Why People Management is Replacing Talent Management

The Epic Shift: Away from “Talent” and now focus on “People.” Talent scarcity is still a problem, but engagement, empowerment, and environment are now the real issues companies face.

For the last ten years businesses and human resources departments have been heavily focused on building talent management strategies. Originally conceived as programs to help manage people from “pre-hire to retire,” these strategies have spawned a $10+ billion software industry, helped refocus HR departments, and have educated CEOs and business leaders about the importance of talent.

And the scarcity of talent gets worse. Just this month a New Yorker article details the emergence of “talent agencies” for software engineers, replicating the marketplace for talent agencies in Hollywood. The company discussed in the article, 10X Management, brings together top engineers and product designers and serves as a complete agency to help you find top software teams. As the world of work becomes more contingent and the disparity between highly skilled and others grows (read “The Myth of the Bell Curve” for more on this topic.), the need to attract top people will get harder.

Our latest research shows that your ability to attract talent (the right people, not just anyone) is now one of the biggest differentiating factors in business. We see a fast-growing new marketplace for tools and vendors which help you assess your culture and find people who “fit” – fit with your strategy, your culture, your team, as well as the job. New talent analytics tools and strategies now help you figure out who fits, find people who fit, and make sure you know how to keep people who fit.

With all these changes, and an accelerating need for new young leaders, is “talent management” as we define it working? As I go around and talk with business and HR leaders, I am left with a big question:

Do today’s “talent management” programs, as defined, work? Have all the companies who purchased and implemented talent management software truly transformed themselves? Have we really built the “talent-centric” organizations we talked about over the last decade?

My answer is simple: the world of “talent management” shifted under our feet. “Talent management” strategies we conceived in the last ten years are rapidly becoming out of date. A focus on “pre-hire to retire” is becoming less relevant, stack ranking and performance management is being totally revamped, corporate training is undergoing a total transformation, and the concepts of “staffing and assessment” are being replaced by a focus on corporate culture, engagement, work environment, and empowerment.

As I look back on the talent management research we did in 2005 and 2006 I realize that while most of it was important and fundamental, almost all of it has changed today. In this article I will give readers some perspective and then highlight the important trends and opportunities we have to better attract, engage, and manage people in the next decade.

History: Corporate “Talent Management” Started Around 2004

Around ten years ago (circa 2004) people in HR started talking about bringing together many of the standalone practices within HR into a new function called “Talent Management.” At that point in time the economy was growing and pundits were talking about “The War for Talent.” (I believe McKinsey started the phrase.) The challenges included aging baby boomers, a tight economy for critical skills, and the need to build leaders around the world. This set of issues refocused HR on building talent programs to recruit, develop, and better manage people.

Here is the issue we talked about over the last ten years – and it has turned out to be true (slide from 2004):

These set of talent challenges pushed HR to think differently. Rather than define itself as the “service center for employee issues” and a “service center for managers,” HR started to redefine itself as the “talent management function” for business. This was a profound shift and it set off ten years of restructuring, reskilling, and redesigning the HR function.

The original idea, shown above, was to “bring together” each of these standalone programs into an end-to-end process. Originally people called it “pre-hire to retire” (a dated, now that people change jobs so much), and it set of a big set of strategies and software vendors to try to not only optimize each step, but bring all the steps together.

The term was coined: “Integrated Talent Management” – and a set of software vendors started to build “Integrated Talent Management Suites.” We called them “suites” because they were kind of cute and novel, not really a standard software package yet.

The goals of integrated talent management were lofty: give companies an integrated view of capabilities, leadership gaps, succession pools, and even talent needs for the future. Even today this is a tough thing to do, but we have built an industry around this whole idea.

Software vendors jumped in quickly, setting off a major chain of acquisitions. I believe Authoria (now PeopleFluent) and Softscape (now owned by SumTotal Systems) started this idea, when they pitched the idea of a single software system that would integrate recruiting, performance management, compensation, and maybe even learning management. Softscape had an integrated HRMS and talent platform in the early 2000s and Authoria won the “shootout” for integrated suites at the HR Technology Conference in 2007, (which we as an analyst firm actually designed).

We aggressively jumped into research in this area, and in 1997 we published one of the reports which helped define the market, called High-Impact Talent Management. I wrote much of this report and I remember thinking very hard about what this all meant to business.

