human resource management

CHAPTER 2

BUILDING COMPETITIVE ADVANTAGE THROUGH

INTEGRATED TALENT MANAGEMENT

Marcia J. Avedon, Gillian Scholes

The business world is more dynamic today than ever before with an

accelerating pace of new technologies, increasing globalization of markets

and competition, changing regulatory requirements, and increasingly

commonplace mergers, acquisitions, and divestitures. In this tumultuous

environment, organizations must continually renew their organizational

capability to achieve competitive advantage. However, it is increasingly

challenging to find the talent needed to compete in this dynamic business

environment.

The availability of educated, working-age talent is shrinking in many of

the world’s labor markets (Zolli, 2007). Multinational companies are

moving work to developing lower-cost countries, only to find the talent

wars and wages subsequently escalating in those countries (Qihan &

Denmat, 2006). Skilled leaders and other professionals, with the

capabilities to enter new markets, create new business models, and

innovate new technologies, are highly sought after (Michaels, Handfield-

Jones, & Axelrod, 2001). Consequently, the demand for talent is

outstripping the supply. As a result, top performers in key talent pools

typically have multiple employment opportunities at any point in time. In

addition, senior leaders, including CEOs, are in their jobs for shorter

periods of time (Lucier, Kocourek, & Habbel, 2006), and employees

generally no longer expect lifetime employment with one company.

Leadership and employee development, through experience and

education, still takes considerable time and effort and will never be a

quick fix. This set of complex, changing business and talent realities

creates the imperative for companies to focus on talent in a strategic,

systemic, and customized manner.

The ability for a firm to create an integrated system that yields a continual

flow of talent ready to address specific strategic and operational

opportunities may be the single-most enduring competitive advantage.

While organizations often find that their strategies, products, services, or

markets require change, the need to have relevant, differentiated talent to

achieve these business goals remains constant. However, the specific

talent strategies need to adapt accordingly. Several recent surveys of both

chief executive officers and chief human resource officers confirm that

attracting, developing, and retaining talent is a top concern (Donlon,

2007; HR Policy Association, 2007). One CEO identified the point well

(Donlon, 2007): “We are the most highly regulated industry in the world,

and we have the most compliance issues in the world. So, those are risks,

but our single biggest issue is human capital. We are losing it really fast

and that is really scary.”

This chapter provides definitions, models, and examples for creating a

dynamic, customized, and integrated talent management system. We do

not provide a set of absolute “best practices” or optimal solutions that will

work for all companies. The focus is on creating a framework and the

inherent logic of a talent management system for the particular company

at a certain point in time. Also, approaches are presented to ensure that

the talent management processes are sustainable but adaptable and, most

importantly, are integrated into the business management system and

organizational culture. Specifically the integration of talent management

is discussed at three levels: (1) integration with business strategy,

including human resource (HR) strategy; (2) integration of the talent

management system; and (3) integration with the culture of the

organization. Also provided are “learnings” and examples of how to make

these connections in the talent management framework in order to

achieve the greatest impact on business outcomes.

Only in the last several years has the term talent management become

popular, although it is defined in a variety of ways (Lewis & Heckman,

2006). These talent management definitions include:

• “Rebranded human resource management,” that is, taking the

traditional HR functions and doing them better

• Human resource planning and succession planning

• Talent as an attribute—either focusing on developing the inherent

talents in all employees or focusing on “highly talented” individuals in

general, usually high-performing or high-potential individuals

In this chapter we use the term talent to mean those individuals or groups

that are strategically important to the purpose and goals of the

organization. Specifically, talent refers to those individuals and groups

with the strategic competencies that enable a company to achieve its

short- and long-term goals. They exhibit the competencies that will add

the most value to customers and in doing so, help to differentiate the

organization from its competition. We define talent management as a

subset of human resource (HR) processes, programs, and tools designed

to identify, assess, develop, and retain talent.

Boudreau and Ramstad (2002) have proposed focusing on what they call

pivotal talent, that is, the pools of talent where improvements in

capabilities will make the most significant impact on competitive

advantage. Business strategy involves making choices about resources and

investments to create competitive advantage. When talent management is

integrated into strategic business planning, there is an opportunity to

discuss the capabilities and skills needed to execute the plan. This helps

leaders create proactive plans to ensure that they have the talent they

need to achieve the strategy.

Zuboff (1988) further defines talent in terms of the value that the talent

segment brings to satisfy the needs of the customer and the degree of

difficulty to replace the talent. This concept can be extended to segmented

pools of talent by considering their strategic value to the organization and

by their internal or external availability. This approach leads to the

conclusion that given limited resources, the investment in people needs to

be skewed toward the pools of talent that will provide the biggest value to

the enterprise. Although all employees should be developed and engaged

in order to achieve a sustainable organization, some groups of talent

should be identified for additional focus. Therefore, the primary purpose

of talent management is to define which groups and individuals are key to

the organization’s future, and then design and deliver processes,

programs, and tools that grow this talent base.

Taking a targeted approach can be disconcerting to those who believe that

organizations should invest in all employees. This does not mean that

development is only confined to the strategic talent pools, but that

additional investment should be made in strategic talent. This is really no

different from a classic market segmentation approach, where

investments in markets and brands vary depending on the strategic

importance to the organization. This is captured in the philosophy of one

large financial services company that advocates providing “good

development for all, great development for some.”

Making decisions about which talent pools are strategic is the first step in

creating an integrated talent management strategy. We have identified

four broad categories of

• Leadership talent

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• Talent for strategic functions

• Talent for strategic technologies

• Talent for strategic geographies

Leadership talent is generally an area of strategic importance for most

organizations. As business becomes increasingly complex, the leadership

competencies that are necessary for success have become harder to find

and develop. In an environment where leaders no longer stay with one

company for their entire career, it is critical to ensure leadership

continuity and a flow of leaders through all career stages (Charan,

Drotter, & Noel, 2001).

Executives must look not only at their current leadership teams to assess

whether they have the performance levels and competencies needed for

the short term, but also to the future needs of the organization. It is

important for them to ask the questions:

• Where will the next generation of leaders come from?

• Are we grooming leaders early in their career and facilitating their career

progression?

• Do we have talent shortages in early career, midcareer, or senior

leadership talent?

Once these questions have been answered, then targeted programs can be

created to grow leadership at the different stages within the pipeline.

Leadership capability is a key differentiator between companies with

sustained success and other less successful companies (Holstein, 2005).

Therefore, identifying and developing employees with leadership

potential is a major area of focus and investment in leading companies.

Also, attracting and retaining leadership talent is a priority in top-

performing companies.

Every organization has key functions that are of critical importance to the

organization’s strategy at a given time. Typically these functions become

dominant in the culture, while other functions play a secondary or

supporting role (Hewitt, 2000). For example, in technology companies,

the hardware and software engineers fuel product development and

innovation (the core goal of the company), while marketing, finance, and

operations are essentially supportive functions. As their markets mature,

some technology companies may find that they need to shift their focus to

marketing and field service, in which case their talent strategy needs to be

adjusted to increase the attention given to those functions.

