skilled at determining which talent profiles would be
more successful than other profiles for accomplishing certain strategies.
We can better match individual executives to particular executive
positions and companies. There is an increasing expectation that the
talents of an individual or executive team need to match business
strategies and organizational demands. While this has been suggested in
the past (Gerstein & Reisman, 1983; DeVries, 1992; Silzer, 2002b), it is
now being given more attention in executive selection decisions.
Corporations are now more likely to carefully outline the specific business
environment and business strategies and identify the specific executive
skills and abilities required in the position. An effort is made to select
executive candidates whose talent profile matches the position and
business situation.
There is some risk that a match to near-term requirements may ignore
longer-term executive requirements. If a candidate is well matched to the
immediate executive opportunity and business strategy, the individual
may be less well matched for new strategies and situations as the business
evolves and changes. The decision to focus on fidelity to current needs, or
maximizing the short-term match, can result in a mismatch over the
longer term when the business requirements later change.
Executive failure can occur sooner if the candidate is not a good match for
the immediate business situation and later if the candidate is not well
matched to different future challenges. Either way, the talent must be the
right fit for the situation and the strategies. Unfortunately, there are few
executives who can be equally effective in a range of business situations,
which is one reason executive tenure, particularly CEO tenure, is
declining.
In general, corporations are beginning to better match talent with longer-
term business strategy. However, the quality of the match may last only as
long as the business strategy and business environment stay the same.
For some companies in some industries with little change, this approach
works well. Some leading companies, particularly those in fast-changing
industries or global markets, now recruit or identify internal executives
who have fungible skills and abilities that can adapt to different business
situations and demands. This still focuses on identifying and matching
individuals to the business environment and strategy but tries to identify
broadly talented, fungible individuals who can learn and adapt to new
business requirements. For example, some companies such as Bristol-
Myers Squibb are enhancing their executive selection methods by
supplementing assessments of an executive’s ability to achieve short-term
strategic objectives with an assessment of the executive’s ability to learn
and adapt to new strategies and business conditions. This ability to adapt
to future needs is receiving significant weight in selection decisions.
Talent management efforts must produce the talent needed to achieve
specific business strategies. Numerous examples throughout this book
show the link between talent and business strategies. Although generally
the business strategy drives the talent strategy, sometimes the reverse
happens. Some companies are becoming more sophisticated in assessing
the existing talent in the organization and developing business strategies
that best leverage that talent (companies with entrepreneurial talent
starting new businesses or companies that are good at customer service
starting new service businesses). At other times, companies have realized
that they had a shortage of talent in a particular area and were unable to
pursue a desired strategic initiative.
The term talent dates back to ancient Greeks and biblical times, starting
out as measure of weight, then becoming a unit of money, and later
meaning a person’s value or innate abilities (Michaels et al., 2001). We
might now refer to a person with innate abilities as a “gifted” individual.
We could make a distinction between individuals who have innate
abilities in an area (who are gifted) and those who have learned their
skills and knowledge. Of course, people have a mix of natural and learned
abilities and skills. That distinction, however, is not common in
organizations, so our use of the term talent includes people with both
innate and learned skills.
In organizations talent can refer to:
• An individual’s skills and abilities (talents) and what the person is
capable of doing or contributing to the organization
• A specific person (she is a talent, usually implying she has specific skills
and abilities in some area) or
• A group (the talent) in an organization
In groups talent can refer to a pool of employees who are exceptional in
their skills and abilities either in a specific technical area (such as
software graphics skills) or a competency (such as consumer marketing
talent), or a more general area (such as general managers or high-
potential talent). And in some cases, “the talent” might refer to the entire
employee population. Many companies now have multiple talent pools,
beyond their high-potential pool. Other versions have been called
acceleration pools (Byham, Smith, & Paese, 2002) and pivotal talent
pools (Boudreau & Ramstad, 2005), which are different ways to define a
talent pool and guide decisions about talent and on how much to invest in
them.
Over the years as companies have delayered, eliminated bureaucratic
systems, and globalized, the nature of organizational talent has changed
(see Sears, 2003, for a summary) from a focus on division of labor
distinctions to an evaluation of strategic contributions. Sears suggests that
“talent is knowledge” (as a competitive advantage) and that it is shaped by
what customers value. For the purpose of this discussion, we will use the
three definitions of talent listed above.
Talent management is an emerging concept in corporations. Although the
term talent management is becoming more widely used, it does not have
a single, clear definition. Discussions about talent management often
focus on what processes or components are included and what types of
talent are managed. The term is often used informally without any specific
definition. Lewis and Heckman (2006) found a variety of definitions for
talent management—as a process, as an outcome, and as a specific
decision—which adds to the confusion.
Some people use talent management as a synonym for human resource
management and nothing more. This meaning essentially includes all of
the traditional human resource processes: recruiting, selection,
development, human re
retention, and others. T
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are considering renaming the human resources department as the talent
management department, although we know of no actual examples where
this has been done. The title of Director or Vice President of Talent
Management is becoming common in major organizations. With each of
the past name evolutions, from employee relations, to personnel, to
human resources, there has been a reconceptualization of the function,
resulting in a different approach to the function. Similarly, the
introduction of the term talent management may provide the business
world with an opportunity to establish a new definition and expectation
for HR performance and effectiveness. While we are not advocating that
HR change its name, we do think that talent management represents
something much more than just a collection of existing HR processes.
Talent management has been used more narrowly either as a new term
for an existing HR function (as a substitute for succession planning,
human resource planning, or leadership development) or to focus on a
select group of employees (individuals who are seen as having exceptional
skills and abilities or having the potential to handle greater
responsibility). We think the use of talent management to refer to only a
small group of employees or a singular process is too narrow and
potentially damaging to an organization. Both approaches can exclude
large groups of employees from the talent management process.
This issue is related to the current discussion among human resource
professionals on where to invest employee development funds. One
argument is to make significant investments in the broad group of
employees and not just in a select group (such as the high-potential pool)
since their continued strong performance and personal growth is
important to the organization. Others (Boudreau & Ramstad, 2005) argue
that organizations should differentially invest in special groups of
employees—the “pivotal talent”—that are more strategically important to
the organization and invest much less, if at all, in other less critical
employee groups.
The term talent management could include a long list of HR processes
and components and cover only some, most, or all employees. Varied
definitions are being used. (See the sample definitions in Table 1.1.) Some
definitions are very narrow and focus only on a single process or
employee group, while other definitions are so broad and all inclusive that
it is difficult to know what they intend to include.
Lewis and Heckman (2006) criticize many definitions of talent
management as having no clear meaning or not being sufficiently
strategic. However, we think there is great value in the term and suggest
that it can be useful, strategic, and grounded in business reality. Our
definition of talent management can be found in Exhibit 1.1.
Table 1.1. Sample Definitions of Talent Management
Our definition does not focus on any single HR process but rather
includes a range of activities that attract, develop, deploy, and retain. We
think this definition captures the core objectives and components of talent
management.
There is some emerging agreement on which HR activities should be
included under the umbrella of talent management, and includes
activities that benefit or focus on individuals such as recruiting, staffing,
development, performance management and retention. These seem to
most clearly connect with managing the talent in the organization.
However many, if not most, HR activities and processes are somewhat
connected to talent management. See Table 1.2 for this list.
Exhibit 1.1. Core Talent Management Definition: Silzer and
Dowell
A recent HR executive interview study by the Conference Board identified
the components of talent management as recruitment, retention,
professional development, leadership and high-potential development,
performance management, feedback and measurement, workforce
planning, and culture (Morton, 2004). Others might argue that additional
HR activities and systems should also be included as components or that
some activities on the Conference Board list might not always be directly
connected to talent management.
For example, compensation systems are often leveraged to attract and
retain talent in organizations. One could argue that this is the main
purpose of compensation: to attract, motivate, and retain particular
individuals or groups of employees, such as sales representatives or
engineers. So for specific groups and specific individuals, the
compensation system is often used to manage talent in an organization.
However, compensation is not usually seen as part of talent management.
There are other HR activities, (see Table 1.2) such as organization culture
initiatives, employee engagement programs, and employee surveys that at
times might contribute to attracting, developing, deploying, and retaining
talent.
There is another group of HR activities and processes that few people
would specifically include in talent management. These activities, such as
organizational development, focus more clearly on organizational issues
and seem only tangentially related to talent issues. Employee benefits
usually falls in this category as well, primarily because of federal
regulations and labor agreements that dictate certain required
components. However, organizations have begun to offer employees some
benefit options. For example, there are choices around flextime, when to
take personal holidays, and level of health coverage. Some employees are
now making career decisions based on the attractiveness of benefits
offered at different companies. Kalamas, Mango, and Ungerman (2008)
argue that employee benefits should be seen as a competitive weapon and
clearly linked to talent management efforts.
Table 1.2. Talent Management Components
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Some people might argue that all HR activities and processes contribute
to and should be included under the umbrella of talent management.
They are likely to see talent management and human resource
management as synonymous. Most HR professionals, however, see these
as different from each other (see a related discussion in Chapter 20) and
view human resource management as the larger umbrella including
essentially everything listed in Table 1.2.
Talent management must not just coexist with many other organizational
programs and systems but also support and coordinate with them. It must
be driven by the business strategies and in turn help drive business
results. This relationship is represented in Figure 1.1 The business results
should then in turn influence setting new business strategies and talent
strategies. The business results in many organizations are used as a broad
outcome measure of whether the talent management effort is effective.
