What is Talent Management?

Talent Management” has become one of the most important buzzwords in Corporate HR and Training today.  In this article we will explain the history, principles, and processes of talent management and help readers understand this important area.

From Personnel to Strategic HR to Talent Management

To understand why Talent Management has become so important, we must first look at the evolution of corporate HR:

Stage 1:  Personnel Department: 

In the 1970s and 1980s the business function which was responsible for people was called “The Personnel Department.”  The role of this group was to hire people, pay them, and make sure they had the necessary benefits.  The systems which grew up to support this function were batch payroll systems.  In this role, the personnel department was a well-understood business function.

Stage 2:  Strategic HR: 

In the 1980s and 1990s organizations realized that the HR function was, in fact, more important – and the concepts of “Strategic HR” emerged.  During this period organizations realized that the VP of HR had a much larger role:  recruiting the right people, training them, helping the business design job roles and organization structures (organization design), develop “total compensation” packages which include benefits, stock options and bonuses, and serving as a central point of communication for employee health and happiness. 

The “Head of Personnel” became the “VP of HR” and had a much more important role in business strategy and execution.  The systems which were built up to support this new role include recruiting and applicant tracking (ATS), portals, total compensation systems, and learning management systems.  In this role, the HR department now became more than a business function:  it is a business partner, reaching out to support lines of business.

Stage 3:   Talent Management:   

We are now entering a new era:  the emergence of “Talent Management.”   While strategic HR continues to be a major focus, HR and L&D organizations are now focused on a new set of strategic issues:

  • How can we make our recruiting process more efficient and effective by using “competency-based” recruiting instead of sorting through resumes, one at a time?

  • How can we better develop managers and leaders to reinforce culture, instill values, and create a sustainable “leadership pipeline?”

  • How do we quickly identify competency gaps so we can deliver training, e-learning, or development programs to fill these gaps?   How can we use these gaps to hire just the right people?

  • How do we manage people in a consistent and measurable way so that everyone is aligned, held accountable, and paid fairly?

  • How do we identify high performers and successors to key positions throughout the organization to make sure we have a highly flexible, responsive organization?

  • How do we provide learning that is relevant, flexible, convenient, and timely?

These new, more challenging problems require new processes and systems.  They require tigher integration between the different HR silos — and direct integration into line of business management processes.  Today organizations are starting to buy, build, and stitch together performance management systems, succession planning systems, and competency management systems.  The HR function is becoming integrated with the business in a real-time fashion. 

Best-practice examples of companies embarking on these processes include Aetna, Capgemini, Eastman Chemical, Kimberly-Clark, PitneyBowes, SCI, Seagate, Steelcase, Textron, and more.  You can read about these companies’ talent and performance management initiatives in Performance Management 2006.

Defining the Talent Management Process

Organizations are made up of people:  people creating value through proven business processes, innovation, customer service, sales, and many other important activities.  As an organization strives to meet its business goals, it must make sure that it has a continuous and integrated process for recruiting, training, managing, supporting, and compensating these people.  The following chart shows the complete process:

integrated talent management


1.  Workforce Planning:  Integrated with the business plan, this process establishes workforce plans, hiring plans, compensation budgets, and hiring targets for the year.

2.  Recruiting:  Through an integrated process of recruiting, assessment, evaluation, and hiring the business brings people into the organization.

3.  Onboarding:  The organization must train and enable employees to become productive and integrated into the company more quickly.

4.  Performance Management:  by using the business plan, the organization establishes processes to measure and manage employees.  This is a complex process in itself, which we describe in detail in our new research Performance Management 2006.

5.  Training and Performance Support:  of course this is a critically important function.  Here we provide learning and development programs to all levels of the organization.  As we describe in the Death of the Corporate University, this function itself is evolving into a continuous support function.

6.  Succession Planning:  as the organization evolves and changes, there is a continuous need to move people into new positions.  Succession planning, a very important function, enables managers and individuals to identify the right candidates for a position.  This function also must be aligned with the business plan to understand and meet requirements for key positions 3-5 years out.  While this is often a process reserved for managers and executives, it is more commonly applied across the organization.

7.  Compensation and Benefits:  clearly this is an integral part of people management.  Here organizations try to tie the compensation plan directly to performance management so that compensation, incentives, and benefits align with business goals and business execution.