When a company embarks on a new business strategy it is particularly

important to identify which functions need to be strengthened and

supported by the talent strategy. Treacy and Wiersema (1995) proposed

that although companies need to be good at three fundamental business

strategies—product innovation, operational excellence, and customer

intimacy—they should aim to excel at only one, in which case, the

company’s focus will be reflected in the dominance of certain functions in

the organization (see Table 2.1). For example, when one diversified

manufacturing conglomerate moved toward a strategy of accelerated

revenue growth from developing existing products and markets as well as

acquiring new companies, it started to hire and develop business

presidents from different functional backgrounds. Traditionally all

business presidents in this company had come from either the finance or

operations functions, but seven years later, over a third of these roles had

leaders with sales, service, or marketing backgrounds. This represented a

significant shift in the general management capabilities inside the

company, and one that was more in line with their new market

orientation and growth strategy.

Table 2.1. Identifying Talent Needs to Achieve Business Strategy

Source: Treacy & Wiersema (1995).

In many instances, products or services rely on a particular technology for

a competitive advantage in the marketplace. As technologies develop and

change, it may be necessary to recruit or develop talent with different

experience. This can be a challenge, particularly if a company has built its

culture around one technology and now needs to incorporate new

approaches. In the energy industry, for example, large petroleum

companies are investing in new technologies such as geothermal energy

and biofuels in order to meet society’s demand for renewable energies.

They are partnering with different universities and researchers, and

finding ways to attract talent who can commercialize the new technologies

in new areas of the world. Often this creates tension between the

traditional parts of the organization and the new start-up businesses

because the expectations of the new talent for compensation, benefits,

and work environment may be very different from the prevailing norms.

The organization will have to develop new strategies to attract and retain

talent with different skills and aspirations in order to be successful with

the next generation of product and solutions.

A growth strategy often requires geographic expansion, either within the

domestic market or into other countries of the world. It is particularly

hard to build organizational capability in rapidly developing economies

(Boston Consulting Group, 2005) and requires a targeted talent strategy

to build success. The emphasis for talent management will likely be very

different when the organization is attempting to build a strong talent pool

in these economies than when it is entering a more economically mature

country.

Starting up in a new geography can be an expensive undertaking, and so a

well-planned talent strategy, along with the right level of investment, is

crucial. Identifying which geographies are the top priorities and then

developing the appropriate talent strategy for each particular market is an

essential first step toward business expansion. Without a targeted

approach, it is likely that the business strategies will not be implemented

as quickly or as successfully as envisioned. When foreign companies enter

a new geography, they are competing for talent against each other,

sometimes in markets where there is a lack of an educated workforce or

an existing workforce that has developed under very different political or

economic models, such as communism versus capitalism. This requires

tailored hiring and development plans in order to have the skills that are

needed to grow the business.

For example, in China some companies found that although they were

able to find manufacturing and business managers to start up their

operations, they were unable to find a distribution channel for sales and

marketing to effectively bring their products to market. Since midcareer

managers typically came from government-owned enterprises in a

communist system, they had no experience in the use of dealers and other

channels that could market products and services to end customers.

Companies that wanted to grow through product distribution had to find

ways to identify, educate, and support independent dealers in order to

create a channel. This took time and investment before they could achieve

their growth plans.

The model of talent management that we propose integrates business and

human resources strategy, talent management processes, and

organizational culture; provides a systemic approach; and results in

having talented leaders and individuals available to accomplish the

mission of the organization.

Most of the published literature on talent management refers to the

integration of talent management processes relative to other elements of

human resource management or within the talent management system

itself (Corporate Leadership Council, 2005; Morton, 2004). While these

definitions may be of in

of integration alone wil

organization. The only w

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being in support of, and part of, the business strategic plan and ultimately

part of the culture or mindset of the organization. This is supported by

recent research by Gubman and Green (2007) for Executive Networks on

their members’ experience with the evolution of talent management in

their organizations. In their model, described in Figure 2.1, talent

management evolves from a programmatic approach, where the focus is

on the alignment of initiatives and activities, to a culture where managing

talent is “an unquestioned, top-of-mind priority that becomes second

nature to executives (and line managers)” (p. 1).

Figure 2.1. The Stages of Talent Management

Source: Based on Gubman & Green (2007).

The discussion of approaches to integrated talent management should

consider integration with strategy—both business strategy and human

resource strategy—as the starting point. This is consistent with Lewis and

Heckman’s (2006) talent management decision architecture and

Boudreau and Ramstad’s (2007) human capital bridge decision

framework. Both models start with strategy, or sustainable competitive

advantage for the enterprise, as the critical input into the design of the

talent management system.

Most organizations have a strategic planning process, but many do not

explicitly incorporate organization and talent strategy development into

their strategic planning. Organizations that have embedded the talent

strategy into their strategic planning process on a recurring, systematic

basis ensure that they have the talent to execute the strategic plan. Ulrich

and Lake (1990) discuss organizational capability as one of four ways an

organization differentiates itself in the eyes of the customer. For a

company to succeed, it must be capable (that is, have the capacity and

competence) in four areas:

• Economic and financial

• Strategic and marketing

• Technological

• Organizational

Their model asserts that building organizational capability must be given

the same level of attention as the other three.

Specifically, the integration of talent management plans into strategic

plans answers the key question, “How do we ensure that the organization

has the competencies and capacity to achieve its goals?” This question

needs to be asked at the time of strategy development, not left until it is

time to implement the business plans. The availability and readiness of

talent, internally or externally, will have an impact on the feasibility of a

strategy and can make the difference between success and failure.

A number of companies have incorporated talent planning into their

strategic planning cycle as a formal business subprocess. For example,

many have written about and tried to emulate General Electric’s “Session

C,” GE’s well-established process of talent review that is integrated into

the annual management planning processes (Corporate Leadership

Council, 2001). These approaches are successful only to the extent that

the strategic priorities or themes are consistent across the long-range

strategy, the annual operating plan, and the talent and organization plan.

To be truly integrated, the talent and organization plans must support the

requirements of the strategic plans (three- to five-year plans for the

business including financial goals) and annual operating plans (one-year

goals and objectives).

Charan and Bossidy (2002) describe the talent process as critical to

successful execution of business strategy. They specifically emphasize the

talent process as “making the link with strategy and operations” (p. 141).

Some companies prepare the strategic plans and talent plans

simultaneously to ensure integration. Regardless of whether the talent

planning is a component of the strategic plan or a direct outgrowth of it,

an integrated talent management system must be focused on determining

the specific talent needs critical to achieving the business goals and on

identifying the actions that will have the greatest impact on gaining

strategic competitive advantage.

In addition to alignment with the business planning processes, an

effective talent management process must include an honest, critical

analysis of how well the company is currently achieving its talent goals to

meet the business needs. Sophisticated, evolved talent management

systems have both strong “look-forward” and “look-back” components to

learn from mistakes or gaps and to build on successes. This approach also

allows thoughtful decisions to be made about investments in strategic

hiring, training, or other talent development activities.

When the talent management system is not well integrated with the

business plan, there is often an excessive focus on the forms, programs,

and process. For talent management to be truly integrated into the

business planning and review system, the focus must be on achieving the

strategic talent goals and on candid talent conversations at both the

strategic and operational levels. Once the business strategy is translated

into a talent strategy with measurable actions and goals, then there must

be a process to follow up on commitments just as with other aspects of the

business plan.