The process we discovered and wrote about, shown above, was one driven by the business. We found a few leading edge companies doing this – starting with business strategy, moving to talent strategy, and from there to HR and process design. But many started at the bottom, and focused their talent management programs on software implementation or solutions to integrate HR.

Even today this remains a challenge. With so many vendors in the market and the ERP providers offering talent management software, it’s common for companies to buy software first, and then later figure out how to use it. Today more than 40% of the companies buying HR software are focused on “making it easy to use” and integrating heterogeneous systems, not “solving particular talent problems.”

To help companies understand what talent management was all about, we developed the framework shown below (which many of you have seen). It pulled together all the practices and processes to consider in an integrated talent strategy.

As the framework illustrates, we mapped out how these processes worked together and documented many of the process steps to link each together. Today such an integrated framework is common in most HR departments, and continues to be a point of ongoing discussion.

As our framework shows, we define learning and capability management, competency management, planning, and business alignment as “uber processes” which play everywhere in the organization, and you can also see that performance management, succession, career, and leadership development make up the core. This is still a very valid process diagram, although some organizations may put talent acquisition in the middle (depending on your stage of growth.)

I distinctly remember meeting with a client around that time (2008 or so) and they said to me “what about diversity, doesnt that belong in here?” My reaction was “no, I’ve never heard anyone think of diversity and inclusion as part of their talent strategy.” Well of course I was wrong – today Diversity and Inclusion is very core to this whole set of processes (or should be).

The idea, again, was to provide what vendors sometimes call “pre-hire to retire” HR processes with an integrated set of programs that all work together. And in the early days talent acquisition wasn’t even considered a part of this process.

Today almost every major corporation has a “VP of Talent” or “VP of Talent Management” and this person’s job is to manage some combination of the HR functions shown above. In some cases the company brings performance, succession, and leadership development together. In other cases the L&D team is integrated as well. And in many companies today the recruitment or talent acquisition team is also part of this function.

2006-2012: Software Vendors Jump In With Both Feet

While all this thinking was taking place within HR, software vendors smelled an opportunity and jumped in. Following Authoria’s lead, companies that sold standalone tools for recruitment, performance management and learning management (SuccessFactors in Performance Management, Taleo in Recruiting, SumTotal or Saba in Learning) suddenly realized that they could or should have everything. So there was a very exciting 8 year period of consolidation.

This was quite exciting for all of us. Some of the deals included:

• Authoria purchased several small companies and was later purchased and became PeopleFluent.
• Taleo acquired Learn.com and was later acquired by Oracle. Oracle later purchased SelectMinds to expand its recruitment offering.
• SuccessFactors acquired Plateau and was later acquired by SAP.
• ADP acquired Workstream and built out its own LMS and talent paltform, and has since launched integrated analytics and benchmarking as part of its talent management solution.
• CornerstoneOnDemand expanded from LMS to talent management and later acquired Sonar6 and then Evolve (analytics).
• Stepstone acquired a variety of software companies, extended itself into end-to-end talent management, and renamed itself to Lumesse.
• Silkroad acquired a variety of companies including an HRMS company and built out a suite, pioneering the idea of the HRMS being part of this “suite.”
• Saba and SumTotal (LMS companies) acquired smaller companies to build out their end to end talent suites.
• Halogen Software, Kenexa, and many others went down this path – creating an industry of “integrated talent management software” companies.
• IBM acquired Kenexa and is going down this path now, and Salesforce has made some efforts through their acquisition of Rypple and launch of work.com (which has been repositioned for sales forces today).

This entire industry has become huge, with more than $9 billion of total product revenues in the market each year. Today the whole concept of a “suite” is going away and the ERP vendors have jumped in. Almost all the ERP vendors have built or bought similar products to integrate with core HR systems (HRMS).

As those of you who work in the software industry know, this is the food chain of software companies. As a market evolves, bigger vendors with larger sales forces and lots of existing customers buy up smaller companies because they can quickly put these new products into their sales channel, rapidly growing that market.

Integrated Talent Management Software Market Defined Itself

Over these 10 years this market “defined itself.” Vendors grew and many went public (most were acquired). The ones remaining are still looking for exit strategies to become acquired, go public, or find ways to keep growing. In a sense what happened to “talent management software” is identical to what happened to CRM software – the original markets of “sales force automation” and “marketing automation” were converged into a new category, which eventually became dominated by major players.