Figure 1.1. Talent Management Framework
The talent management framework in Figure 1.1 shows the relationships
among business strategy, talent management, and business results. We
suggest that organizations use five main processes to ensure that the
necessary talent is available to achieve their business strategies, and most
HR programs, systems, and processes are related to these five talent
processes:
1. Attract and select talent to the organization.
2. Assess competencies and skills in talent.
3. Review talent and plan talent actions.
4. Develop and deploy talent.
5. Engage and retain talent.
These talent management components are more than just independent
activities and processes. Later we will discuss why they need to be
connected and integrated. Most HR professionals are very aware of the
natural flow of talent through the organization, beginning with efforts to
attract and recruit talent and moving through various HR assessment and
development processes to retention efforts. A model of how talent flows
through a company is represented in Figure 1.2.
The talent management model in Figure 1.2 illustrates how talent moves
through an organization and through various talent management systems
and processes. Ultimately the success of each of the components and the
system as a whole should be measured and the results used to guide both
the business strategy and the talent strategy.
Figure 1.2. Talent Management Model
Talent management, however, is more than a string of HR programs and
processes, which Gubman and Green (2007) describe as a programmatic
approach to managing talent in an organization. It is a new of thinking
about, designing, and implementing talent processes and systems. In
some ways, it is a systems approach to thinking about talent. Boudreau
and Ramstad (2007) argue that managing organizational talent and
human capital should become a decision science like financial
management. We support the use of evidence-based decision making
regarding talent; however, because of the complex individual differences
among people, it will be difficult for talent management to become a
precise decision science.
Talent management systems and processes need to be strategically driven
and fully integrated with each other. These qualities and others can take
talent management efforts to much higher levels of effectiveness and
greater organizational contributions.
Talent management efforts are becoming more widely known and used in
many business organizations. We are interested in finding out what
separates effective and successful talent management systems—the ones
that add true value to an organization—from the less effective systems.
We discussed this with many colleagues in a wide range of companies and
asked them to share their experiences and their views on which
companies have the most effective talent management efforts and why
those efforts are successful. Many of these companies are mentioned in
this book, and some of our colleagues, who are doing leading-edge work
in talent management, agreed to write chapters for this book about their
insights and experience.
For many years, human resource departments have been working hard to
make sure they had effective recruiting efforts, staffing departments,
leadership development programs, succession planning reviews, and
other HR programs. Since the early 1990s the focus for many
organizations has been on building solid human resource functions,
programs, and systems. Some organizations achieved their goal of being
highly effective in specific areas of HR and established a reputation for
being a leading edge HR group. However, a higher level of performance
expectation is now being set that requires both an integrated and a
strategic talent management effort. Many organizations are now working
toward this objective.
Based on our experience and the perspectives of others, we think there are
four distinctions that ch
efforts. The four succes
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advanced talent management efforts from those that are made up of
effective but independent HR programs, systems, and initiatives—a
programmatic approach. The four distinctive success factors for talent
management, or the DIME model, are presented in Exhibit 1.2.
Exhibit 1.2. DIME Model of Talent Management Success
In most organizations, there is widespread understanding of the
company’s business strategies and a strong focus on achieving them. Due
to increased competition and limited financial resources, organizations
are making tough choices on where to invest those resources and which
strategies and products to pursue. The days of the broad conglomerates
may be waning as companies divest businesses that are not core to their
mission or split into multiple independent companies. Organizational
functions have had to demonstrate that their structures, processes,
initiatives, and people are aligned with a clear set of business objectives.
Anything that does not clearly and directly support those strategies does
not get funded. Like other functions, HR has had to become much more
strategic, and at the center of that effort is the strategic role of talent
management.
The connection between talent management and business strategy has its
roots in two trends that have emerged since the mid-1990s:
• The emergence of talent as strategic resource and competitive advantage
• The evolution of the Human Resources function as a strategic business
partner
The idea of viewing talent as a strategic resource has been discussed for
decades. For example in the 1960s, engineering talent was seen as a
strategic resource needed for the United States to remain competitive
with the Soviet Union in the space race. There was a rush to establish,
fund, and promote engineering education in the United States.
In the 1990s, executive talent was beginning to be seen as a strategic
resource and competitive advantage to business. This was evident in their
high public profiles and the media attention they attracted, as well as the
extraordinarily high compensation packages they were paid. There was
also more visible attention paid to CEO turnover, with some companies,
such as AT&T, having multiple CEOs in a relatively short time period. The
individual differences in the skills, abilities, and experience of CEOs were
often seen as directly affecting the financial results of a company. The
business world and financial analysts paid attention to the way the
business press depicted the impact of corporate leaders on company
results and the “great man” theory of leadership seemed to regain some
currency (Organ, 1996).
During this period Zuboff (1988) and Stewart (1997) were discussing the
relationship between talent and business strategy by outlining the impact
of technological innovations on the value of talent with specific technical
skills and pointing out the difficulty of replacing that specialized talent
from the marketplace. High-value, difficult-to-replace technical talent was
beginning to be seen as a strategic asset. Their approach helped to identify
the strategic talent in the organization, that is, those individuals or groups
of individuals who create a competitive advantage for the company.
Zuboff (1988) argued that talent is critical to business strategies, and
Stewart (1997) suggested that this strategic talent might be found at all
levels in the organization. Boudreau, Ramstad, and Dowling (2003) now
call these pivotal talent pools.
In the same vein, Gubman (1998) was making the case that “your
workforce is the only thing that is both necessary and sufficient to execute
strategy” (p. 15). He argues “the real strategic opportunities for becoming
a singular success, achieving uniqueness, and moving quickly lies in your
most unique and potentially most powerful resource—your workforce” (p.
16).
Some companies, such as GE, gained a reputation for developing and
producing successful corporate executives who were then highly sought
after by other companies and moved into CEO positions in many other
organizations. GE’s executive leadership talent was seen as a strategic
asset and a competitive advantage.
Others companies focused on different strategic talent pools. Capital One
Financial created a huge corporation, almost from scratch, that put talent
at the center of its business strategy. The objective was to build the
business analyst and business entrepreneur talent pools, which in turn
could start, build, and lead a wide range of businesses. Merck, a
pharmaceutical company, gives a lot of attention to identifying and
recruiting the leading scientific researchers in particular medical areas,
such as diabetes, in order to capture the premier talent and become the
leading provider of pharmaceutical products in that area. Honeywell, a
wide-ranging manufacturing firm, focused on building a talent pool of
general managers who could run a range of businesses. Strategic talent, in
a variety of roles but particularly leadership talent, has moved to the
center stage in the business world as a critical resource. Collins and
Porras (1994) suggest that effectiveness in developing internal leadership
talent is one of several factors that predict an organization’s performance
and longevity.
Companies are starting to see that some talent is not easily replaceable.
The demand for leadership talent, particularly global leadership, is rising
as the large baby boom generation of leaders is beginning to retire. More
companies are chasing and competing for a shrinking resource (Michaels
et al., 2001; Bartlett & Ghoshal, 2002). The McKinsey global surveys in
2006 and 2007 (McKinsey & Company, 2007; Guthridge, Komm, &
Lawson, 2008) found that global respondents “regarded finding talented
people as likely to be the single most important managerial preoccupation
for the rest of this decade” and “expect an intensifying competition for
talent—and the increasingly global nature of that competition—to have a
major effect on their companies over the next five years” (p. 5).
Talent is seen as a scarce resource. And as Barney (1995, 2001) suggests,
companies gain sustained competitive advantage when they develop
“resources that are valuable, rare and hard to imitate.” Some companies
have tried to leverage their existing internal strategic talent for new
business development, such as when an industrial company leverages its
internal high-performing customer service function to start a separate
customer service business. However, most companies, such as GE and
Capital One Financial, build their strategic talent to match their business
model and strategy.
Borrowing a phrase from Andy Grove (1999) at Intel, McKinsey
Associates suggest that the “war for talent is a strategic inflection point”
for business (p. 2). It is one of those turning points in business when
something, such as a technological innovation or the emergence of a
major new competitor, significantly changes the way everyone approaches
their business. They argue “that talent is now a critical driver of corporate
performance and that a company’s ability to attract, develop and retain
talent will be a major competitive advantage far into the future” (Michaels
et al., 2001, p. 2).
Lawler (2008) notes that “increasingly, companies in a wide variety of
businesses are finding that people can be their number one source of
competitive advantage” (p. 1). In fact talent issues need to be carefully
considered when developing business strategies. He suggests that “talent
considerations are central to both the development and the
implementation of business strategy” (p. 9).
In a recent global survey, senior executives from around the world
indicate that their two most important management challenges are
recruiting high-quality people from multiple territories and improving the
appeal of the company culture and work environment. Over 85 percent of
these same executives said “that people are vital to all aspects of their
company’s performance particularly their top strategic challenges:
increased competition, innovation and technology” (Deloitte Touche
Tohmatsu & Economist Intelligence Unit, 2007) .
Some argue that selecting top performers makes a big difference in
business results. Axelrod et al. (2001) suggest that the “top performing 20
percent or so of managers ... were twice as likely as average ones to
improve operational productivity and to raise sales and profits” (p. 2).
Some argue that organizations should get the very best available talent in
every position (Smart, 1999), and McKinsey (Michaels et al., 2001) seems
to support the view of hiring only star players. But that approach may be
counterproductive for o
that in an era of limited
most talented individua
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even be detrimental to employee engagement and motivation. Highly
talented individuals in strategically unimportant positions are likely not
to receive the attention, work challenges, career opportunities, and
rewards that they require to stay engaged. Boudreau and Ramstad (2005)
suggest that resources should be focused on the strategic talent and not
invested equally across all employees.