A current example of the integration of the talent planning into the

strategic business plans is in Ingersoll Rand’s security technologies

business. Traditionally this business created value from the design,

manufacturing, and marketing of mechanical locks primarily in North

America under the Schlage brand. The strategic planning process a few

years ago identified growth opportunities and goals through acquisitions

and market expansion into electronic access control and electronic

security. It was clear that this strategic shift required new skills in

electronics and electrical engineering, software development, and global

market development. The new talent requirements demanded a shift in

how talent was sourced, recruited, assessed, and assimilated. Through the

strategic plan, it was determined that many of the new hires will come

from “high-tech companies with human resource practices and work

environments different from those at Ingersoll Rand.”

The strategic plan defined the specific business opportunities in electronic

locking and security by geographic market segment over the next five

years. In addition, the business leaders identified the numbers and

expertise levels of software, electronics, and electrical engineers needed;

the sources of this talent; and the strategies for recruitment. New leaders

with experience in global markets and the new technologies were also

identified, as well as plans for developing internal high potentials. The

plan also identified the potential retention risk if the cultural issues,

including differing work environment expectations, were not addressed

with the change in the talent base. Interestingly, the company was not

abandoning the mechanical locking segments, so while there was a

disproportionate investment in the new strategies, it was important to

also keep the current, traditional talent pools engaged. Once the strategic

plan was approved, including the talent goals, detailed action plans were

established and reviewed quarterly.

Companies that have their talent management system highly integrated

into their strategic management system will evaluate leaders’

effectiveness based on their ability to develop and implement

organizational and talent strategies to achieve sustainable performance.

Leaders in these companies understand that achieving their talent plans is

as important as achieving their financial plans. For example, Ingersoll

Rand Security Technologies has the highest profit margins in the

company and outperforms competitors in many markets, success that can

be partially attributed to its talent strategy.

An organization’s huma

accomplishment of the

such as employee relati

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development in order to create an HR environment that is aligned with

organizational goals. In addition to the need to integrate talent

management into the business strategy, it must be integrated with the rest

of the HR strategy. The integration of talent management within the HR

strategy may be accomplished in a number of ways, including through

using common HR principles, philosophy, mindset, and HR systems and

data, or by having shared competency models as an integrating

framework. Once the requirements for talent are identified from the

business strategy, strategic human resources programs should be

designed with flexibility to differentiate strategic talent. For example,

within an overall budget for annual merit raises in pay, leaders need to be

able to give significantly higher increases to deserving individuals who

meet the criteria for strategic talent.

Companies have implied or explicit philosophies or principles underlying

their HR strategy. For example, one company may have a principle to

strive to have top talent in all positions or talent pools. This is similar to

the philosophy that Smart (2005) describes in his book Topgrading. He

defines an “A” player as one who qualifies among the top 10 percent of

those available for a position. This talent principle could be inconsistent

with the HR philosophy if the compensation approach is always to bring

people into the organization at or below the median pay level in the

market. Although they may be among the top 10 percent of those willing

to accept that level of pay, they may not be getting the true top 10 percent

of those qualified, since others may have been available if the pay was

higher.

On the other hand, if the overriding principle in a company is top pay for

top talent or pay for performance, with a focus on distinguishing

individual contributions, then the topgrading philosophy for talent

management may fit very well. This philosophy also requires a strong

performance management system and training for managers in order for

them to distinguish performance levels. Again, alignment across HR

processes or functions is essential so that the principles are consistently

applied. Otherwise HR processes may be working at cross-purposes from

the talent management goals.

The connection between leadership potential and equity compensation is

another opportunity for integration within the HR strategy. Often the

principle is that annual incentives such as bonuses should tie directly to

an employee’s performance in the prior year (assuming consistent

business performance). Whereas the overriding principle for long-term

incentives, such as stock options or restricted stock awards, is often to

have the awards linked to employees’ potential for future contributions.

Employees who are seen as the future leaders of the company and critical

to the long-term success of the company are given larger grants of equity

than those who do not have as much potential, even if their performance

levels are the same. This type of linkage sends a powerful message to the

high-potential talent about their value to the organization for the long

term. Also, this approach assists with retention since equity grants

typically vest several years into the future. These linkages between long-

term incentives and talent management practices of performance

management and succession planning are good examples of an integrated

HR strategy.

Another HR principle that illustrates integration with the HR functions is

in the area of benefits, specifically health and welfare and retirement

programs. Some companies view benefits simply as a cost of doing

business, almost like keeping the lights on. These companies want to be

on par with their competition but not highly differentiated. Often this is

not explicit but is the result of their investment in and positioning of their

benefits offerings relative to benefits of other employers. In contrast,

other companies view benefits as a key part of the HR strategy, not just

from a cost management standpoint but also as a component of the value

proposition for attracting and retaining talent.

In addition, the approach to integration of benefits and talent

management may be segmented by career stages. For example, after

identifying the critical talent issues, benefits changes may be made that

will help attract early career talent or retain experienced talent. Given the

demographic shifts in the workforce, with baby boomers retiring in large

numbers, some companies are reexamining the early retirement

provisions in their pension programs. Adjustments can be made to the

formulas and credits to ensure they do not provide too great an incentive

for experienced critical talent to retire early. Other companies have

created “phased retirement” programs that allow experienced workers

with key knowledge or skills to move from full-time to part-time status in

lieu of full retirement without penalties to their pension calculations.

These approaches allow better planning for transfer of knowledge to other

workers, prolong key talent contributions, and may reduce recruitment

costs.

Another area of integrated talent management within HR is in the health

benefits arena. This has become a more critical part of the HR strategy for

many companies as the workforce ages and the cost of health care

escalates for employers and employees. Some organizations have

developed creative “wellness” programs to keep employees healthy and

productive. These initiatives may include on-site fitness centers or

reimbursements for private fitness center memberships, health

diagnostics and resources and free physicals and screenings, or even

incentives for healthy behavior such as not smoking. Companies with a

well-integrated HR strategy use such investments to improve the

company’s employment brand by promoting these benefits during the

recruitment process and strongly linking benefits with talent acquisition.

In addition to philosophical or principle-based linkages between the

components of the HR strategy, technology can help to align decision

making and ensure the philosophy is executed as planned. For example,

with well-designed information systems, managers can access individual

performance and potential data at the same time they are allocating

rewards, such as bonuses and equity grants. Decision makers can look at

the differences between the average awards for top performers and

average performers to ensure they achieved the desired differentiation.

Such reports can be predesigned and user friendly, allowing the talent

logic to be embedded into the work of every line manager as they manage

their talent. In the initial years, the system can teach and reinforce the

talent principles.

Another example of information systems that facilitate integration is

when a company expects its leaders to create a positive work environment

and measures employee engagement. Employee engagement survey

scores can be included in the database as an additional planning tool for

managers when evaluating annual performance of their own managers.

Many companies state that performance evaluations, promotions, and

rewards are a function of both results and leadership behaviors. Well-

designed HR systems, data, and analytical tools can help managers

reinforce these connections by making both leadership information, such

as engagement scores or leadership competency ratings, and traditional

results on financial or other business metrics readily available for talent

management decision making.

Competency models can be effective tools to define the critical skill

requirements for the business strategy and to align the various talent

management and HR processes accordingly. Such models can also help to

transform the culture of a company to the extent that new competencies

are defined and valued for future success. For example, if a company

wants to become more customer focused and emphasize innovation to a

greater extent, these competencies should be part of the competency

model. Then selection systems, performance management processes,

succession and talent reviews, training, and development programs can

all be linked to the same critical competency needs.