I firmly believe, by the way, that the evolution of this market has been very good for business. Today, while the market is more commodity like than ever, companies can buy an integrated talent suite quite easily and most of it will work pretty well (still lots of little holes here and there).

As the core features of these systems have commoditized, innovation is threatening the space again. Today vendors are building embedded analytics, mobile tools, time and labor management, and soon employee engagement monitoring and management tools embedded into the suite. (Read my article on the Ten Disruptions in HR Technology for more.) I expect another ten years of innovation, with new billion dollar vendors to be created.

Today The World Has Changed: Integrated Talent Management Is No Longer The Problem

As we reflect on the last ten years, its clear the world has changed. While integration is still a big topic in HR (particularly in technology) and most bigger companies are moving toward building more integrated HR technology strategies, this whole market has shifted. Integration of the core HR processes, once considered the nirvana of talent management, is not the top of mind issue today.

In fact today, whether we like it or not, everything in HR is connected. Since those early days we now have ubiquitious social networking, total connectivity across all people and systems, and a porous talent system that leaks and collects data from the outside world like never before. Our recruitment, employment brand, and even employee engagement is extended into the public internet, so our internal systems and data no longer stand alone.

Today, while core talent programs must still work together, we need to consider the whole “ecosystem” of talent issues in our strategies, programs, and systems.

And there are some new, even more important things to consider.

Engagement, The Overwhelmed Employee, Analytics, Work Simplification, and The Quantified Employee

And those original building blocks of talent management are no longer enough. Today companies not only face leadership and skills gaps, they face new challenges: employee engagement is at an all time low, retention scares everyone, and companies are just now starting to grapple with the issue of what we call The Overwhelmed Employee. Companies are struggling to figure out how to make work “easy” and “humane” given the fact that the barriers between work and life are all but gone.

Also, as I mentioned earlier, the topics of diversity and inclusion are top of mind. Silicon valley firms are now embarrassed at their male, youth-dominated culture – yet it’s very hard to change. Today businesses need to focus on building a diverse, inclusive, and humane work environment – topics we never talked about ten years ago.

Performance management, once considered the core of all this, is now being totally redesigned – with a focus on much more simplicity, coaching, agile goal management, and developmental feedback. And I firmly believe that real-time engagement monitoring and what I call “The Quantified Employee” is going to become a huge topic in the next year or two.

What about talent analytics? We thought about it a little in 2008 but now it’s the #1 new program on the mind of most HR teams. Today’s analytics, as we have written about extensively, is far more than the “HR Analytics” talked about in the 1990s and 2000s – this is a brand new “people analytics center of excellence” that looks at all aspects of people and how we hire, manage, recruit, and retain people based on hundreds of data attributes. And I believe people analytics will rapidly integrate with financial and other business analytics, letting businesses understand the people issues behind all major business challenges (ie. sales productivity, product quality, customer retention, etc.).

So my point is that the original idea of “integrated talent management” is really no longer the problem. We have to accept that everything is related – and now, rather than think about “integration” we need to focus on how we “drive talent outcomes.” We have shifted away from thinking about all the internal HR issues we have toward an outward focus on “solving the talent problems in my company.”

Executives and Business Leaders Want Results. This is HR’s New Job.

Here’s what we see. Today, as the economy picks up and companies are competing for people again, businesses want HR tools and systems that directly drive employee engagement, help improve employment brand, and platforms that harness and reach out into the internet to find, source, and attract candidates. They want learning software that builds a compelling self-directed digital learning environment, and they want goal management tools that are agile, easy to use, and help people develop.

I would suggest that most of the big issues you face in your company fall into one of the 9 boxes above (with the bottom box there to define some of the environmental issues to address). Today CEOs and business leaders just want you to address these topics – and do it in an “integrated way” with a modern and high-impact HR service delivery model.

And on that topic, our research clearly shows that HR has to “get out of the way” and spend more time in the business giving business leaders simple and effective tools, not building complex multi-step business processes which nobody has time to do. (Only 8% of the companies in our Global Human Capital Trends research think their performance management process, for example, is worth the time they put in!).

Talent Management Software Drivers Have Changed Too.

Companies still want integrated HR systems, but what they don’t want is complex, integrated ERP software that makes everyone’s life more complicated. In fact, they want life to be more simple. More than 40% of the companies we just surveyed in our upcoming Human Capital Trends study are embarking on projects to “simplify the work environment.” 47% of the people we surveyed who are buying new HR software systems cite “ease of use” and “integrated user experience” as one of their top two buying criteria.