The most effective HR programs are designed to support and achieve
specific business strategies. Each program must be able to clearly outline
how it directly supports a strategy. In many cases, this is measured by
specific concrete outcomes. Corporations are becoming leaner and wiser
about where to invest limited resources, and HR is being required to
demonstrate the value that human resource programs add to the
business. As a consequence, we are getting much better at deciding where
investment in talent management programs will create the most value
and in measuring the impact of HR programs and contributions to the
business strategy. This book is full of business examples of the connection
between talent management initiatives and business strategy.
Clear organizational attention has been given to translating business
strategies into human resource and talent strategies. Increasingly these
efforts include establishing an HR or talent brand for the company,
establishing company values and an aligned internal culture, and building
the broad organizational capabilities and competencies needed to achieve
business objectives.
The process of aligning HR strategies with business strategies can be
complex and challenging, particularly if HR efforts are only considered
after the business strategies are already set. Many argue that HR needs to
be involved in setting the business strategies as well (Beer, 1997; Ulrich,
1997). Lawler (2008) goes further and argues that talent strategies are
business strategies.
Numerous people (Gubman, 1998; Sears, 2003) have outlined how
business strategies can be translated into human resource and talent
strategies. Gubman (1998) also suggests that the “lead” talent
management practice may change depending on the business strategy or
“strategic style.” For example, he recommends a “selection for fit”
approach for a customer strategy and a “performance-based
compensation” approach for an operations strategy. Being aligned with
the business strategy typically means more than just knowing what to do;
it also means acting in ways that focus on and advance the business
strategy.
Human Resource professionals increasingly are considering their work to
be strategic. In the distant past, only some HR executives had the
strategic and analytical thinking skills and the broad business experience
to understand the strategic implications of their work or perhaps the
personal motivation and ambition to step up to a strategic role. In
addition, business executives may have been hesitant to include HR
executives in strategic discussions.
This is now changing with the advent of a new wave of HR professionals
who have the required business experience and the strategic skills to get
accepted as business partners. Chief financial officers went through a
similar evolution in their roles. HR executives are now seeking
opportunities to make strategic contributions at the executive level and
are earning a seat at the strategic table as they demonstrate their added
value.
Once Human Resources decides to align processes, systems, and activities
with the business strategies, then the next step is to pursue strategic
talent management. How can your organization best attract, develop,
engage, and retain talent to achieve those business strategies? The
strategic links between these are not easily made (see Figure 1.3). While
there is usually a strong link between the business environment (external
market, competitors, customers, etc.) and the business strategy, the next
link to a talent strategy is often much weaker. This is often a result of the
insufficient experience of many talent management professionals in
translating business strategy into talent strategy. Once the talent strategy
is understood, then talent management professionals seem to be more
effective in translating it into specific talent programs, processes, and
systems. For many talent management professionals, their primary
expertise and experience are in developing systems, programs, and
processes to achieve a specific HR or talent objective.
Figure 1.3. Strength of Talent Management Links
Once the talent systems and programs have been developed and
implemented, HR has not been highly effective in measuring outcomes
and progress against business and talent strategies. So the links to
measuring progress and business results are weak. However, most
organizations have fairly strong links from business results back to
business strategies, and of course external financial analysts always seem
ready to remind them of this link.
If the goal of HR is to align with the business strategies, to focus on
deliverables, to be judged on impact, and to add measurable corporate
value, then the corporation needs to have a clear and robust business
strategy (Hewitt, 1997; Ulrich, 1997). If the strategy is clear, then, Hewitt
(1997) suggests, HR can link to it by building the core strategic
competencies, developing a process for leveraging those resources, and
building a global strategic mindset in the organization. Of course, this
may be easier said than done.
Companies are learning that having a selection system pursue specific
objectives and having a leadership development program pursue very
different objectives leads to a waste of both financial and human
resources. The various talent management initiatives and HR activities,
systems, and processes need to be aligned at a minimum, but they are
most effective when they are fully integrated.
Most organizations, however, do not have fully integrated talent
management systems, but are operating at a more basic talent
management stage. We suggest five stages of talent management
integration: (1) reactive, (2) programmatic, (3) comprehensive, (4)
aligned, and (5) strategic (see Table 1.3).
Table 1.3. Five Stages of Talent Management
Source: Adapted from American Productivity and Quality Center (2004)
and Gubman & Green (2007).
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The most primitive stage of talent management puts an emphasis on
quickly addressing immediate and urgent talent issues. This often means
finding a quick and readily available program that appears to be a
solution. This approach relies on the broad range of packaged off-the-
shelf programs from outside consulting firms. These plug-and-play
programs and tools are designed to be generic and quick fixes.
Unfortunately, they rarely take into account the organization’s culture and
strategic issues, often do not adequately address the initial problem, and
have a short life in most organizations.
Most large business organizations have built professional Human
Resource functions that establish programs and processes that are at least
consistent over time. They may not be well developed, but they are
repeatable, which gives the perception, often false, of being effective
(tradition is sometimes mistaken for proven). Many staffing programs in
the past were very consistent—recruiting at the same schools, asking the
same selection questions, relying on a single decision maker—but they
were not always effective. They often failed to update the selection process
and techniques to adapt to changing talent needs and candidate
populations. These habits thrived in many industries, such as the textile
industry, that had significant difficulty adapting to the changing business
environment.
Many organizations have tried to build and implement talent programs
and processes that are rigorously developed and represent state-of-the-art
thinking in the area. For example, in the 1990s there was a rush to build
leading-edge leadership development programs in many companies,
following the GE model. Many companies hired leadership development
specialists to do this. The results were comprehensive programs and
processes that were seen as very effective in achieving their specific and
narrow development goals. Often, though, these programs were
independent, freestanding efforts that were unconnected with other talent
management efforts.
Since the mid-1990s, there has been a great deal of effort in some
companies to have an aligned talent management approach. In this stage,
HR professionals link their HR systems and processes with other HR
systems and processes and are aware of the range of talent objectives and
efforts. The various efforts may be linked together using similar language
and talent models. They also may work toward a shared goal when there
seems to be a connection, but they are not all driven by larger business
and talent strategies.
For example, those executing a sales recruiting program and those
executing a sales training program are often aware of each other’s goals
and work to make sure their efforts are aligned, that is, they are not
working against each other’s objectives. However, their efforts may not be
fully integrated, that is trainee performance results from the training
program may not be used to adjust or modify the recruiting efforts.
Similarly, the recruiting outcomes may not be used to modify the training
approach. While they both may support producing high-quality sales staff
in general, they are not taking advantage of the potential synergy between
the two programs. Although they may have well-developed and
comprehensive programs and are aware of their connection, they are not
sufficiently integrated to realize the full possible synergistic benefits to the
organization.
An organization might have recruiting, assessment, and development
programs that are separately comprehensive and rigorous and that
coordinate with each other. However, they may all have different goals.
Alignment suggests separate components “forming a line” or “being
arrayed on the same side of a cause” (Merriam-Webster, 2002). However
we think a higher stage of talent management is to be both strategically
driven and fully integrated.
Ultimately the talent management approach should be strategically driven
to be most effective. It is more than just being on the same side of a cause
(alignment); it is actually intensely focusing on achieving the business and
talent strategy. This requires that the talent management programs and
processes have the same shared strategic goals as the recruiting and
staffing processes. In this stage, HR programs and processes are
synergistic and multiply their effectiveness across and through other
systems, programs, and processes.
For example, a corporation may be interested in forming a business
development unit to create innovative approaches to satisfy customer
demand. From a talent strategy perspective, it needs to be staffed with
entrepreneurial people who have the potential to start and lead new
businesses. All of the HR systems and processes, from recruiting to
assessment, development, retention, and compensation, need to fully
understand and work together to achieve that business strategy and the
talent strategy of hiring and building entrepreneurial talent. The type of
talent needs to be specifically defined, and each HR area needs to identify
its interface and shared responsibility with every other HR area. For
example, a discussion of an individual who failed soon after moving into
the new unit would need to be addressed by the larger team (recruiting,
selecting, development, onboarding, and retention), not just by the
selection staff.
A failure in one part of the talent effort is a failure for the strategy, and
everyone should have some responsibility to correct it. In some ways, the
strategy (business or talent) defines the team rather than the specific HR
system or program. These systems and processes are strategically driven
and fully integrated.
Avedon and Scholes (see Chapter 2) discuss the importance of being
integrated at three levels in the organization:
• Integration with business strategy and human resource strategy
• Integration within the talent management processes
• Integration with the culture of the organization
All three are important integration components, and an organization
needs to do all three to have a fully integrated, strategically driven talent
management system. Being integrated within talent management
processes suggests alignment (stage 4) within HR. But to be strategic
(stage 5) also requires being integrated with both the human resource
strategy and the busine
suggests that the values
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processes are consistent with the cultural values of the organization and
that they have been not only accepted but engrained in the culture
(Strategic, stage 5). An “up or out” career philosophy might work in an
organization that does not value having long-tenured employees but
would probably not work in an organization that values the development
of deep relationships between employees.
Gubman and Green (2007) suggest four stages of talent management:
Programmatic, Systemic, Strategic, and Cultural (see Chapter 2 by
Avedon and Scholes for a more complete description). Earlier Gubman
(1998) also discussed alignment with business results and strategy but
used the term alignment similarly to how we use the term strategic. The
distinguishing feature of his alignment model is “a clear line of sight from
strategy to people,” which is similar to our Strategic, stage 5 (p. 33).