Many companies have also found that a well-defined competency

framework is helpful to give managers a new language to describe and

communicate expectations. For example, in the 1990s when Larry Bossidy

was CEO of Allied Signal, the company had a competency labeled “bias for

action,” and it became clear that this was one of the attributes that was

highly valued in leaders. Action orientation and drive were preferred over

being methodical and highly analytical. Bias for action was a well-

articulated, discussed, and understood competency. It became a defining

aspect of the company culture and helped fuel the rapid transformation of

the corporation.

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One global company had grown through acquisition over the years and

had been managed as a holding company. While some product lines and

business processes were integrated, several HR processes were allowed to

remain disparate, including the core compensation structure that differed

across businesses and within the same geographic locations. Talent

movement for development and succession was relatively rare across

businesses and countries.

When a change in business strategy required moving talent across the

company, the inconsistencies in pay grades became a barrier to

movement and development. The corporate HR group was charged with

developing a global grading system to ensure a consistent pay

classification structure for all professional jobs around the world. The

structure was implemented over several months by evaluating jobs using

a common methodology. This standard structure laid the foundation for

easier movement and succession of talent across the entire company. This

was an example of the need for integration between the HR processes of

compensation and talent management to achieve the business strategy.

Once the business and talent strategy has been determined and the

human resources strategy has been aligned, a talent management process

needs to be in place that integrates programs and initiatives to drive the

desired outcomes. Talent management is most effective when it is a

system, where the process itself is integrated so that activities form a

logical flow, and the output from one step becomes the input to the next.

Talent management activities need to follow a cycle just like any other

business process. This ensures that strategic and tactical decisions are

addressed every year and that they are timed to have the most impact on

the success of the business plan. Functional talent management and other

HR initiatives are then selected to close gaps between the current state of

talent capability and the desired state. Establishing these linkages is a

critical step in designing a talent management system because it ensures

that the gathered information gives a complete picture of the strengths

and weaknesses of talent at both the individual and the organizational

level.

We propose a model of talent management that aligns programs and

operates as a core business management process and is driven by a

process around four steps:

1. Identify strategic talent requirements.

2. Assess individuals against required competencies.

3. Develop their capabilities.

4. Retain key talent.

After talent pools have been identified, they are assessed, and the results

of the assessment lead to development actions, including career moves for

individuals. At the enterprise level, succession plans are created for key

functional roles or talent pools, and the assessments are used to validate

and develop succession candidates. Also, strategies for internal and

external staffing are developed based on the availability of qualified

internal candidates.

In our experience, the value from the talent management system comes

from the integration and alignment of the whole process rather than in

the design of any particular program or initiative. Even if an organization

cannot afford sophisticated programs and tools, having an integrated

system around a few core programs will have a tremendous impact on the

ability to create a culture where the value of the talent is fully realized.

Ultimately, as a Conference Board study proposed (Morton, 2004), the

primary integrating mechanism “is truly a merging of the hearts and

minds around the power of talent and the importance of connecting the

talent mindset to all aspects of the business” (p. 5).

During the long-range plan, the senior team of a multinational company

realized that they needed to reduce their time to market for new products

in order to achieve their growth and innovation goals. They decided to

evaluate how product engineering was being managed and determine

whether their engineering center in India, which had been used mainly for

routine engineering work, could do some of the new product development

process.

Their initial assessment of the capabilities of the India engineering group

led them to recruit a new leader for that group from outside the company

—someone who had led new product development for a peer company. In

his first six months with the company, he developed a proposal for how

the India engineering center could participate in the design and

development of certain new products for global markets. He and his talent

management specialist then used a third-party firm to conduct in-depth

assessments of the senior engineering leaders, using interviews, testing,

and simulations, built on the competencies that were identified as critical

to success for the center as a global innovator. Each leader received a

detailed report of the findings from the assessment, along with

developmental suggestions. One-on-one development discussions were

held between each participant and her manager to review the assessment

findings and to consider the participant’s career interests. Development

plans were created, and a process was outlined for monitoring the

completion of specific development actions.

During the course of this process, new product development roles were

designed, and the company moved individuals into these roles based on

the assessment results. The assessments ensured that leaders were placed

based on their fit for new product development work and their ability to

manage and motivate teams of newly hired engineering graduates.

Because of the competitive market for engineers in India, some changes

were made to compensation programs and the work environment. The

company invested in a major new design center with the latest

technologies in order to support new product development, but also to

attract and retain the best new engineers. By offering them a state-of-the-

art environment, the company was able to assure engineers that they

would have exciting work and would continue to learn and develop as

engineers.

By the time of the next long-range plan review, the company was feeling

confident that a significant piece of the new product development process

could be managed from India, and the domestic group felt confident

about the capabilities of their colleagues in India. As a result, they were

able to manage more projects, improve their time to market, and reduce

the cost of development.

Schein (1985) proposes that culture and leadership are “two sides of the

same coin” in that the behavior of leaders creates and reinforces the basic

assumptions and beliefs of the organization. Often without realizing it,

leaders communicate what they consider important through the issues

and activities that they spend time on. Members of the organization

observe this behavior and draw conclusions about what is important.

Schein identifies five ways in which the behaviors of leaders embed and

reinforce the underlying culture of the organization:

1. What they pay attention to, measure, and control

2. Their reactions to critical incidents and organizational crises

3. Their deliberate role modeling, teaching, and coaching

4. Their criteria for allocating rewards and status

5. Their criteria for recruitment, selection, promotion, retirement, and

excommunication

In lay terms, the culture of an organization is “how things are done

around here.” Nothing defines success better than when the talent

management practices are so ingrained in the organization that they are

part of the management culture. For example, a benchmarking team

evaluated the talent management metrics of companies who had been

identified as having the best talent management practices. In many cases,

the team could not find any elaborate scorecards or dashboards. When

these benchmark companies were asked how they knew that their talent

management practices were working, they replied that employee

development and talent management were just part of the culture.

This resonates with our experience working in several large companies.

The talent management tools and processes were not too different across

companies, but the success of talent management differed considerably.

As others have observed (Hewitt Associates, 2005; RBL Group, 2007),

what seems to have the

commitment, ownershi

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talent management. So a key learning about talent and culture is that

while mindset, methods, and metrics all matter, mindset matters most.

The focus initially must be on creating a talent mindset in all leaders,

starting at the top. Before any discussion on programs and processes, the

senior leadership of the organization must come to believe in the value of

talent and their role in the creation of a culture where strategic talent is

identified and actively managed for the long-term success of the

organization.

At Ingersoll Rand, after nearly three years of focus on talent management

by the chief executive and the senior management team, it was clearly

time to make talent management a business accountability for all

managers. Although the human resources and talent organization was

driving a comprehensive talent management process, it was not going to

achieve full impact until all managers understood their role and acted as

stewards of talent. The senior team decided to ask a group of high-

potential leaders enrolled in the company-sponsored M.B.A. program to

create a way of assessing the current management culture and providing

an action plan for creating a culture of talent stewardship.