How About The Word Talent Itself: I Suggest We Change to “People”

Finally, as we consider how talent management has changed, let’s talk about the word “talent.” I remember when we first started using the word, HR staff used to say “we don’t recruit talent, that’s what Hollywood does.” Well now everything in HR is about the “talent” and the word has started to become a little meaningless.

Are we all just “talent” to be used by our employers? Are we defined entirely by our skills and ability to drive results or do work for the organization?

While everyone is here to drive results in some fashion, I would suggest that thinking of people entirely as “talent” has become a limiting concept. Of course we want to hire, train, develop, and lead people so they deliver results – but today we have to reflect on the fact that each individual who works for us (and many more are contingent each day) are actually individual people, coming to work for their own particular reasons.

For example, most companies no longer think about people from “prehire to retire” any more. As Reid Hoffman discusses in his book The Alliance, we hire people like we hire professional athletes. They work for our organization as long as it is valuable for both parties, and then people move on. If you’re highly skilled and successful in your career, you’re getting job offers in your in-box, so you’re always an “active candidate.” You are definitely “talent” – but you may or may not feel committed to your employer over a long period of time.

And unlike professional athletes, most of us don’t “sell our skills” to employers, we volunteer our efforts at work every day. We come to work because we like it (hopefully), and the compensation and benefits we receive is only one of the many reasons we show up. We have outside lives, personal career goals, individual passions, and we want to be creative. I would suggest we are more than just “talent,” from a management perspective – we are simply “people” – just like our customers are “consumers.”

We know this shift has happened because all our research shows that engagement and retention has become one of the biggest issues in business today (followed very closely by the need to give people education, training, and development). If we can’t create an environment that attracts you and others to the organization, you go elsewhere. This is why new tools to understand the drivers of engagement, analyze and predict retention, and manage flight risk are among the hottest new areas of HR. (The annual engagement survey is rapidly becoming obsolete.)

So I would suggest that we, in HR, start to think about employees as “people” – and this is why more and more companies are starting to rename their HR organizations things like “People Operations” or “People Management.” Sure we have to do HR administration, but ultimately our job is to make sure “people” are engaged, trained, in the right jobs, aligned, and supported.

Think About Employees as Consumers or Customers

If we start to think of their employees as “people” or consumers (ie. they can always go elsewhere), then all of a sudden we think about “talent management” in a new way. It’s not just a way to integrate HR processes, it’s a series of strategies, programs, investments, and promises that make everyone’s life, work, and career better for them (not just the company). This is where work is going – we now work in a world of independent free agents, each of which is like a voluntary “consumer” who may choose to stay or leave.

Bill Jensen, an entrepreneur who has written on work simplification, just finished a large study of work he calls “The Future of Work – Search for a Simpler Way.” It’s a great read, and what he talks most about is how passion is the new driver of employment success.

The Deloitte Center for the Edge recently publishes a series of papers on worker passion, and they also explain that only around 13% of the world is truly “passionate” about their work. These “passionate explorers” absolutely love their work, and they are responsible for many of the most innovative products and services we have.

BCG’s Rainer Strack did research on 200,000 employees over the last few years to look at drivers of engagement. As he states in his TED video:

What are the job preferences of these 200,000 people? So, what are they looking for? Out of a list of 26 topics, salary is only number eight. The top four topics are all around culture. Number four, having a great relationship with the boss; three, enjoying a great work-life balance; two, having a great relationship with colleagues; and the top priority worldwide is being appreciated for your work. So, do I get a thank you? Not only once a year with the annual bonus payment, but every day. Our global workforce crisis becomes very personal. People are looking for recognition.

Eric Schmidt and Jonathan Rosenberg, in their new book How Google Works, call this group “smart creatives” – people who are intelligently connected to their work and they constantly learn, study, experiment, and create. Most of Google’s products are created this way, and the company actively incents people to create and re-create every day.

This is not the “talent management” or “integrated talent management” we’ve been talking about in the past. This is something more. We may call it “people management” or maybe even “creating a people environment.” The company creates a definable culture (driven from leadership), hires against that culture, empowers people to deliver, and holds them accountable to results. And the scaffolding around this includes a great work environment, lots of development opportunities, great benefits and pay, and a culture of inclusion and coaching. These are all things which HR talks about, but they go well beyond “integrated talent management.”