Sloan et al. (2003) discuss how a company’s globalization strategy (global,
international, transnational, or multidomestic) can link to defining
leadership roles and requirements and to designing a talent management
system. They also point out the importance of aligning three core talent
management processes:
• Drawing people into the company ( attract and retain)
• Assisting people to take on new roles (select and transition)
• Encouraging people to develop new skills and maintain high
performance (mobilize and develop)
Others who have studied or written about talent management tend to use
the term integrated to mean connected or aligned and not strategically
driven (American Productivity and Quality Center, 2004; Morton, 2004;
Smilansky, 2006) . They suggest that talent management can be
integrated by making the “right connections” between programs and
processes. Some suggest that having a centralized competency model is
the integration cornerstone for a company rather than the business
strategies. In our opinion, being connected or aligned is a worthy goal but
falls short of being strategically driven (that is, integrated with the
strategies).
In a Conference Board survey (Morton, 2004), approximately one-third of
75 “HR-related executives” viewed their talent management initiatives as
integrated or having “connections made to all critically related aspects in
the organization” (p. 22) (for example, connected or aligned processes).
The respondents suggest that this connection occurs primarily through
the talent management processes (cited by 49 percent) and talent
management professionals (cited by 49 percent). The HR areas that are
mentioned most frequently as connected are performance management,
recruitment and leadership, and high-potential development. The areas
mentioned as the least connected are workforce planning, retention,
feedback, and measurement. The survey respondents said the talent
management initiatives that were the most important were leadership
development and high-potential development (cited by 73 percent),
performance management (cited by 44 percent), culture (cited by 21
percent), and retention (cited by 16 percent). Based on the survey data
and corporate interviews Morton proposes a “road map to talent
management maturity” and recommends a specific order for bringing HR
processes into talent management maturity: (1) recruitment, (2)
professional development, (3) culture, (4) retention, (5) performance
management, (6) feedback and measurement, (7) leadership and high-
potential development, and (8) workforce planning.
In discussing executive talent, Smilansky (2006) advocates integrating
talent management with the core components that underpin these HR
processes such as: an understanding of jobs and the hierarchy of
managerial positions, the definition of managerial competencies, and
culture and values. Although his focus is on executive talent, he does not
emphasize business strategy as the foundation for talent management,
even at the executive level.
Another talent management consortium benchmarking study (American
Productivity and Quality Center, 2004) surveyed 21 companies and
concluded that companies should “integrate the various elements of talent
management into a comprehensive system—an overall talent
management framework, a competency model consistently used across
elements, opportunities for the various stakeholders to work together, the
use of data from one process as input to other processes, and partnerships
between HR and line managers are all mechanisms used to foster
integration” (p. ii). This study (like those by the Conference Board and
Smilansky) emphasizes coordination between HR programs and
processes, but does not suggest that talent management processes need to
be determined and driven by the business and talent strategies.
We think, however, that talent management systems need to be fully
integrated with and driven by business and talent strategies. In addition,
talent management programs and processes need to be integrated with
each other and not just connected or aligned.
In the past, senior executives in many organizations had limited contact
with talent programs and processes. Frequently they attended annual
replacement planning meetings that focused on discussing impending
retirements and potential replacements for those positions. Over the
years, these meetings have evolved through different phases, from
replacement planning to human resource planning to full strategic talent
management (see Table 1.4).
In the 1970s and early 1980s, some leading companies, notably Exxon
and AT&T, moved from single position staffing and replacement planning
to longer term Human Resource planning. This initially involved
elaborate replacement plans and succession wall charts that identified not
only individuals who were the likely near-term replacements for specific
leadership positions but individuals who could be developed over one to
three years to be viable future candidates. In the 1990s and 2000s, there
was an evolution in organizations to talent management that focused on
aligning Human Resource programs and processes in order to identify
and develop talent, both leadership talent and specialized talent.
The talent planning and management process is now becoming a core
business practice, driven by business strategy and talent strategy. Both
Dowell (see Chapter 9) and Avedon and Scholes (see Chapter 2) make a
clear case for the central business role of strategic talent management in
organizations. Dowell argues that the talent review process “forms the
third leg of the organization planning process along with reviews of the
organization’s strategy and operating plans.” Avedon and Scholes suggest
that it should be one of three core business practices along with the
strategic planning process (including financial goals) and the annual
operating review. Dowell points out, “The organization’s strategy provides
the foundation for identifying future talent needs, and the operating plan
provides the mechanism for allocating resources (financial and human) to
support the actions identified during the talent review process (such as,
new recruiting efforts, developmental programs for high potentials, and
retention programs).“ He makes the case that talent can be central to
gaining competitive advantage:
Table 1.4. Evolution of Talent Management and Planning
Organizations put their future at risk if they do not apply the same
discipline to planning the development of their talent as they do to
planning the development of products and services. The ability to
formulate and execute s
place. An organization’s
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competitive advantage. When an organization has highly talented
individuals in strategically critical positions, this talent becomes a source
of competitive advantage that is one of the most difficult to replicate by
competitors.
In fact, in leading organizations these three business processes form the
foundation for effectively managing a corporation. They place as much
emphasis on the strategic talent reviews as they do on the strategic
planning process and the annual operating reviews.
Over the years, others have also suggested that talent planning should be
considered an important business process. Walker (1980) makes a clear
case for the long-range planning of human resources and argues for
linking it with three levels of organizational planning: strategic planning,
operational planning, and annual budgeting. Ulrich (1997) advocates for a
strategic approach to Human Resources that puts an emphasis on adding
corporate value, gaining impact, delivering results, and integrating HR
practices into the business strategy.
Mohrman and Lawler (1997; Mohrman, Lawler, & McMahan, 1996)
propose that Human Resources be a full business partner and an integral
part of the management team. They include in the partnership role
“developing strategy, designing the organization, change implementation
and integrating performance management practices ... (goal setting,
performance appraisal, development practices and rewards) ... with each
other and with the business management practices of the organization”
(Mohrman & Lawler, 1997, p. 246).
However, it has taken some time for organizations to see these links and
to see Human Resources as a business partner. Some progressive
companies, such as GE, PepsiCo, Bristol-Myers Squibb and Ingersoll
Rand, have made these links and are leveraging their talent approach for
their own business advantage. Other companies seem to be slow to make
this transition. Hewitt (1997) suggests that this may be due to the false
assumption that the corporation has “a robust concept and process of
competitive strategy” (p. 39). He also suggests that an organization’s
strategic planning process is often little more than annual budgeting and
that many current executives have limited strategic skills. Others note the
weak links between the strategic planning apparatus in an organization
and superior competitive performance (Ashkensas, Ulrich, Jick, & Kerr,
1995).
Some senior executives may have difficulty viewing HR as a strategic
function. However in many organizations, such as at Ingersoll Rand and
PepsiCo, both the Chief Executive Officer and the Chief Human Resource
Officer see a critical strategic role for Human Resources and talent
management.
Most companies, and most managers for that matter, rely on Human
Resources to design, implement, and monitor various talent management
programs and processes. In leading companies, such as PepsiCo,
Microsoft, Bristol-Myers Squibb, and Ingersoll Rand, senior executives
take an active role in linking talent management to business success. They
now have or are building a talent mindset, or what Avedon and Scholes in
Chapter 2 call talent stewardship in the company. As talent management
becomes integral to the organization culture, every supervisor, manager,
and leader in the company is expected to take responsibility and
accountability for attracting, developing, deploying, and retaining talent.
Everyone is expected to take an active role in talent management, from
identifying and recruiting exceptional talent to coaching employees and
guiding the careers of individuals with the potential to assume greater
responsibility.
Many years ago companies discovered the value of using quality circles in
manufacturing operations—an idea borrowed from Japanese companies
that involved manufacturing plant employees taking responsibility for the
product quality in their group or department. These groups later evolved
into employee involvement groups (self-directed work groups), which had
decision-making responsibility over the work in their group. Over the
years, executives and managers became used to giving employees greater
decision-making authority. This approach was seen as a way to improve
product quality, empower employees, attract more talented people, and
lower costs at the same time. First-level supervisors were perhaps the last
organizational level to fully accept shared decision making with their
employees—and perhaps with some justification, since the process
restricted their direct control and their span of responsibility and often
led to a significant reduction in the number of supervisors.
By the time talent management emerged, employees, managers, and
executives were used to the idea of pushing responsibility down into the
organization. One of the last holdouts of tightly held responsibility was,
and still is, the talent planning process. Executives often hold these
meetings in private and are cautious about sharing their conclusions or
even the process or decision rules or guidelines. Most corporations are
still hesitant to let individuals know if they have been designated as high
potential (see Chapter 5 by Rob Silzer and Allan Church in this book).
As organizations have made talent management a central focus across the
whole company, and not just in HR, there is a need to involve and engage
all managers and leaders in talent management activities. One trend that
supports this distribution of talent responsibility is the emergence and use
of organization-wide competency models (Hollenbeck, McCall, & Silzer,
2006) as a central organizing framework for talent management.