Drawing from their experience in business operations, the team used a

methodology from lean manufacturing called the maturity path. This

approach defines specific behaviors that will lead to process excellence at

four levels of performance: from beginning through improving,

succeeding, and leading. By creating a simple grid of behaviors, they could

score the effectiveness of a plant on inventory management, for example,

and show what concrete steps they can take to achieve best-in-class

performance in that area over time. The team took the five elements of

Ingersoll Rand’s talent management model—identify, assess, develop,

move, and engage—with the nine subprocesses associated with those

elements and placed them on the vertical axis of a grid. They placed the

four generic stages of process excellence—beginning, improving,

succeeding, and leading—on the horizontal axis. This tool became known

as the “leader/manager index” (LMI) (Ingersoll-Rand Company Limited,

2007).

The next step was to identify the specific behaviors at each stage of the

maturity path as a manager demonstrated process excellence in talent

management. Working with the talent organization, they completed the

cells of the grid with behavioral descriptions of effectiveness at each stage.

This tool allowed managers to clearly determine what they need to do to

be effective in the specific talent management processes. Figure 2.2 shows

excerpts of the progression in behaviors in the LMI to assess talent

stewardship.

LMI scoring is either 0 or 1 in each subcategory, and it is not possible to

score 1 unless all the behaviors in that cell can be verified. The total LMI

score indicates the stage the manager has reached in the execution of the

processes and gives the person a clear guideline on how to improve.

Scores across managers can be aggregated to determine a total LMI score

at the group or organizational level.

Figure 2.2. Excerpt from the Ingersoll Rand Leader/Manager

Index

During the annual goal-setting and performance management process,

managers assess themselves using the LMI tool and then review their self-

assessment with their managers. They establish a score and an

improvement goal for the year, which is then linked to 10 percent of their

annual incentive. Ultimately employee feedback from the employee

engagement survey will also be incorporated into the process. Since the

LMI tool is a device for continuous improvement and managers are

measured on improvement rather than by an absolute score, it has

become an effective way of teaching Ingersoll Rand managers how to

excel at talent management.

The LMI has become accepted across the company as a way to make

progress toward the company’s goal of creating a culture of exceptional

global leadership. The expectation is that by building talent management

into the measurement and reward system for leaders in this way, talent

stewardship will soon become an integral part of the management culture.

The need to proactively build strategic capabilities has led to the

emergence of talent management as a function within HR organizations.

This function focuses human resource processes, programs, and tools on

the critical groups of talent that are required for organizational success

—perhaps no more than 20 percent of the workforce at any point in time.

From reviewing current literature and from our own experience in a

variety of businesses, we have identified six generic components common

to any integrated talent management model, which are depicted in Figure

2.3. Starting with strategy, the core talent management processes are

identification, assessment, development, and retention, all supported by a

culture of talent stewardship. These components all need to be in place

and reinforcing of each other for talent management to add the highest

value and impact to the business.

Figure 2.3. Talent Stewardship Model

This is a generic model that can be customized to suit specific

organizations. Although the generic components will be present, the

implementation of the model may look very different from one company

to another as one or mo

component of the mode

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For a talent management system to be of value it must be driven by the

short- and long-term needs of the business. Linking the talent

management process to the business planning processes of the

organization ensures that the talent strategy stays aligned, and is

monitored and measured throughout the annual planning cycle.

Business strategies have a tendency to be aspirational and not take into

account the realities of implementation that depend on the capabilities

and capacities of the people of the organization. While leaders usually

think in terms of whether they have the physical and financial assets to

execute a new strategy, they often forget to assess their leadership

capabilities. For example, it is not unusual to find a leadership team

talking excitedly about venturing into developing markets, but without

recognizing that neither they, nor their teams, have any experience in the

new geography.

A review of organizational and talent capability during the discussion of

long-term strategy provides an important opportunity to assess the

feasibility of strategy implementation. For example, one company uses a

tool (see Table 2.2) that asks business leaders to translate their top three

strategic business priorities into the specific organizational competencies

that will be needed in order to implement each priority successfully. They

then identify their current gaps and the actions that they need to take to

close the gaps. These actions become business initiatives that are

monitored and measured throughout the year. The power of this tool is in

creating a thought process that forces leaders to develop the capabilities

that will ensure that they can achieve their business aspirations.

After having determined the talent requirements that are strategically

important to the organization, the next step is to consider whether there is

a sufficient internal pipeline for the short- and long-term talent needs.

Inevitably the talent strategy will require some mix of external hiring and

internal promotion. Even in organizations that have a philosophy of

promoting from within, there still is some percentage of talent that needs

to be brought in from the outside to meet strategic needs. This could be at

the executive level, or it could be in a relatively obscure technical

discipline, such as writing architectural specifications, which is crucial to

how the products are sold.

Depending on the business strategy and the competencies required, the

organization needs to determine the ratio of internal to external hires.

The “make versus buy” decision will vary by strategic talent pool. For

strategic technologies, such as a bench scientist for new pharmaceutical

research, the only answer may be to acquire those skills externally,

whereas it may be feasible to develop general management talent from

within the organization.

Table 2.2. Strategic Business Priorities and Organizational

Implications

Being in a position to promote from within for the majority of openings

requires strong succession planning, career planning, and talent

movement processes. Overcoming barriers to moving talent across

organizational boundaries, such as business sectors or functions, can be

difficult, but with the right level of leadership commitment, it will reap

benefits. It may mean creating a culture where jobs are posted and

individuals are encouraged to apply for positions outside their current

organization and where moving to another part of the enterprise is viewed

positively rather than as a lack of loyalty to their current group.

This process may need to be actively managed at certain levels, using the

succession plan to develop qualified slates of candidates from across the

company. At these levels, individuals are invited to interview for new roles

after obtaining the support of their manager. The match between

individual development needs and career plans can also be used to

proactively drive movement, where time in position is tracked and talent

is declared available for a cross-business or cross-functional move. In this

way, it may be possible to create an opportunity that will be

developmental for the individual. This requires a culture of talent

movement, where managers are willing to “offer up” talent, knowing that

this will build bench strength for the whole company and that they will

receive talent in return.

Choosing to hire externally because you want to, rather than because you

have to, is an aspiration that many companies have in today’s talent wars.

But this will be a reality only if all the components of the talent

management system are working together to create a pipeline of available

internal talent for critical positions.

The external sourcing and recruitment strategy will have to be adjusted to

source talent that might not have been considered before. This is an

opportunity to integrate diversity and inclusion into the talent

management agenda by making the business case that the company

cannot afford to be missing out on any talent sources in today’s

competitive talent market. This requires examining the aspects of the

culture or work environment that support or create barriers to inclusion.

For a multinational company or one planning to expand internationally,

the mix of local hires and expatriate hires is an important decision.

Decisions should be made regarding the aspects of talent management

that are global, that are regional, and those that can be unique to a local

market or specific business need.

Whenever possible, it is advisable to hire ahead of the need, and certainly

hire for future, not just for present job requirements. This may be easier

to do in businesses where profit margins or business growth are high. For

example, one high-growth computer technology company was known for

hiring talented individuals whenever it found them, knowing that the

growth in the business would ensure productive roles for them within a

matter of months. In this way, they were able to keep up with the growth

of the business; however, as the industry slowed, this talent strategy

needed to change. Even a highly cost-controlled organization can identify

creative ways to do anticipatory hiring. In industrial companies, where

costs are tightly managed, many companies have adopted an approach

where the bottom 10 percent of performers are managed out of the

organization and the resulting vacancies are used to hire strategic talent

(Smart, 2005).

