The Business Case for Talent Management: Steve Ballmer Agrees

Talent management makes money.

If you are trying to build a business case for a corporate talent management program, here is some astounding data:

Of the 700+ organizations we studied in 2010 and 2011, only 7% told us that they have a “strategic talent management” program. We defined talent management in four levels of maturity:

* Silod (all HR practices operate seperately, with little standardization)
* Standardized (HR practices standardizes, but not highly integrated with each other)
* Integrated (A talent management leader in place, but integration still in process)
* Strategic (A high degree of integration with business leaders taking charge for most talent practices).

Our research found that around the world, 28% of organizations are “silo’d”, 45% are “standardized,” 20% are “integrated,” and 7% are “strategic.” This data was collected through a variety of surveys and interviews. And this maturity is very slowly improving (only 5% were “strategic” in 2009).

Now the big news.  This pays off.

Companies at level 4 are generating more than twice the revenue per employee, 40% lower turnover rates, and 38% higher levels of employee engagement. And they also spend almost twice as much per employee on HR in general. So while this costs money, it really pays for itself.

Microsoft’s Steve Ballmer proves the point.

Now let’s look at a very specific example. BusinessWeek just published a fascinating interview with Steve Ballmer, CEO of Microsoft. In this interview Mr. Ballmer discusses his growth as a leader, and explains that when he first got the job 3 1/2 years ago he believed that he could “muscle” most major decisions through the company. But Microsoft’s tremendous failures with Vista demonstrated that the company was not working well together and there were not enough empowered leaders in engineering. Today Ballmer has totally changed his management philosophy and is now focused heavily on recruiting the right leaders and making them work together.

I spent a few days at Microsoft recently and after many years I felt a whole new energy. Product groups are clearly working more closely together, the company is now heavily focused on design and usability (Microsoft’s new phone software is getting rave reviews), and I expect Windows 8 and Skype integration to be a huge home run for the company. If you read between the lines of Ballmer’s interview (and visit Redmond), you can see that this turnaround is all about talent management and leadership. And today Microsoft’s stock is at it’s highest level in three years.

Talent Management is Good Business, not just Good HR.

As we discuss throughout our research, Talent Management is not an HR strategy, but a business strategy. HR’s role is to design and promote the process, but it is up to line leaders to actually “run” talent management.  They are the “talent managers.” So until and unless you have line leaders taking charge, this is all just more human resources administration. So only 7% of companies believe they have reached this level of management maturity.

And this is not really a surprise. Organizations must continuously invest in management and leadership training, because people are always getting “promoted” into leadership without the necessary skills (67% of respondents rate their first line leaders far-behind or well-behind in the skills they need to do their jobs). And the “Right” leaders for your company are unique to your own culture, business, and strategy.

By the way, talent management is not something you copy out of a book. Your talent management strategy is unique to you. If you are a fast-growing company, you may need to focus on strategic sourcing and building your employment brand. If you are globalizing, your focus should be the integration of your recruiting and internal talent mobility program. If you suffer from low engagement and employee performance, it may be time to focus on the revamp of your performance management and development planning process.  And on and on.

The bottom line is this: companies that work on these “soft” programs dramatically outperform those that don’t. The numbers prove it.