For example, Capital One Financial in the early 1990s developed a
comprehensive research-based competency model, based on the business
strategy of the company, that was widely shared with employees (Silzer,
1996; Silzer & Douma, 1998). Also developed with the actual competency
model were many supporting programs and materials—selection tools,
360-degree feedback instruments, development catalogues, training
programs, and performance management rating systems, for example—
that were widely distributed to employees for self-directed use. The
objective was to put as much talent-related information as possible in the
hands of employees, managers and leaders, so they could take
responsibility to improve their own performance, advance their own
careers and improve the performance of their group. This was an early,
and quite successful, attempt to push talent responsibility down into the
organization and even to individual employees. One of the reasons this
worked so well was that employees saw it as an opportunity to take some
responsibility for their own development and careers.
Talent management became engrained in the Capital One organizational
culture and became a manager responsibility and mindset. Ulrich (1997)
suggests the “shared mindset of common culture represents the glue that
holds an organization together” (p. 68). Leading talent companies such as
PepsiCo and Capital One Financial understand that to successfully
achieve business and talent strategies, talent management efforts must be
a core business process that is the responsibility of all managers
throughout the company.
McKinsey (Michaels et al., 2001) reinforced the importance of adopting a
talent mindset in an organization in order to successfully compete in the
war for talent. They described talent mindset as “a deep conviction that
better talent leads to better corporate performance” and “the belief that
better talent is a critical source of competitive advantage.” Guthridge et al.
(2008, p. 8) describe it as a “a deep commitment to talent throughout the
organization, starting at the top and cascading through the ranks ... a
conviction among business unit heads and line leaders, that people really
matter.” Avedon and Scholes in Chapter 2 define it as “a frame of mind, or
a culture, where every manager feels ownership and accountability for
talent on behalf of the organization.”
McKinsey (Michaels et al., 2001) proposed that talent management needs
“to be a central part of how to run the company” and “a huge and crucial
part” of every leader’s job (p. 27). Gubman and Green (2007, p. 1) advise
that talent management should be a “top-of-mind priority that becomes
second nature to executives” (p. 1). Michaels et al. (2001, p. 22) go further
and suggest that managers need to “commit a major part of their time and
energy to strengthening their talent pool and helping others strengthen
theirs.” Jack Welch modeled this mindset when he said, “I view my
primary job as strengthening our talent pools. So I view every
conversation, every meeting as an opportunity to talk about our talented
people” (Michaels et al,, 2001, p. 31).
Guthridge et al. (2008, p. 8), McKinsey consultants, point out that they
“consistently see that top performing companies instill the mindset and
the culture to manage talent effectively.” Lawler advocates building a
human capital-centric organization, where “every aspect of the
organization is obsessed with talent and talent management” (2008, p.
10). He suggests that human capital—centric organizations “do everything
they can to attract, retain, and develop the right talent” and that “talent
management deserves a
management” in a comp
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McKinsey argues for a top-down approach (Michaels et al., 2001) that
requires “the CEO’s leadership and passion” and suggests that a leader
“establish a gold standard for talent, get actively involved in people
decisions deep within the organization, drive a simple, probing talent
review process, instill a talent mindset in all managers, invest real money
in talent and hold themselves and their managers accountable for the
strength of the talent pools that they build” (p. 27).
Sears (2003, p. 140) suggests that there are two types of talent mindset:
the first “clearly comes from the top,” where the CEO champions a
commitment to talent, while the second comes from “talent athletes” or
“leader-managers,” who “ultimately conceived, built, implemented and
sustained” the business strategies and talent strategies (p. 140).
We think talent management must be championed by the CEO with the
full commitment of senior leaders, but ultimately talent must be owned by
managers and leaders at all levels. In the Capital One example, the
mindset was easier to establish than in most mature organizations
because the company had a limited history, the senior executives had a
strong talent orientation at the beginning, the culture had a data-based
learning orientation, and almost all associates (selected through
rigorously developed selection tools) were hired with limited or no prior
organizational experience. The associates were bright, highly motivated,
ambitious, and committed to learning and using the talent management
tools to improve their competencies and advance their careers. It should
be noted that during the first ten years, Capital One Financial grew from
300 to 28,000 associates and had outstanding financial performance.
The creation of a talent mindset does need to start at the top with the
CEO’s commitment. In many organizations, this is probably the biggest
hurdle to establishing a talent mindset. CEOs often do not understand it,
are not interested, or have their own outdated view of talent. Their
interest and involvement are based to some degree on their past
organizational experience. If they had worked in a company committed to
talent management at some time in their career, they would be more
likely to understand it and actively support it. Larry Bossidy, for example,
who spent many years in GE leadership before becoming CEO of Allied
Signal and later of Honeywell, states, “There is no way to spend too much
time on obtaining and developing the best people” (Bossidy, 2001, p. 46).
Executive commitment seems to be a starting point. McKinsey Associates,
in a 2000 survey of corporate executives (reported in Michaels et al.,
2001), revealed that talent was much more likely to be seen as a top
priority by officers from high-performing companies (49 percent) than
officers from average-performing companies (30 percent). However,
while 93 percent of the officers surveyed think managers should be held
accountable for the strength of the talent pool that they build, only 3
percent of the surveyed officers think their companies actually do this.
Gaining CEO and executive commitment may be the greatest hurdle that
Human Resource executives and talent management professionals face in
establishing a talent mindset in their organization.
These four talent management success factors (the DIME model as
presented in Exhibit 1.2) run through this book and show up in many of
the chapters:
• Driven by business strategy
• Integrated with other processes
• Managed as a core business practice
• Engrained as a talent mindset
These are the design criteria for outstanding talent management systems
and critical to the future success of talent management.
Other talent management frameworks have proposed similar and
different design and implementation approaches. Avedon and Scholes (in
Chapter 2 in this book) and Wellins et al. (2006) outline talent
management models similar to ours (see Figures 1.1 and 1.2) and include
common elements such as business strategy; attract, select, and identify;
assess; develop and deploy; and retain. Wellins et al. (2006) describe
their model as focusing exclusively on leadership talent, while in
comparison, the Avedon and Scholes model is more broadly applicable
and lists connections to specific HR programs and processes. The
American Productivity and Quality Center (2004) reported on a
benchmarking study on talent management and found that the “best
practice organizations” excelled at recruiting, identifying, developing,
performance management, and retention.
Gubman (1998, p. 33) presents the Hewitt Associates alignment model,
which is called the “Improving Business Results with People Model” and
is designed to “line up all the critical elements in talent management.” It
takes a broad strategic approach emphasizing how business strategies get
translated to business capabilities, people requirements, and workforce
strategies. Gubman discusses how the strategic style of a company—its
products, operations, and customers—can determine the lead talent
management practice for the organization. Gubman identifies five key
talent management practices (staffing, organizing, learning, performing,
and rewarding) and gives company examples of each.
Sloan et al. (2003) discuss the strategic management of Global
Leadership Talent, although their recommendations seem equally
relevant for nonglobal talent. They propose five steps for designing a
talent management system: (1) define the value proposition for
employees, (2) identify talent gaps, (3) choose the source for needed
talent, (4) align talent management processes, and (5) build
organizational support mechanisms. They also identify six core talent
management processes grouped in three clusters:
• Attract and retain—drawing people to the organization
• Select and transition—helping people take new roles
• Mobilize and develop—encouraging development and high performance
Smilansky (2006) focuses on the management of executive talent. His
book is based on in-depth interviews with the heads of HR at 14, mostly
European, companies. He outlines six key steps to effective talent
management: (1) focus on critical jobs, (2) develop high-performance
talent pools, (3) assess potential, (4) develop capabilities of high-potential
executives, (5) reduce the impact of organizational silos, and (6) develop
solid performers who may not be high potential.
Others discuss talent management in general or narrow ways. Lawler
(2008) sees outstanding talent as critical to having a human capital
—centric organization but discusses talent management only generally.
He supports the importance of establishing management priorities and an
employer brand but only briefly mentions identifying talent needs,
selection, development, or retention. Similarly, Sears (2003) provides a
more general discussion of talent management and focuses on strategy
formation, delivery, and performance. He discusses six key talent
processes: relating (establishing relationships), recruiting, retaining,
performance management, learning, and rewarding.
Several thinkers in this area advocate applying models from other
functional areas to talent management. Cappelli (2008a, 2008b) focuses
on the “uncertainty of talent demands” in an organization and cautions
against having an oversupply of talent because of costs and other factors.
To address the risk uncertainty, he suggests using a supply chain
management model and proposes a “talent on demand framework,”
similar to just-in-time manufacturing, and that companies should
undershoot their estimates of the talent that will be needed. While this
theoretically may make sense for reducing costs it seems unlikely that
companies will tolerate much risk in not having or being able to quickly
attract the right talent when it is needed. Many companies, however, are
already thoughtfully weighing the risks in make or buy decisions around
specific talent groups.
Boudreau and Ramstad (2005, 2007) propose a decision science for
managing talent resources and determining talent strategies that they call
talentship. They offer an analytical approach, based on a financial
management model, to understanding the impact of business strategy on
talent planning and talent management and how investments in talent
can provide strategic opportunities. Their model is complex and may be
difficult to apply in practice. Underlying the approaches by Capelli
(2008a, 2008b), as well as Boudreau and Ramstad (2005, 2007), is the
premise that organizations should differentially invest in critical or pivotal
talent capabilities and pools in an organization and focus on talent groups
that can have the greatest impact on strategic success. This is not a new
idea. Some leading companies have been selectively investing in critical
functions, career paths, or positions for some time.
In addition, much has been written on the various components of the
talent management process. The following are the relevant chapters in
this book related to specific talent management components.