Setting aside a budget to invest in even a handful of strategic positions

will create a buffer of talent and enable the organization to be more agile.

Traditionally companies have used graduate rotational programs to build

their leadership pipelines, with the intention that the majority of those

hired will spend their en

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career rotational programs can be an excellent source of talent. These

hires may be used for enterprisewide initiatives and can be particularly

useful in strategic geographies as a way of attracting and developing a

local pipeline of talent for the midterm. What is critical is that the

retention of these early-career hires is long enough to provide a return on

the investment.

Implementing selection systems that are built on the organization’s

strategic competencies and used for both external and internal selection is

a critical component to the talent management system. Teaching

managers to use behavior-based interviews is a valuable first step toward

building an understanding of the science of talent management. If

managers can learn to assess competencies during the selection process,

they will start to use these skills when assessing their employees for

development and potential.

Once individuals have been placed, there is still a need for a formal

assessment process to indicate their current and future capabilities

against business performance, strategic competencies, and career

potential. A good performance management system, one that assesses

individuals not just on what they do but also on how they do it and also on

their development of strategic competencies, is an important foundation.

However, the performance management system is truly effective only if

managers are objective and are skilled in the assessment of results,

behaviors, and competencies. Often there is a lack of calibration across

the organization, making it extremely difficult to get a true sense of the

capability of the organization as a whole.

Incorporating the use of validated instruments for particular job families

provides additional objective assessments of individuals for both

development and selection into high-potential talent pools or into new

roles. The management of these data becomes extremely critical, and

organizations need to establish which data are to be “owned” and used by

the organization and which data are “owned” by the individual for

developmental purposes and not shared for decision making by

management. Some companies have implemented policies that essentially

create a “firewall” between the assessments used in learning programs

and the assessments used for validation of potential or for internal

selection. This gives the individual the safety to experiment and take risks

in a learning environment without worrying that the data may be used in

the selection process. Ultimately organizations strive to have an open

environment where strengths and development needs can be discussed

without defensiveness, but this is hard to achieve.

Formal leadership assessments that are designed and conducted by

qualified individuals, either internal or external to the organization, are

invaluable when evaluating the capabilities of strategic talent. These

assessments are time intensive and typically include in-depth background

and career history, cognitive and personality tests, and peer and manager

interviews. They can be particularly helpful when assessing high

performers for their potential to be successful at the next level in the

organization. Such assessments will lead to a “three-way” discussion with

the individual, his manager, and the assessor, to validate the findings and

agree on the priorities for a development plan. This type of assessment

may be used as part of selection for promotional opportunities, and in this

case, the data are owned by the organization. A critical element that can

be captured by this approach is in the “fit” of the individual with the role

the person is being considered for. Silzer (2002) notes that the question of

fit is too often ignored, leading to a mismatch between the capabilities of

the individual and the needs of the environment. Ignoring the question of

fit can lead to costly mistakes that damage the individual, the

organization, and the business.

Development planning for both current and future roles is one of the most

important activities that managers can do to accelerate the growth of

capabilities in their organization. The Corporate Leadership Council

(2004) found that development planning was one of the strongest drivers

of employee engagement. By having an effective development plan—one

that is challenging but allows sufficient time to complete the plan—

managers can significantly improve the engagement of their employees.

Leaders need to engage all employees in development but need to be

especially focused on targeted development for strategic talent.

To be effective, development requires a three-way partnership focused on

creating development actions tied to business needs and competency

requirements (Kaye, 2002). As Figure 2.4 shows, the individual, the

manager, and the organization each have specific accountabilities to make

development successful. First, the organization’s role is to provide

processes, tools, and investment and encourage a culture of continuous

development. Next, managers need to be skilled in identifying areas for

development, helping to find the appropriate resources and opportunities

and providing coaching and feedback on an ongoing basis. Third,

individuals must take responsibility for their own development by

following through on development suggestions and committing to

improving their skills and developing new competencies. Finally, the

development actions and plans must be linked to the needs of the

organization and the opportunities inherent in the business plan.

Figure 2.4. Development as a Three-Way Partnership

Source: Adapted from Kaye (2002).

Development plans must include the appropriate mix of activities and the

appropriate level of challenge for the individual. The Center for Creative

Leadership (McCall, Lombardo, & Morrison, 1988) asked executives,

“What has had the greatest impact on your development in your career?”

The results were that 70 percent of their responses described experiences,

20 percent described relationships, and 10 percent described formal

training. Many practitioners have used this research to suggest that

development plans should include activities from all three areas, with

roughly 70 percent of the development plan geared toward experience

(projects and assignments), 20 percent to relationships (learning from

managers and peers), and 10 percent to formal training programs. We

also propose that managers should determine the appropriate degree of

challenge for the individual when identifying a developmental activity.

Managers have a tendency to think that formal training programs are the

most appropriate development solutions, but they need to be made aware

of the ways in which individuals could broaden their learning through on-

the-job experiential activities, which may have an even stronger

developmental impact. Ideally, the development plan will use all three

types of activities for one development goal: for example, providing

training on strategic pricing, coaching by a pricing expert, and the

opportunity to develop a pricing proposal for a product or service that is

then presented to the marketing team.

Another common pitfall is identifying development actions that have too

little or too much challenge or risk. What must be evaluated is both the

importance of the assignment or job to the organization and the degree of

“stretch” or previous experience required for success (see Figure 2.5).

Sometimes organizations are reluctant to take a risk in providing an

individual with an assignment that is a first-time learning and repeatedly

rely on those who are proven in a given area. This is not developmental

for either the person who has done the role many times or for the person

never given the opportunity. What is critical is to find an opportunity that

is not of the highest importance level to allow the first-timer to develop

skills or to provide support from the more experienced person.

Conversely, a person who is given a highly important role with many

“firsts” and little support is being set up for failure. For example, moving

someone to a new business and a different country as a promotion will

have a lower probability of success than promoting this person in a

business that he knows Figure 2.5 is a useful

tool to find the optimal

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or moves. This optimal level, or “sweet spot,” encompasses the

development actions or moves that provide sufficient challenge for growth

without undue risk to the individual or the organization. The tool can also

be used to determine which person is best for an open role from a

development standpoint.

Figure 2.5. Planning Optimal Development Assignments

Broad functional and business experience is essential in today’s business

world. Companies need leaders who have the ability to make sound

decisions in a rapidly changing environment, and so the experience of

having been in diverse business situations can build the confidence and

judgment necessary for the challenges of the future. Herb Henkel,

Chairman and Chief Executive Officer of Ingersoll Rand Company,

captured his expectations for development as “2 X 2 X 2 + 5” (Ingersoll-

Rand Company Limited, 2004), which is company shorthand for

experience in:

• Two businesses

• Two functions

• Two geographies

and with the five stages of a business life cycle:

• Starting up a business

• Turning a business around

• Growing a mature business

• Implementing an enterprise initiative

• Leading a large acquisition or divestiture

Herb Henkel’s belief is that general managers and functional leaders who

have experienced these varied challenges will be best prepared to lead

complex, multinational organizations to sustainable success over the long

term. This is in keeping with the findings of McCall et al. (1988) on the

importance of varied challenges and development experiences. Taking

this approach necessitates having an effective succession management

process that identifies high-potential talent from across the organization

and proactively moves them for developmental purposes considering the

specific learning opportunities in the assignments and the experiential

needs of candidates. This approach to development through experiences,

including cross-business, cross-function, and cross-geographies, has

become a well-understood part of the talent management model in his

company.

