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In this article by Development Dimensions International, a talent management consultancy, the authors discuss on the 9 nest practices for talent managment. In part 1 of the article, we would like to share their thoughts on the drivers for talent management.


The original article can be viewed here. http://www.ddiworld.com/DDIWorld/media/white-papers/ninebestpracticetalentmanagement_wp_ddi.pdf?ext=.pdf

Organizations know that they must have the best talent in order to succeed in the hypercompetitive and increasingly complex global economy. Along with the understanding of the need to hire, develop, and retain talented people, organizations are aware that they must manage talent as a critical resource to achieve the best possible results. Few, if any, organizations today have an adequate supply of talent. Gaps exist at the top of the organization, in the first- to midlevel leadership ranks, and at the front lines. Talent is an increasingly scarce resource, so it must be managed to the fullest effect. During the current economic downturn we may experience a short ceasefire in the war for talent, but we’re all seeing new pressures put on the talent running our organizations. Are today’s leaders able to do more with less? The A-players can, and there should be a strategic emphasis on keeping those leaders— and developing their successors. Many organizations are reducing their workforces, but let’s be careful not to cut so deep that talent is scarce when the economy rebounds.

The idea of managing talent is not new. Four or five decades ago, it was viewed as a peripheral responsibility best relegated to the personnel department. Now, talent management is an organizational function that is taken far more seriously. In The Conference Board’s 2007 CEO Challenge study1, CEOs’ rankings of the importance of “finding qualified managerial talent” increased by 10 percentage points or more when compared to the same research conducted just one year earlier. Research conducted in 2008 by DDI and the Economist Intelligence Unit (EIU)2 found that 55 percent of executive level respondents said their firms’ performance was likely or very likely to suffer in the near future due to insufficient leadership talent. This point of view was reiterated in one-on-one interviews with top executives, conducted as part of the same research study. This emphasis on talent management is inevitable given that, on average, companies now spend over one-third of their revenues on employee wages and benefits. Your organization can create a new product and it is easily copied. Lower your prices and competitors will follow. Go after a lucrative market and someone is  here right after you, careful to avoid making your initial mistakes. But replicating a high-quality, highly engaged workforce is nearly impossible. The ability to effectively hire, retain, deploy, and engage talent—at all levels—is really the only true competitive advantage an organization possesses.


There is no shortage of definitions for this term, used by corporate leadership the world over. With a nod to other points of view, DDI defines talent management as a mission critical process that ensures organizations have the quantity and quality of people in place to meet their current and future business priorities. The process covers all key aspects of an employee’s “life cycle:” selection, development, succession and performance management. Key components of a highly effective talent management process include:

> A clear understanding of the organization’s current and future business strategies.

> Identification of the key gaps between the talent in place and the talent required to drive business success.

> A sound talent management plan designed to close the talent gaps. It should also be integrated with strategic and business plans.

> Accurate hiring and promotion decisions.

> Connection of individual and team goals to corporate goals, and providing clear expectations and feedback to manage performance.

> Development of talent to enhance performance in current positions as well as readiness for transition to the next level.

> A focus not just on the talent strategy itself, but the elements required for successful execution.

> Business impact and workforce effectiveness measurement during and after implementation.

Organizations have been talking about the connection between great employees and superior organizational performance for decades. So, why the current emphasis on managing talent? There are several drivers fueling this emphasis:

There is a demonstrated relationship between better talent and better business performance. Increasingly, organizations seek to quantify the return on their investment in talent. The result is a body of “proof” that paints a compelling picture of the impact talent has on business performance. To highlight just a few:
> A 2007 study from the Hackett Group3 found companies that excel at managing talent post earnings that are 15 percent higher than peers. For an average Fortune 500 company, such an improvement in performance means hundreds of millions of dollars.

> A study from IBM found public companies that are more effective at talent management had higher percentages of financial outperformers than groups of similar sized companies with less effective talent management.

> Similarly, a 2006 research study from McBassi & Co. revealed that high scorers in five categories of human capital management (leadership practices, employee engagement, knowledge accountability, workforce organization, and learning capacity) posted higher
stock market returns and better safety records—two common business goals that are top of mind for today’s senior leadership.

Talent is a rapidly increasing source of value creation. The financial value of our companies often depends upon the quality of talent. In fact, the Brookings Institution found that in 1982, 62 percent of an average company’s value was attributed to its physical assets (including equipment and facilities) and only 38 percent to intangible assets (patents, intellectual property, brand, and, most of all, people). By 2003, these percentages nearly flip-flopped, with 80 percent of value attributable to intangible assets and 20 percent to tangible assets.

The context in which we do business is more complex and dynamic. Hyper-competition makes it more difficult than ever to sustain a competitive advantage long term. New products— and new business models—have shorter life cycles, demanding constant innovation. Technology enables greater access to information and forces us to move “at the speed of business.” Global expansion adds to these challenges—a single company may, for example, have its headquarters in Japan, its R&D function in China,and its worldwide sales operations based in California. And as we mentioned already, the recent economic downturn following years of rapid economic growth adds a whole new dimension to how we manage talent. Record layoffs, lower engagement, and less opportunity for advancement all present additional challenges to managing talent.

Boards and financial markets are expecting more. Strategy + Business magazine once described CEOs as “the world’s most prominent temp workers.” In 2007, CEO turnover was 13.8 percent, and the median tenure for a CEO who left office was six years. Boards and
investors are putting senior leaders under a microscope, expecting them to create value. This pressure, most visible at the CEO level but generally felt up and down the org chart, drives a growing emphasis on the quality of talent—not just at the C-level, but at all levels.

Employee expectations are also changing. This forces organizations to place a greater emphasis on talent management strategies and practices. Employees today are:

> Increasingly interested in having challenging and meaningful work.
> More loyal to their profession than to the organization.
> Less accommodating of traditional structures and authority.
> More concerned about work-life balance.
> Prepared to take ownership of their careers and development. Responding to these myriad challenges makes it difficult to capture both the “hearts” and “minds” of today’s workforce. Yet, it’s critical to do so, as research from IBM and the Human Capital Institute highlights.

Their July 2008 study showed that 56 percent of financial performers understand and address employee engagement. This is just one piece of a large body of evidence that illustrates how the cultures built within our organizations are crucial to attracting and retaining key talent.

Workforce demographics are evolving. Organizations wage a new “war for talent” these days. Today, 60 percent of workers over the age of 60 are electing to postpone their retirement due to the financial crisis, according to a 2009 survey by CareerBuilder.10 Many
hold top positions, squelching the opportunity for lower-level talent to advance and leaving younger workers feeling stuck (and potentially looking for opportunities with other organizations). At all levels, each deferred exit from the workforce is one less new hire in an already depressed job market.