• Attracting and selectin
• Assessing (Chapter 5)
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• Reviewing and planning (Chapter 9)
• Developing and deploying (Chapters 6, 7, and 8)
• Engaging and retaining (Chapter 10)
• Measuring progress (Chapter 12)
• Specific talent pools (Chapters 11, 13, and 14)
• Company approaches (Chapters 15, 16, 17, 18, and 19)
• General talent management discussion (Chapters 2, 20, 21, and 22).
There is also a large body of literature on each of these components
(Jeanneret & Silzer, 1998; Hollenbeck, 2002; Silzer, 2002a, 2004, 2005;
Silzer & Adler, 2003).
Organizations face a number of issues and obstacles to the effective
implementation of strategic talent management. They can be grouped into
three areas: the nature of talent, design and execution issues, and
influences and challenges.
Organizations have to decide whom to include as talent and what they
mean when they discuss “talent.” This raises a few choices that can affect
the design of the talent management approach and the organizational
culture and brand.
A core question in designing talent systems is whether there is a dominant
view in the organization, and among the senior executives, about whether
talent is something you are born with or whether talent can be developed.
While most experienced industrial-organizational psychologists believe
that the answer is “both,” many executives, and even many HR
professionals, have strong opinions and biases for one alternative or the
other. This is usually due to their limited exposure to the research in this
area and their own personal experiences. These beliefs can directly affect
organizational decisions on whether to build or buy talent and whether to
emphasize recruiting and selection programs or to create extensive
training and development programs.
Believing only in natural talent leads an organization to focus heavily on a
selection approach to talent, since it is assumed that there would be little
development or learning on the job. Once the job requirements change,
the job incumbent is moved out, and another individual is selected into
the position as a better match to the new requirements. The result is
frequent recruiting of talent from outside the company, and the resulting
high turnover is considered a cost of doing business. Some companies
pursued this approach (and some still do) when there was a ready and
available supply of external talent to hire and the compensation was high
enough to attract the specific talent needed. This is more of a “just in
time” approach to talent (see Cappelli, 2008b) . These organizations often
develop a reputation for giving individuals a lot of early responsibility, but
their tenure is generally short. The financial industry has developed a
reputation for this approach over the years.
Believing only in developed talent leads to bringing in a large group of
individuals early in their careers and using an extensive development
effort to build their skills over time and sort out those individuals who
learn and develop the most. The difficulty with this approach is that it is
costly and time consuming and is generally seen as a luxury that few
corporations can continue to afford. This approach may result in
prematurely placing individuals in stretch roles with the hope that they
will grow into the role. Although some people can do this, there typically
are costly failures, which can be a financial drain on the corporation.
Research suggests that a person’s natural talent or abilities generally set a
range of how much they can be developed in an area. Consider, for
example, intellectual, interpersonal, and motivation skills. Individuals
typically have different levels of natural talent in each of these areas,
which can set limits on how much the individual can further develop in
each area.
Many business organizations today have a selection or development bias,
although not to the total exclusion of the other. Sometimes this is
generated from the attitudes and beliefs of the CEO and senior executives
or by the history of the company. Enlightened executives and HR
professionals realize the need for a mix of selection and development
efforts, and understand that well-designed development efforts can
significantly build on and extend an individual’s natural talents. Selection
and development need to be closely integrated and driven by shared
goals. The right mix depends on the specific situation and a range of
considerations, such as the type of talent needed, the availability and cost
of external talent, and the competitive advantage of having unique
internal talent.
Some organizations have put a good deal of effort into identifying and
developing only high-potential talent (see Chapter 5). Other organizations
try to raise the talent level in all positions by developing a much broader
group of employees. This raises the question of which way is best for
building a more effective organization: a broad inclusion or a narrow
inclusion of employees in development programs.
High-potential programs typically focus on identifying individuals who
have the potential to advance several levels in the organization and then
differentially invest in their development. This talent pool is often seen as
the future of the company. Greater consideration is now being given to
selectively focusing on the specific talent that will have the greatest
impact on achieving strategic objectives and giving little, if any,
development resources to other employees, who are seen as replaceable
and not critical to achieving business objectives (Boudreau & Ramstad,
2005). The decision to restrict who receives developmental resources can
be seen as a rational and strategic use of limited development resources.
Other organizations are interested in improving the effectiveness of all
employees and broadly include larger numbers of employees in
development efforts. There are several reasons to use this approach. One
might argue that all employees can contribute to improving company
performance through their own work efforts, even if in small ways. Some
HR professionals are concerned about having only a select group of
individuals get development attention and suggest that this is
demotivating and feels exclusionary to those not included. They argue
that development is an effective tool for engaging and motivating most
employees. In addition, there is the risk that the individuals who are not
included in the development efforts may decide as a result that their
career will be limited at the company and may leave for better career
opportunities and more development support at other companies, and
they could turn out to be strong long-term contributors.
Most companies have a mixed approach, offering specialized and
advanced development opportunities for select talent pools while also
providing some level of development support for other employees.
Selective investment but not exclusive investment seems to be a common
approach. The choices that organizations make on this issue partially
define their culture. Our experience is that effective talent organizations
balance these two approaches, providing basic learning and development
opportunities for most employees while having specialized and extensive
development programs for individuals in strategically critical areas or
with the greatest potential to contribute at higher levels in the
organization.
This issue focuses on the type of talent mix that is desired in the
organization. Some organizations want the best talent available in every
position, while others are comfortable hiring individuals in most positions
who have just enough talent to satisfy the job requirements, and then
hiring the best talent available in only a select few positions.
The maximizing organizations and consultants (Smart, 1999) suggest that
the organization benefits in many ways by hiring the best talent possible
in every position. They argue that only the best talent can bring new
thinking and innovative ideas for improving effectiveness and efficiency
in every position. GE famously pushed for managers to identify and turn
over the bottom 10 percent of performers every year in an effort to
constantly upgrade talent. Although there have been some employee
lawsuits over this approach, it continues to be used in some business
organizations.
Others take the satisficing approach and argue that hiring only the best
talent available in every position can be an inefficient and wasteful use of
corporate resources, giv
this approach (Boudrea
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suggest that the improvement in effectiveness is small, and the return
does not justify the financial investment. Rather, they say, hiring people
who can perform the job competently is all that is needed in many
positions.
HR professionals again see the need for a mixed approach depending on
the situation. If you are staffing an entire pharmaceutical research group,
it might be smart to hire only the best research talent you can in order to
maximize the likelihood that they will discover a medical breakthrough in
treating a disease. But if you are staffing a customer call center with
customer representatives, it might be wiser to bring in a mix of people:
some who can advance to be call center supervisors and others who will
be very happy being a solid, high-performing call representative for many
years and who are not pushing for greater responsibilities or to redesign
and upgrade their work.
Talent decisions around these issues are rarely easy and often require
careful consideration of the situation, the culture, the strategic needs of
the organization, and the talent brand that the company has or wants to
establish. Only rarely can organizations make a clear, absolute, and
companywide decision on any of these three talent issues.
Many functional areas in organizations, including HR, have trouble
getting the right balance between design complexity and
comprehensiveness and between execution ease and effectiveness. For
example, the design of IT software programs and HR succession planning
processes are known for being overdesigned, adding many extra features
and complexities that often make them difficult to implement and use.
They often crash (software programs) or are ignored (elaborate succession
planning notebooks). Design and execution decisions can make or break a
talent management program or process.
Many HR professionals have read with great interest about the latest
advances, tools, and programs for talent management programs. Often
these features or ideas are promoted by external consulting firms or
academics as essential to having an effective and leading-edge system.
While some of these ideas make sense, others are short-lived fads that
often soon prove to be unnecessary and distracting.
Less experienced HR professionals are more likely than experienced
talent management professionals to get enamored with being on the
leading edge of the field and can be more easily influenced by an
aggressive consultant. Often the downside is that the programs take a
long time to develop, are complicated to explain, are impractical, and
ultimately are ineffective in addressing the business need. The most
effective organizations and HR professionals know how to balance design
and execution issues and always draw a clear line to solving a business
need. Often simpler design leads to more effective execution.
Most programs and processes are designed and implemented to meet
specific business needs and strategies. In general, this has been a widely
accepted approach, with little attention given to the interests and needs of
individual employees. However, it is now recognized that employees are
more motivated and effective when their needs and interests are
considered in organizational decisions. Employees are often encouraged
to take command of their own career and pursue their own career
interests and goals. People have learned to manage their careers and
make their own career choices.
However, this often comes in conflict with organizational plans and
decisions. It is not uncommon for organizations to carefully plan out a
series of leader moves, with one person replacing another in a chain of
moves, when someone in the middle of the sequence turns down the offer
(often because of their own interests or ambitions) and disrupts the whole
series of moves. Frequently the individual’s career interests, willingness to
move, or personal life needs were not adequately known or considered
beforehand. Executives and leaders who know their employees well
enough to understand their individual interests and needs are more likely
to make decisions that are consistent with the needs of both the
organization and the individual.
On many issues, executives and HR professionals have to carefully decide
what information can be shared and what information needs to remain
confidential or closely managed. This is particularly true when dealing
with sensitive HR and talent information. But where should the line be
drawn between what must remain confidential and what can be shared?
In the past, it seemed that everything was considered confidential, and
the executive suite often resembled a locked fortress.
But a more open, transparent environment has evolved in some
organizations that supports sharing certain information because it can
motivate and engage employees to improve performance. The argument is
that employees are more likely to set higher performance and career goals
if they are aware of the possible benefits and rewards available to them.