I am not sure what to call the “next stage” of talent management, but for want of a better phrase I think it’s something simple like “People Management.” (I would love your ideas for a new phrase). It means building an organization that is designed for “people” not “talent,” one which is forgiving, transparent, developmental, and still holds people accountable. It’s not an “up or out” culture, but rather one of “we can all succeed here if we are all on the same page.”

The Traditional Talent Management model vs. People Management Concepts

Is “Talent Management” dead? Of course not. The concepts and principles are not going away. But as an area of focus, we in HR have to think more broadly. “Talent Management” is now “People Management” and it has to take on a much broader perspective and holistic approach.

We need a much more holistic view of how we manage people, one focused on each individual as a voluntary consumer, and a strategy which builds a culture of focus, inclusion, support, and results.

• In “talent management” we think about lifetime career management and “pre-hire to retirement. In “people management” we focus on mobility, job to job transitions, and constant and regular movement of people to new projects and assignments.
• In “talent management” we focus on the integration of HR practices across the lifecycle of an employee. In “people management” we focus on making employees happy, giving them a highly engaging and enjoyable work experience, and giving them software tools that make their work easier, not just tools for HR.
• In “talent management” we focus on identifying the “top talent” and segmenting, ranking, and rating people based on performance and potential. In “people management” we focus on everyone’s strengths and find roles that help people leverage their skills, empowering them to add value wherever we can.
• In “talent management” we put together career ladders and progressive training programs that take you from place to place. In “people management” we assume that people want to learn all the time and in their own way, so we create an entire “learning environment” to help people continuously develop and learn at work.
• In “talent management” we segment people and reward them based on performance, with narrow bands of compensation. In “people management” we reward hyper performers with tremendous rewards and try to make sure everyone is rewarded based on their potential market value, not just their performance rating.
• In “talent management” we think about people in terms of the way they add value to the company, training and focusing them on what the business needs. In “people management” we focus on each individual as an “owner” and try to create an environment where they feel part of the mission and give them flexibility to add value in unique and special ways.
• In “talent management” we create talent pools and try to group people into segments and clusters to manage them better. In “people management” we embrace and honor diversity and realize that every person is unique and try to remove unconscious bias and empower people to thrive in their own way.
• In “talent management” we buy software that integrates all of HR together into an “integrated data platform.” In “people management” we buy software that empowers people to do their jobs better, is very easy to use, and is a “system of engagement.”

The shifts are profound and subtle at the same time. Ultimately what has happened is that employees are now “in charge” and we as HR or business leaders have to think about building a company or organization that honors and empowers everyone. Sure some people won’t fit, so we need to assess and focus on fit more than ever – but once we hire someone into the company, we want to build an organization that engages and empowers them to succeed.

Key to today’s working world is a focus on the team: hands-on managers who empower small teams, teams who work well together, and people who fit and want to be part of the team mission.

Finally, about Employee Engagement: Becoming Simply Irresistible(tm)

I”ve had the opportunity to think about this for quite some time now, and the best way I have been able to explain it is to rethink the organization as one that “attracts” and “engages” people as its mission. We still set goals and hold people accountable for results, but we do it in an empowering way, with a focus on finding the right people who fit our mission, environment, and goals.

One of the tools I’ve been working on and sharing with you over the last year is what we call building the “Simply Irresistible” organization, a company which appeals to each individual in their own special way. (A book on this topic will be coming in 2015/2016.) As this chart shows, there are a lot of interconnected “people issues” to consider as we build organizations which thrive.

We can look back over the last ten years and see amazing progress in business, technology and HR. Today leaders face new people challenges, forcing us to redefine and extend what the original “integrated talent management” tried to accomplish.

So is “talent management” dead? As defined in 2004, I’d say it is – but rather than throw it all away, let’s take what we’ve learned and evolve it into something even better. Whether you are a leader, manager, or HR professional, we need our organizations to succeed. Building on what we’ve learned and focusing on the new topics of fit, engagement, empowerment, and culture will help us move our teams forward. It’s and exciting time to work in the people side of business – I hope you continue to share your thoughts with me as we all move into a new year.

I look forward to your thoughts and comments, and I look forward to sharing much more on this topic in the coming months.