8.  Critical Skills Gap Analysis:  this is a process we identify as an important, often overlooked function in many industries and organizations.  While often done on a project basis, it can be “business-critical.”  For example, today industries like the Federal Government, Utilities, Telecommunications, and Energy are facing large populations which are retiring.  How do you identify the roles, individuals, and competencies which are leaving?  What should you do to fill these gaps?  We call this “critical talent management” and many organizations are going through this now.

In the center of this process are important definitions and data:  job roles, job descriptions, competency models, and learning content. 

How do you Develop and Implement a Talent Management Strategy?

As I describe above, Talent Management is a natural evolution of HR.  It is a series of business processes — not a “product” or “solution” you can buy. 

Organizations we speak to are focused on different elements — driven by their maturity and the urgent business problems they face today.  While a few mature organizations have dealt with most of the processes above, most organizations focus on several of the key elements and build an integrated approach over time. 

Additionally, Talent Management is a “forward-looking” function.  Not only should talent management improve your organization’s flexibility and performance, it should give you the information and tools to plan for growth, change, acquisitions, and critical new product and service initiatives.

A few critical issues we have identified in our research:

1.  Talent Management requires integration and communication between existing HR-L&D functions. 

Training can no longer be “left on an island.”  As we detail in our workshops, the L&D organization must align much more closely with the performance management and recruitment process.  Training programs should be developed and updated to continuously address problems which surface in the performance management process.  New hires which are hired because of certain competencies should see a set of training offerings which complement and reinforce these competencies.  Compensation program should naturally tie to the performance management process.

2.  Competency management, a mis-understood and difficult part of training and HR, has become critical. 

The job descriptions, roles, and competencies used for performance management are shared by L&D, recruiting, and succession planning.  There are many techniques for effective use of competencies – many are described in our performance management systems research.  A simple best-practice is for your organization to have a small set of consistent, easy-to-understand competencies which can be applied across the organization.

3.  Software solutions are maturing, but not the solution. 

Despite vendor claims, there is no complete “talent management” software solution yet.  Vendors each offer different elements of this solution.  To solve urgent problems, most companies today buy standalone systems:  standalone learning management systems, standalone standalone performance management systems, standalone recruiting and standalone compensation systems.  As the market matures and companies press harder for integration, vendors will create more integrated solutions.

Our research has found, however, that software is not the solution.  In fact, of the 62 processes we studied, HR software was ranked 55 or lower in business impact.  You cannot “buy” a software solution to implement your talent management strategy.  You must focus on the top 22 process areas of greatest impact and build this strategy through a business-driven process.  Our research and workshops will help you develop this strategy.

What does this mean to your Organization?

Talent Management is a powerful and important trend across HR and L&D.  It changes the way you are organized, how you use technology, how your resources are allocated, and how you measure what you do.   If you are a training manager, director, or CLO, talent management will impact your role.  You may be asked to integrate your learning programs with the company’s performance management initiative. 

Many organizations have a new job:  The VP of Talent Management.  This role typically includes Learning & Development, Performance and Competency Management, and Succession Planning fucntions.  We believe that this integrated “HRD” function is an important evolution in the way HR organizations are run.

What does this mean to your HR-IT Strategy?

Talent Management will also impact your systems strategy:  For example, do you want a stand-alone LMS or should your LMS be integrated with the company’s performance management systems?  What systems integration are the most important?  How do you use competency models to tie learning to performance management?  What “suite” products are mature enough for your particular organization’s needs?

The role of HRIT has also become much more complex.  It is no longer possible to focus on HRIS systems alone – HRIT must understand learning technology, competency management technology, portal technology, and the integration of these different applications.  In many organizations LMS systems, for example, are not managed by HRIT.  Over time we believe the role of HRIT will be more strategic than ever.

Despite these issues, our research has shown that very few organizations have “integrated talent management systems” and most of the vendors of such products are far away from delivering a totally integrated solution.

For more information on our in-depth research on talent management, including best practices in each of the 8 key areas, the top 22 high-impact talent processes, and benchmarks for your HR organization, read High Impact Talent Management, our groundbreaking research on this important new business strategy.