While some personal information, such as compensation level, is still
considered confidential, other information, such as the development
opportunities given to high potentials or high achievers, is seen as serving
as an incentive for others. (See Chapter 5 by Rob Silzer and Allan Church
for a discussion on what information gets shared with high-potential
individuals.)
A balance must be found between protecting private individual data while
communicating the talent processes and programs in enough detail so
they can be understood and serve as incentives for all employees. High
ethical standards need to be maintained when implementing and
communicating talent programs and processes so that resources are
allocated based on merit, not relationships or some other bias, and
information is shared based on reasonable guidelines that consider both
the organization’s and the individual’s needs. Transparency helps assure
employees that developmental resources are being allocated fairly.
The world is getting more complex and interconnected, and change is
happening rapidly. These changes can be distracting or even defeating for
some organizations. Others see them as an opportunity to gain
competitive advantage and take the view that if “you are not changing,
then you are falling behind.” Here are some influences and challenges that
can be seen as obstacles or opportunities for organizations.
Many organizations are pushing HR and other functions to be more
strategic in their view, processes, and decisions. Often this means looking
into an ambiguous and quickly changing future to try to predict future
situations and dynamics and then make the right decision for those
circumstances. Years ago, these decisions were made intuitively, based on
some fuzzy understanding of past experiences and current circumstances.
More recently, there has been a movement toward analytical decision
making based on solid data. Capital One Financial, primarily a credit card
company but more recently a bank holding company, has had more than a
decade of strong financial performance by relying on a data-based
decision-making approach to business management and HR.
There is now an emergence of evidence-based HR approaches that rely on
concrete data to guide decisions. Making talent decisions based on data
analysis can be a big step up from a fuzzy intuitive approach to talent. For
example, measuring and analyzing past leadership turnover rates and
reasons may be more helpful in guiding talent system development than
having a 20-year company veteran provide his personal intuitive views of
what to do.
However, data analyses collect data from the past, look back at what
happened, and are constrained by the circumstances of that past. For
example, if the turnover data were collected during a strong economic
period when switching companies to advance a career was both attractive
and easy to do, then the data may not be entirely relevant to a slow
economic period.
In psychology, one basic accepted premise is that the best predictor of
future behavior in an in
circumstances. This is a
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individuals and making future-oriented decisions about talent. Relying
solely on an analysis of the past is looking backward and only captures the
reality of the past. Looking forward, predicting the future, is frequently
not just an extension of past. Looking forward should involve both careful
analysis of the past and some judgment about how the future will be
different from current or past circumstances.
Thinking strategically and making future-oriented decisions is different
from analytical thinking and extrapolating the future from the past. The
design of talent programs and processes, as well as the assessment of
talent, needs to be based not only on past organizational and individual
data but also on judgments of how business requirements might be
different in the future and how individuals may change and grow in the
future. The future belongs to those who can perform successfully in the
future, not to those who duplicate the behaviors of the past.
Over the years business cycles seem to be getting shorter, quarterly
financial reports seem to be turning into monthly reports, executives are
moving around financial assets to serve short-term balance sheet needs,
and a CEO’s survival seems to be increasingly based on quarter-to-quarter
results. At the same time talent system cycles are getting much longer,
often three to five years or more. The career paths of high-potential or
early-career talent can bridge 10 to 20 years or longer in an organization.
This presents a dilemma on how to effectively and simultaneously manage
both of these fundamental business processes.
Some organizations force the talent system into the short-term business
cycle. This involves addressing short-term talent needs and ignoring
longer-term talent planning and management. This could be called
replacement planning. It is often driven by a CEO who is either totally
preoccupied with quarterly business results or is not capable of long-term
thinking.
Other organizations understand the need to have different time cycles.
They can readily deal with short-term talent issues and decisions while
also maintaining a focus on long-term talent development. The companies
that are known for developing talent, such as GE, are equally well known
for the time and attention given to long-term talent reviews and planning.
A study by Hewitt Associates and the Human Resource Planning Society
(2005) found that the top twenty companies for producing leaders, such
as 3M, GE, and Johnson & Johnson, when compared to 350 other
companies, are much more likely to have succession plans for the CEO
and other executives. They also are much more likely to have their CEOs
involved in the planning and to hold their leaders accountable for
developing their direct reports. They do not succumb to the pressure of
focusing only on short-term issues and crises. When they make short-
term talent decisions, they also consider the long-term implications and
try to satisfy both at the same time.
Most companies have global market opportunities and are facing global
competitors, a situation that presents complex talent challenges. Senior
executives are asking whether they have the talent to enter these global
markets and whether they have the talent who can compete against the
new competition. In the face of these challenges, some companies retreat
into familiar markets and products. Most initially address these
challenges by sending familiar internal talent into the new global markets
to compete. While this offers a conservative entry approach, over time it
often leads to limited success or even business failures. What this
approach misses is the importance of having business leaders who
understand and can execute within local culture and business practices.
Most companies eventually move to hiring and developing local talent
who are capable of running the business without compromising the
organization’s fundamental culture and principles.
In most corporations, the CEO has a tremendous amount of authority to
influence a wide range of decisions. Since the late 1990s, there has been
an increase in the cult of the CEO in the business world. Whether the CEO
is revered or reviled, there is little question about the CEO’s clout in an
organization. As a result, the CEO’s views and biases regarding talent are
often clearly reflected in talent policies, processes, and programs. In the
past, the CEO exerted enormous control over the talent in organizations,
which often resulted in either taking ownership over talent issues,
delegating them (usually to other business executives), or ignoring them
entirely. Because of the power of CEOs, many HR professionals have been
hesitant to challenge their views or even voice alternative perspectives. So
the talent system in most organizations has been heavily shaped by the
CEO.
More recently (and throughout this book) human resource and talent
professionals are being asked to take a more strategic role and be a
business partner to the CEO. This means proactively influencing the CEO
and educating him on talent issues rather than just simply implementing
the CEO’s talent views and biases. The most effective CEOs will recognize
the value of this partnership and the seasoned views of others. This
becomes a particularly critical issue when a company has a new CEO.
Depending on the circumstances, it is often important to convince the
CEO not to make rash changes to the existing talent approach while she
gains perspective on this new role and organization.
In order to develop and implement the talent practices, program, and
culture that we have been discussing, different people in the organization
should have talent management responsibility and accountability:
• Board of Directors
• CEO, senior executives
• Human Resource and talent professionals
• Line managers
• Individual employees—the talent
The Board of Directors for corporations has historically not spent much
board time on talent matters. Although the board members have usually
been involved in the selection process and compensation packages for the
CEO and other senior executives, they have had limited interest or
involvement in broader talent management efforts. However, as talent
management grows in strategic importance, there have been calls for
more active board involvement in managing organizational talent
(Michaels et al., 2001; Lawler, 2008).
McKinsey consultants (Michaels et al., 2001) find that boards have a
limited knowledge and involvement in talent issues, and they advocate for
the corporate board to take a more proactive role in managing the internal
talent pool. They found that only 26 percent of 400 corporate officers
somewhat or strongly agreed that “the Board of Directors really know the
strengths and weaknesses of the company’s top 20 to 100 executives” and
only 35 percent thought that the “Board plays an important role in
strengthening the overall talent pool of the company” (p. 172).
The American Productivity and Quality Center benchmarking study on
talent management (2004) found that the 16 corporations sponsoring the
study (with the surveys likely completed by HR and talent professionals)
think the Chairman of the Board and the Board of Directors have the
highest accountability for talent management in the organization. Others
are rated as having lower talent accountability—in decreasing order, the
CEO, the COO, Human Resources, the leadership development function,
and other senior-level executives.
At about the same time a Conference Board survey of 75 HR talent
professionals in 35 companies (Morton, 2004) found that 72 percent of
respondents think their boards of directors take a direct interest in talent
management integration. This suggests that HR and talent professionals
think the board has primary accountability for talent management and
takes some interest in talent management (although this could be an
interest only for the most senior talent, that is, the top 5 to 20 executives).
Lawler and his colleagues at the Center for Effective Organizations have
regularly surveyed corporate board members about their organizational
role (Lawler, 2008). In 2006 they found that only 32 percent of board
members say they track measures of human capital or talent to a great
extent. In addition, they
in the development of k
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financial officers (CFO Services and Mercer Human Resource Consulting,
2003) found that only 23 percent of the 191 CFOs say that their boards are
highly involved in human capital issues, even though the CFOs report that
49 percent of investors are beginning to ask about human capital issues to
at least a moderate extent.
Lawler (2008) and Michaels et al. (2001) clearly advocate for much
greater involvement by the boards of directors in talent issues. Lawler
suggests that boards need the “power, knowledge, motivation,
information, and opportunity” in order to take more responsibility for
managing talent and human capital. and he challenges boards to spend as
much time on talent as they do on financial and physical asset allocation
and management.
We agree that boards should take a more active role in monitoring talent
management efforts in the company, particularly now that talent
management is accepted as a critical corporate strategy. Table 1.5
presents some talent responsibilities we recommend for the Board of
Directors and other key roles in the organization. The board should be as
involved in talent as it is in business strategy, financial management, and
CEO effectiveness.
The CEO probably has the single greatest influence on talent management
effectiveness in an organization. In many studies, it is common to find
that the commitment and involvement of the CEO and senior leadership
are foundational requirements for successful talent management. They
are expected not only to champion the efforts and role-model talent
management behaviors to others but also to take responsibility for talent
results.