Role models, whether they are direct managers or peers, have a

significant impact on development. As the Center for Creative Leadership

research showed, we learn by observing the behavior of others who are

successful, so having effective leaders with the right values at all levels of

the organization is critically important.

The relationship with the direct manager is particularly significant as we

learn which behaviors to emulate and which not to emulate. Having a

relationship where the manager gives the appropriate balance of

challenge and support creates an environment where talented individuals

can learn and grow. Having the opportunity to discuss weaknesses

candidly and to have regular feedback and coaching can accelerate the

development of leaders at all stages in their career.

Learning from peers through cross-functional, cross-business teamwork

also gives developmental opportunities, as does membership in functional

councils, where specialists come together to share best practices. Other

networks, such as affinity groups, organized by gender, ethnicity, or

business interest, also provide opportunities to learn from role models.

Anecdotally we often get feedback from participants in training and

education programs indicating that they learned as much from their peers

as from the instructor. This suggests that selecting the optimal group of

peers for a class can have a significant impact on the quality of the

learning experience. Peer networks have been found to be critical in

retention of talent. Recently such networking has become virtual through

online groups or communities of practice (Wenger, McDermott, & Snyder,

2002).

Although formal training programs may have a relatively small

percentage of impact on development, the value can be increased by (1)

focusing training and development on the strategic competencies, (2)

having a widespread rollout of specific strategic programs, and (3) getting

leadership participation.

Having a curriculum and a delivery strategy that focuses on reaching

targeted groups with the strategic competencies that they need to drive

the business agenda can be highly effective. This means developing

programs that address the competency gaps that have been identified as

being critical to the organization’s strategy (Meister, 1998). Some

companies organize their programs around a core business curriculum,

with the addition of “colleges” that specialize in specific functional or

technical areas. Those “colleges” are selected based on the strategic

competencies and are targeted to the relevant segment of the population.

The delivery strategy for a particular program can affect the impact on

both the individual and the organization. One company wanted to build a

more entrepreneurial mindset in general managers, and developed a two-

week program that was cascaded through the organization. This meant

that concepts and behaviors were reinforced after the participant left the

classroom because the managers of the participants had also gone

through the program. In this way, the program had an impact on the

leadership capabilities across the company.

The corporate university can also provide learning opportunities through

participation in its own governance. Creating a strategy board consisting

of a cross-section of business leaders has the benefit of increasing

ownership for the university, ensuring alignment with business needs,

and providing a developmental experience for high-potential leaders.

Similarly involving line managers in design teams and having them teach

parts of the curriculum builds their competency and confidence as leaders

(Tichy, 1997).

Over the past few decades, the approach to retention in many

organizations has evolved from a focus on measuring overall turnover to

measuring voluntary versus involuntary turnover in order to get a better

sense of the reason for the losses. More recently, companies have

segmented this further by identifying the turnover of high-performing or

high-potential talent in order to address the specific issues for these

critical employees.

We believe that organizations should go beyond the macromeasures of

turnover to look at turnover within strategic talent pools. This is the talent

that is most important to the future of the organization and where

retention is the most critical. Cappelli (2000, p. 100) proposes “a market

driven retention strategy that begins with the assumption that long-term,

across-the-board employee loyalty is neither possible nor desirable. The

focus shifts from broad retention programs to highly targeted efforts

aimed at particular employees or groups of employees.”

Effective retention efforts require examining each strategic talent pool to

identify who is at risk and why, so that individualized retention plans can

be created. Sometimes this involves accelerating a career move or

providing a key individual with visibility to senior executives in other

parts of the business. The retention action could include the expansion of

current responsibilities or the invitation to participate in a significant

learning program. Invariably the retention strategy will go beyond

compensation and will

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Compensation and benefits strategies need to be monitored for external

competitiveness and internal equity, but as we know, compensation and

benefits alone will not solve retention issues. Targeted “stay bonuses” can

be effective but are not sufficient for long-term retention. Capelli (2000)

suggests that in addition to compensation, companies should consider

how job design, social ties, location, and hiring can be used in designing

effective retention strategies.

Developmental assignments or special projects are often given to the top

performers or high-potential talent as part of a retention or engagement

plan. Although this may generally be a good practice, it points to the need

for the manager to truly understand what is important to an individual

employee and customize the approach accordingly. The assignment could

be seen as highly valuable to meet the employee’s career goals or just

additional workload. If travel is required, the employee could see it as

either an interesting experience or personal sacrifice.

It is equally important for managers to recognize when adding special

projects or developmental assignments will be counterproductive. It is

usually the case that the very individuals whom we want to retain are the

ones who are under the most pressure, are given the most challenging

assignments, and are turned to for participation in activities that go

beyond the scope of their role. This can lead to stress and burnout, which

may make the individual more susceptible to calls from recruiters. It is

important for the manager to pay attention to overall workload and

challenge to make sure that the individual is supported and will be able to

sustain performance over long periods of time.

People are said to join companies and leave managers, which is why

effective management is so important to the development and retention of

strategic talent. Having an effective relationship means that the leader

knows what motivates and engages her employees and is able to assess

retention risk and develop a customized retention plan for key talent.

While the formal retention analyses and plans are important, the informal

leadership behaviors are equally important. Through the leader’s actions,

employees judge whether their contributions are valued and appreciated

or not, and to what degree the company is committed to their future. If

the manager understands the employee’s goals, aspirations, and personal

circumstances and builds a supportive relationship with a two-way

dialogue, then the specific retention action plans will be more effective.

Even if the retention strategy is ultimately ineffective, the best talent

stewards remain in contact even after the individual has left the

organization. Today we cannot interpret a resignation as an act of

disloyalty; it may very well be the best move for the development of that

individual. It is also true that the grass is not necessarily greener in other

pastures and sometimes it is possible to recruit and persuade talent to

return at a later date. This can send a very positive message to the

organization if those who were seen as great talent choose to return to the

company. All in all, there are many benefits to staying connected to

alumni, not least of which is to make them part of the organization’s

extended network of advocates.

The first five elements—strategy, identification, assessment, development,

and retention—enable the organization to put appropriate process and

programs in place and ensure integration across the enterprise. However,

at the heart of the model is talent mindset, or what we call “talent

stewardship”: a frame of mind, or a culture, where every manager feels

ownership and accountability for talent on behalf of the organization. This

means that the manager takes responsibility not only for managing

today’s talent, but also for strengthening the team or the organization for

the future. Once talent stewardship is engrained in the management

disciplines of the organization, it transforms the talent management

strategy from a functional initiative to a competitive business advantage.

This type of culture does not happen overnight. Some companies have

invested heavily in leadership development for decades and have built

supporting systems, processes, and programs that are embedded in the

fabric of the organization. For companies that are just embarking on this

journey, it may take time, but progress can be accelerated by clearly

establishing talent management expectations for line managers, by

providing them with development and support, and by evaluating and

rewarding their results.

In a best-in-class company, every manager must feel ownership for talent

within their own organization and for the larger enterprise. Constantly

scouting for talent internally and externally, coaching and mentoring

others, providing performance feedback, developing and teaching: these

are all part of the day-to-day accountabilities of today’s best managers.

