The Amazing Business Impact of Superior Talent Management

For the last several years HR and Corporate Training managers have been desperately seeking ways to cost-justify their increasing investments in talent management programs, processes, and systems. And many vendors have tried to develop cost-justification models and case studies which prove its business impact.

Today, with our launch of the 2009 Talent Management Factbook®, we have some data which really puts this subject to rest.

First as a preface, let me state that all our research over the last five years has continuously shown that enduring organizations, those which survive dramatic business changes and shifts in market demand, all benefit greatly from an integrated and strategic approach to talent management.   Many fast-growing companies (e.g. Google, Microsoft, and others) manage to grow exceedingly well during good product cycles despite a lack of integrated talent programs.  But over decades, and during transformational times (like now), the companies that thrive and reinvent themselves all have shown to have deep investments in business-driven talent strategies.

The Talent Management Factbook® describes what all these process are and how they work – and of course we are talking about integrated leadership development (driven from the top), an end-to-end approach to succession management and talent mobility, a focus on organizational-wide learning, and a set of performance management and employee development processes which focus on coaching, assessment, fit, and engagement.   More sophisticated approaches include talent segmentation, workforce planning, and career models which define core capabilities across all HR processes.

Our research here shows, as did our High Impact Talent Management research in 2006, that Enduring Organizations, those that survive many business cycles like the one we are experiencing, rely on these practices for survival and prosperity.  Case studies in our research library detail how companies like GE, Caterpillar, Aetna, Rogers Communications, Chevron, Cisco, Accenture, and others use these strategies to thrive, even today.

But to those of us who are not “HR Geeks,” these terms are just jargon.  And so one of the biggest challenges HR leaders have is translating these talent management programs and investments into real business strategies which drive financial returns.   And  today, with most businesses far behind their financial goals, designing and implementing talent management program is harder than ever.   (Far too many talent management programs focus on revamping the performance appraisal process, for example, which is still one of the most disliked HR programs among line managers.)

So here is some data you can use to help convince yourself, your HR leadership, and your business leaders that this investment pays off.

Some Key Findings from our Research Among nearly 800 Global Organizations

1.  Talent Management maturity varies widely across organizations, but is improving drastically. Today our research among the nearly 800 companies that worked with us on this research (conducted with the help of HR Executive Magazine):

• Approximately 5% of organizations are in the advanced stage of talent management, with a senior leader in place, multiple years of experience, and a second or third generation of processes well deployed;
• 41% are in the intermediate stage:  they are developing and implementing strategies which are well defined and have some mature processes already in place;
• 40% are in the novice stage:  they have the beginnings of a plan and are starting to design and implement some programs;
• 15% have not yet started anything at all.

These percentages, by the way, show a tremendous improvement in maturity from 2008:  in 2008 26% of our respondents had no strategy at all.

2.  When we look at the organizations which have intermediate or advanced strategies, they are experiencing tremendously greater business returns than those which are not.

After carefully correlating these findings against a wide range of business and HR data (available in the Talent Management Factbook), we found that these  “talent management leaders” are just better-run organizations.

For example:

• They have 17% lower voluntary turnover rates
• They have 41% lower turnover rates among high performers
• Their median revenue per employee is 26% higher
• They are 28% less likely to have had a major layoff in 2009
• They are 109% more capable of retaining high performers
• They are 87% more capable of “hiring the best people”
• They are 92% better at “responding to current economic conditions”
• They are 144% better at “planning for future talent needs.”

Our data shows that these organizations are far better at planning, managing people, building a learning organization, and redeploying talent to the most urgent and pressing areas.  Their financial returns are higher and they are responding better to the traumatic changes around us.  Why is all this happening?  Because these organizations have made the investment to build the end-to-end talent programs which assess, develop, coach, and move their people rapidly and effectively.  In tough economic times, when the organization needs to reinvent itself, these types of programs pay for themselves hundreds of times over.

This is the third year we have conducted this type of study, and the findings of this research are very important to business and HR leaders around the world.  The details of this research is available to our Research Members and you can also purchase this report online.

I look forward to your comments and feedback on this research.

Note:   “Enduring Organizations” are those which survive multiple economic downturns and have proven their ability to transform their businesses as markets, technology, and the workforce changes.  We first talked about Enduring Organizations at IMPACT 2008 and our research shows that these companies redefine themselves over time from “product and service” companies to “talent companies.”  Watch for my upcoming book on the Seven Keys to Enduring Organizations which should be available this Fall.