Michaels et al. (2001) concluded from their 2000 executive survey that 49
percent of corporate officers at high-performing companies say that
improving the talent pool is one of their top three priorities. In a
benchmarking study at 16 corporations (American Productivity and
Quality Center, 2004), 38 percent of the respondents said that the CEO is
the primary champion of talent management in their organization,
followed closely by senior-level executives (31 percent) and more distantly
by HR (19 percent), the leadership development function (13 percent),
and the board of directors (6 percent). In addition, 60 percent of the
organizations say that their CEO and senior leaders spend 11 to 25 percent
of their time on talent management, with one company, Celanese,
reporting 30 percent of executive time. A Conference Board survey
(Morton, 2004) concludes that during the 2000-2001 weak economy,
two-thirds of corporate respondents reported that their companies did
not significantly reduce any of their talent management initiatives. Some
CEOs spend more time than others dealing with talent issues. Jeff
Immelt, GE’s CEO, stated in GE’s 2005 annual report, “developing and
motivating people is the most important part of my job. I spend one third
of my time on people” (see Lawler, 2008, p. 210).
Table 1.5. Talent Management Roles and Responsibilities
Source: Party based on Michaels et al. (2001), Lawler (2008), and Ulrich
(1997).
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CEOs and senior executives are also held accountable for talent. In the
2004 Conference Board study (Morton, 2004), 52 percent of respondents
(human resource and talent professionals) said that the entire senior
leadership team was accountable for talent management results, while 45
percent held human resources primarily responsible for results.
There is some evidence that senior leaders also hold themselves
accountable. In an interview study with 50 CEOs, business unit leaders,
and HR professionals, McKinsey Associates (Guthridge et al., 2006)
conclude that senior managers blame themselves and business line
managers for failing to give talent management enough time and
attention and suggest that the failures are “largely human” or, as one
executive stated, “Habits of the mind are the real barriers to talent
management” (p. 1). The top obstacles cited by those interviewed are: “1)
senior managers do not spend enough high quality time on talent
management, 2) line managers are not sufficiently committed to people
development, 3) the organization is siloed and does not encourage
constructive collaboration, sharing resources, 4) line managers are
unwilling to differentiate their people as top, average and
underperformers and 5) senior leaders do not align talent management
strategy with business strategy” (p. 2).
Clearly the CEO and senior executives have the authority and
responsibility to significantly influence the talent management process
and results in an organization. They need to understand and role model
the talent mindset in the organization. Both Lawler (2008) and Michaels
et al. (2001) discuss the talent responsibilities for senior executives. See
Table 1.5 for CEO and senior executive responsibilities related to talent.
The CEO in particular must be committed and involved, although we have
seen talent champions in other senior executive roles who can help
compensate for an unwilling or disinterested CEO.
A good deal of attention has been given to suggestions on ways to redirect
and reshape the Human Resources function to make it more relevant and
strategic (Lawler, 2008; Michaels et al., 2001; Ulrich, 1997). In some
ways, it is part of a predictable evolution (similar to the finance function
moving from financial reporting to strategic partner), but it also reflects
frustrated expectations of Human Resources by executives and managers.
Michaels et al. (2001) in the 2000 McKinsey survey found that 88 percent
of officers thought “it was critical or very important that HR should be a
high-impact partner to line managers in strengthening the talent pool” (p.
32); however, only 12 percent of the officers thought their HR leader
actually played this role. Officers and line managers seem to want help
from HR with talent issues. With the emerging organizational interest in
talent management, it seems likely that HR is now stepping up to this
challenge.
Part of the issue is deciding the talent accountability for HR. The
Conference Board survey (Morton, 2004) found that HR was held
accountable for talent management integration by 66 percent of the
respondents, while the leadership team was seen as having the
accountability by 30 percent of the respondents (compared to almost
equal accountability between HR and the entire senior leadership team
for talent management results). The strategic role of Human Resources is
also being advocated. In a 2006 survey (Lawler, Boudreau, & Mohrman,
2006), 39 percent of senior Human Resource executives in Fortune 1000
companies thought their function was a full partner in developing their
company’s business strategy. However, only 24 percent of the line
managers in the same companies agreed that HR actually was a full
partner. Not only is there a difference in HR versus line manager
perceptions, but as Lawler (2008) points out, there was agreement in 60
to 75 percent of these companies that HR is not yet a full partner in
formulating and implementing business strategy.
Michaels et al. (2001), Lawler (2008), and Ulrich (1997) argue that the
Human Resource function should be as strategically important to an
organization as the finance function is. Michaels et al. (2001, p. 32)
suggest that “attracting, developing and retaining talented people is the
stuff of competitive advantage—more so than financing strategies, tax
tactics, budgeting or even some acquisitions. Hence the HR leader has a
much more strategic role to play in years ahead, arguably one equal to
that of the CFO.” Jack Welch, former CEO of General Electric, agrees: “If
your CFO is more important than your CHRO [Chief Human Resource
Officer], you’re nuts!” (see Lawler, 2008, p. 180).
The discussion has focused on what HR should be doing in the future.
Lawler (2008) advocates for three major responsibilities:
• HR administration (provide high-quality, low-cost services)
• Business support (help managers become more effective and make
better human capital management decisions)
• Strategy development and implementation (align human capital
management, organizational development, and organizational design with
the company’s business model)
Over the years, HR departments have been moving beyond HR
transactions and administration (including outsourcing some operations)
to working closely with business managers to make better talent
decisions. The current transition for HR departments is to become more
fully integrated and driven by shared strategic goals. Lawler (2008, p.
166) argues, “In HC [human capital] centric organizations nothing is
more basic to the formulating of business strategy and to its
implementation than talent and organizational effectiveness.” Ulrich
(1997) concurs that HR should be a strategic partner, which occurs “when
they participate in the process of defining business strategy, when they
ask questions that move strategy to action, and when they design HR
practices that align with business strategy” (p. 27).
Despite these calls, a more strategic role for HR has been slow to develop.
In 2000 only 7 percent of managers surveyed said that their companies
“link business strategy t
al., 2001, p. 32). We can
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the current interest in strategically driven talent management.
The Human Resource function has some logical and obvious talent
management responsibilities. Some of them are outlined in Table 1.5. To
accomplish this, HR should have an exceptionally strong staff—the “best
talent” (Lawler, 2008)—of talent professionals, industrial-organizational
psychologists, and other subject matter experts who have the expertise in
talent and can strengthen the link between business strategy and talent
strategy.
Senior executives have a history of wanting to make most, if not all, of the
talent decisions in a company. More recently, HR has been pressed to take
a more active role, beyond just transactions and administration, to
become talent experts. Human Resource and talent professionals have
started to develop the skills and the motivation to fill that role. The next
step in the evolution is for all managers to take personal responsibility
and accountability for talent. We, and others, have called this a talent
mindset throughout the organization.
In 2000 only 26 percent of 6,900 managers surveyed in a McKinsey
survey (Michaels et al., 2001) strongly agree that talent is a top priority at
their company. We suspect that more managers are now likely to see the
importance of talent. In a more recent survey by Lawler et al. (2006), 56
percent of managers indicate that the business leaders’ decisions that
affect talent are “as rigorous and logical” as the decisions that affect other
key organizational resources. But in the same survey, only 42 percent of
human resource executives agreed. The conclusion is that there needs to
be better objective and rigorous decision making regarding talent.
Michaels et al. (2001) found that 93 percent of corporate officers believe
that line managers should be held accountable for the strength of their
talent pool, but only 3 percent of the officers think that actually happens.
In a later McKinsey article (Guthridge et al., 2006), 50 CEOs, business
unit leaders, and HR professionals identified a number of obstacles
related to line managers that prevent talent management programs from
delivering business value including, “Line managers were not sufficiently
committed to people development; ... were unwilling to differentiate top
performers [from] average performers and underperformers; [and] ... did
not address chronic underperformance” (p. 2).
The most successful talent companies, such as Johnson & Johnson and
GE, have effectively created a talent mindset or culture in their
organization where all managers are responsible and accountable for
talent management. (Some of the talent responsibilities for line managers
are listed in Table 1.5.) It seems obvious that if all managers have
responsibility for managing financial resources in their area, then they
should have equal responsibility for talent resources. As Michaels et al.
(2001) suggest, “Once a manager believes that talent is his or her
responsibility, the other imperatives (talent objectives) seem the logical
and natural thing to do” (p. 22).
Most of the discussion on talent management focuses on what the
organization, the leaders, and the managers can do to build and
implement an effective talent management approach. However, in order
for these efforts to be successful, they require the involvement and
commitment of the talent: the employees who will be selected, assessed,
reviewed, developed, deployed, and retained. As individuals take more
responsibility for their own careers, they want to participate in the
decisions that will affect them. Their interests, needs, and life preferences
need to be understood and considered in the talent decisions in order for
the decisions to be successful.
Of course they have some responsibilities as well in the talent process.
(Table 1.5 lists a few of them.) Ultimately an effective talent management
effort is a partnership between individuals and the organization, and both
need to be committed to its success.
This chapter has provided an overview of the key issues and challenges
organizations face in pursuing strategy-driven talent management. It will
require HR to have a more sophisticated understanding of business
strategies and talent strategies and to develop, implement, and evaluate
the talent systems, processes, and programs that will achieve those
strategic objectives. We expect that HR will continue to step up to these
challenges and become a full business partner to the CEO and senior
executives. This book presents a range of approaches that organizations
are taking to these challenges and an array of ideas and solutions that will
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