Managers who are talent stewards have a commitment to developing

others and supporting them for promotional opportunities.

A talent management system should be designed around the six

components described above (and presented in Figure 2.3), with strategy

being a critical input to the system and talent stewardship being the

cultural underpinning. However, within this model there is tremendous

opportunity for customization. The specific talent management strategies

will vary, depending on the business strategy, the stage in the life cycle of

the business, the level of leadership commitment, and the culture of the

organization. This will also vary by company, and so it is possible to see

two successful talent management strategies that are very different. In

Figure 2.6, company A is operating in an emerging market, with a talent

strategy that is focused on external hiring (identification) and retaining

talent (retention). Company B is focused on building an internal

leadership pipeline and is putting additional effort into formal

assessments (assessment) and talent movement (development). The key

point is that the talent management tactics of each company are fully

aligned with their business strategies and they are making the appropriate

decisions about investments in programs.

Figure 2.6. Customized Talent Management

Companies should select from a menu of programs that are designed to

work within the strategic framework of their organization. Most

companies cannot implement a talent management system all at once and

must pick strategically from the menu to create a system that will have the

most impact. Table 2.3 provides some examples of how specific programs

support the different components of a talent management system. This is

not an exhaustive list but illustrates that practitioners must make

strategic choices about program investment across all components,

starting with the areas that will have the most impact on the organization.

Table 2.3. Talent Management Menu

It typically takes many y

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management process, but once the basic architecture is established and

priorities are set, the system can be built out and adapted to meet the

changing needs of the organization. The work of alignment with strategy

and integration with culture is ongoing and cannot be overemphasized. It

is when these two elements are in place that the true power of talent

management can be realized.

Creating an integrated talent management system that is driven by

strategy and supported by a culture of talent stewardship takes a

partnership between three key stakeholders:

• Executive management, including the board of directors

• Line management

• Human resource and talent management practitioners

Chief executive officers and boards of directors must provide oversight

and direction to the talent management process. They set the tone and

signal the importance to the business success. The CEO demonstrates

talent stewardship behaviors for other leaders. A significant driver for

effective talent management is also the interest that boards of directors

take in the talent capabilities of the organization. For decades, boards

have reviewed executive succession plans focused primarily on the CEO

and the top officer positions. Increasingly they are asking questions about

the availability of talent to support strategies in new markets,

technologies, and geographies. Progressive boards—those that

understand the importance of effective talent management—are moving

from an annual to a semiannual review. Also, their topics for discussion in

these reviews are going beyond questions about executive retirements and

succession to a much deeper conversation with the chief executive officer

about strategic talent at multiple levels in the organization.

Talent stewardship is a line management accountability. Accountability

for attracting, developing, and retaining strategic talent is more than a

priority for the best leaders; it is the way they operate on a daily basis. The

best leaders know that they, and their organizations, cannot lead in the

marketplace without highly talented individuals, and so the cultivation of

talent is an essential aspect of being a line manager in business today.

Block (1993) defines stewardship as “the willingness to be accountable for

the well-being of the larger organization by operating in service, rather

than in control, of those around us” (p. xx). Another aspect of stewardship

is leaving a legacy: an organization or team stronger than it was initially,

“to hold something in trust for another” (p. xx). This is not merely an

altruistic notion. Talent stewards know from experience that they will

always be able to attract the best talent to their teams because of their

reputation for successfully developing others. Also, they understand that

their business performance will be stronger as a result of their personal

focus on talent management.

The human resources and talent management function is the enabler. In

an organization that has a talent stewardship culture, the role of the

human resources and talent function is to bring subject matter expertise

and consultation to address the talent needs of the organization. They

design and manage processes and programs, and provide advice and

counsel to managers and individuals, but managers personally make the

final talent decisions. The role of talent management is to help managers

make the best talent decisions in both the short and long terms. In this

way they use data from assessments, performance appraisals, behavioral

interviews, and observation to make recommendations on an individual’s

strengths, areas of development, and potential. As specialists in talent

management, HR should be able to provide insight and

recommendations, but managers have the responsibility to make the final

decisions for hiring, promotions, development, and retention.

Finally, we must always remember that talent management is a high-

touch activity. We cannot forget that talent is composed of individuals

who have their own unique aspirations and motivations. Although talent

management requires tremendous process discipline and the thoughtful

analysis of data, the reality is that we are working with individuals and

attempting to match their needs with the needs of the organization.

Effective talent management is about relationships and requires the

establishment of trust among all parties involved. The organization has to

trust the talent manager’s assessment of individuals and fit; individuals

have to trust that confidentiality will be maintained appropriately and

that the organization is vested in the fairest outcome for their career. Each

individual in the talent pool has a set of personal needs and aspirations.

Issues of mobility, family issues, work/life balance, and career aspirations

often come into play. It typically takes significant counseling and coaching

to orchestrate one succession move. Each situation has to be managed

with the individual, and often the family, in mind. Effective talent

management cannot be orchestrated purely from a database; it requires a

combination of process and relationship to achieve the best results.

We have presented a model of integrated talent management that is

driven by business and human resources strategy and fueled by a

pervasive culture of talent stewardship. The specific components of an

integrated talent management system are supportive and connected but

may vary in emphasis across companies. We believe that this model of

integrative talent management is compelling to achieve superior business

outcomes. These views are based primarily on our practical experience

across multiple businesses, companies, and industries. Currently there is

little research that demonstrates the benefits of a more integrated or

systemic approach to talent management.

One research effort attempted to link talent management to financial

outcomes (Holstein, 2005) and found that companies evaluated as the

“Best Companies for Leaders” had 22 percent greater return to

shareholders than the other companies studied. However, the results of

this study could have been contaminated because company financial

performance was known to the investigators and could have influenced

the choices as best companies for leaders. We challenge researchers and

practitioners to collaborate in order to empirically demonstrate that

companies with greater alignment between their business strategies and

talent management approach achieve stronger financial performance.

Also, we encourage researchers to better define and measure the stages of

talent management evolution in organizations. Such work could also more

rigorously specify the definitions, attributes, and signs that an

organization has moved its culture toward a talent stewardship model of

management.

In the field of talent management, we also know relatively little about why

certain organizations are able to sustain an effective integrated talent

management process over the long term while others falter. We

understand that the CEO and Board of Directors play key roles. However,

some organizations manage to maintain a focus on integrated talent

management even when top leaders and business strategies change.

Practitioners must focus more of their efforts on embedding the talent

management mindset into the management model in the organization

rather than on merely designing and implementing programs. Programs,

by their nature, come and go. We will be successful as a discipline when it

is no longer the exception, but common practice, to have sustainable

integrated talent management as a core aspect of effective management.

As Boudreau and Ramstad (2007) ask, how do we move to a true decision

science, like the evolution from accounting to finance? How do we create

organizations where managers could not imagine running their business

without the necessary data and processes to be effective talent stewards,

just as they could not run their business without strong financial data and

processes to be effective financial stewards?

Other chapters in this book provide in-depth reviews of specific aspects of

talent management. Our view is that the most promising new directions

for the field of talent management are less about specific components per

se, but in selecting the strategically relevant areas to pursue, in managing

and measuring the interconnections and business impact, and in evolving

to a talent stewardship culture.

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