44. A Primer on Talent Management

Globalization, the process by which economies, societies, and cultures are fast integrating through a globe-spanning network of communication and trade, drives both collaboration and competition. And so, in an age when those who possess knowledge¹—not land, labor, or capital goods—own the new means of production, it is no surprise that a contest for talent has been raging since the 1990s. Better talent separates high-performance organizations from the rest. They bet on people, not strategies.

Critical talent is scarce (and about to become scarcer) because of three trends: the ongoing retirement of the “Baby Boom Generation”,² a widening skills gap,³ and large-scale social integration⁴ (driving rapidly changing lifestyles).

Talent management has become one of the most pressing topics in organizations (even if very few have strategies and operational programs in place with which to identify, recruit, develop, deploy, and retain the best). The competition for talent will define organizational milieus for a couple of decades to come. Springing from the three trends, several drivers fuel the emphasis:

In 1997, McKinsey and Company studied 77 large organizations from various industries to circumscribe the magnitude of the war for talent (Chambers et al. 1998). They talked to the top 200 executives in each company to appreciate why these executives worked where they did and how they had become the professionals they were. Organizations with winning employee value propositions had a compelling answer to the question, “Why would a talented person want to work here?” To create such a proposition, a great organization tailors its brand and products—that is, the jobs it has to offer—to appeal. It also pays the price it takes to recruit and retain talented people. The overall top 200 population cared deeply about values and culture, freedom and autonomy, challenging jobs, and good management. Differentiation was important to their compensation and lifestyle. In sum, their rewards were psychological, developmental, and financial. In 1973, Drucker (1973) wrote: “Making a living is no longer enough. Work also has to make a life.” Abraham Maslow had, 30 years earlier, conceptualized a theory of human motivation.⁹

Talent management refers to the additional processes and opportunities that an organization makes available strategically to a pool of people who are deemed to have talent. If talent is not identified and managed by the entire management team, not only the human resource management unit, talent may just as well be defined as a dormant or untapped quality to be accessed in the future, either in an individual or in the collective.

In point of fact, all organizations are equipped with a talent management system, be it by default or design—it is the people side of organizational design, usually entrusted to human resource management units. But a keyword here is “additional”: historically, organizations have concerned themselves almost exclusively with top executives, particularly their replacement and succession. (Senior leaders certainly constitute talent even if, more frequently in the public sector, they sometimes owe their jobs to political correctness or tenure.)¹⁰ Another is “pool”: talent management demands that organizations move from replacement and succession planning to cater to the entire talent pool¹¹ with other processes and opportunities.¹² From a richer results chain perspective, talent management is also about recognizing and addressing the constant challenge to have the right people matched to the right jobs at the right time, and doing the right things. That is, talent management is about managing the demand, supply, and flow of talent across the organization through the human capital engine based on organizational strengths, weaknesses, opportunities, and threats. (The Develop-Deploy-Connect model helps generate capability, commitment, and alignment in talent pool segments.) The third related keyword is “strategic”: with respect to talent, it intimates that an organization, to maintain a sustainable competitive advantage, may wish to maximize organizational capabilities in certain competencies ¹³ and deemphasize others. First, this requires that, having understood what motivates and drives talented people, organizations become management innovators and recognize that they do not need the same talent pool segments all the time (with implications for talent pool strategies, talent management systems, and talent management activities); second, it recognizes at long last that talent management can no longer be the province of human resource management units; third, it exposes the shortcomings of forced ranking ¹⁴ that many have excoriated as misguided, destructive, and outright antithetical to sound leadership.

Like all new fields, there will be strong returns to research. (Ten years after its birth, confusion or disagreement over the way talent management should be defined, operationalized, or supported are still rife.) Promising areas include the architecture of decisions for talent management,¹⁵ talent pool strategies,¹⁶ and the development of valid and reliable talent management measures.¹⁷ Notwithstanding, the proactive, strategic nature of talent management opens new vistas. Across the world, it is agreed that human resource management can, indeed should, add more value to organizations. The best way to accomplish this is to become a business partner that directly improves organizational effectiveness.¹⁸ Any organization needs a wide range of talents to succeed, not only those associated with senior leaders. If an organization recognizes clearly what work needs to be done and what competencies will deliver its strategy for sustainable competitive advantage, knows from talent mapping how best these can be identified and, where current and future gaps are, how they can be closed, numerous methods for managing talent can then be leveraged in support in more open and forward-looking fashion.¹⁹

How talent is defined is specific to an organization. Explanations are highly influenced by markets, industries, organizations, geographies, intellectual disciplines, generations, and of course the nature of talent’s work. All are dynamic, and so likely to change over time according to organizational priorities. Rather than accepting universal or prescribed explanations, organizations will find greater value if they formulate their own definitions of what talent and talent management are. It is crucial for the meaning each gives to talent and its management to fit the organization’s exogenous and endogenous circumstances and particular needs. A language for talent management activities is a prerequisite to developing a coherent talent management strategy.

In 2001, McKinsey and Company revisited their earlier study to structure a successful talent formula (Elizabeth et al. 2001). Taking care to highlight the differences between the old way and the new, they identified that leading organizations execute against five talent management imperatives to

Given that different organizations aim to achieve different things from their talent management systems, while all seek to achieve some form of talent management, the five elements of a talent formula already look dated. More realistically and usefully, the Chartered Management Institute cautions that strategic perspective shapes the way in which the talent management system is viewed, implemented, and put into operation, such that the same activity can result in a different action or outcome depending on the perspective employed. Crucially, the Chartered Management Institute (Blass 2007) remarks that an organization may shift its perspective over time in accordance with changes in the organization’s strategy for sustainable competitive advantage, and indeed the development and embeddedness of the talent management system itself.

The value of an integrated model for managing talent that links directly to improved organizational effectiveness is not lost on organizations. However, at this juncture, many note that an integrated approach is one of the most difficult of all talent management activities to implement, sustain, and enhance (Watson 2009). Next in line, in terms of difficulty, is creating more consistency in how talent is identified, developed, and moved throughout the organization. Third is giving senior leaders greater ownership of and accountability for the talent pipeline. Next, in diminishing order of difficulty, is focusing more on key workforce segments; redefining the critical attributes and competencies needed for the next generation of leaders; linking rewards more closely to performance; improving quality and use of analytics to monitor the need for, and supply of, talent and better differentiate performance; and scaling and adapting talent strategies on a global basis. Recognizing that these processes are necessary to succeed in the twenty-first century is the first, essential step.

Inevitably, any discussion of talent management brings a focus to bear on mavericks. They are the handful of very clever, willfully independent, and highly creative individuals, often evangelistic believers, who produce remarkable results on their own.²⁰ If organizations are finding it difficult to retain top talent, they are finding it almost impossible to maintain productive relationships with mavericks. But mavericks do not necessarily walk away. Contrary to common belief, they need the organization in the same measure that it needs them. (They cannot operate without the systems and resources it makes available.) Managers should be aware of the attributes that mavericks share. (Their one defining characteristic is that they do not want to be “led”.) But the art of leading mavericks can be one of the most rewarding skills one can develop for an organization. A few tips follow: