Making talent management a reality

by 06 Feb 2007

Talent management is an oft-abused catchphrase for HR professionals, but converting the rhetoric into reality often proves challenging. What are the key elements of a good talent management strategy? Angus Kidman reports

Defining the scope of talent management can be a tricky task. Forrester Research defines a talent management system as any package that “allows HR professionals and management to assess employee performance and competencies and align high performers into career paths and succession plans”. In practice, however, those functions can intrude into almost any area of HR management, both in terms of technologies chosen and in overall strategic planning.

Indeed, the emergence of talent management as a separate technology category can partly be ascribed to the success of HR departments in successfully creating basic technology systems to streamline processes such as payroll and leave management. “Once systems are automated, little benefit is achieved in re-automating as new technologies emerge,” Gartner analyst James Holincheck notes in an overview of the market. “The HR community, in a continual quest to remain relevant and innovative, has turned its attention to strategic talent management processes.”

There may be frequent debates as to just what talent management encompasses, but there’s broad agreement that it’s an issue that is becoming increasingly central to the HR function. ORC Worldwide’s 2007 HR priorities survey found that 61.7 per cent of HR managers identified talent management as the most pressing concern for the year ahead. In addition, 33 per cent of the executives who responded to the survey saw talent management as likely to consume the most time for senior HR managers.

That move is being driven both by increasing technological sophistication and growing competition to attract skilled workers. “The real driver for this focus on talent management is that companies have not only recognised the value of talent as a competitive advantage, but they are developing the tools and processes that help optimise organisation capacity and performance,” ORC president Robert Freedman says.

A survey of 150 UK HR managers by Taleo uncovered similar concerns in the areas of both acquisition and retention. Twenty-nine per cent saw hiring new talent as a major problem, while 37 per cent thought retaining existing employees would be the biggest challenge.

Those high levels of concern have seen sharply increased sales for talent management systems. According to Forrester Research analyst Paul Hammerman, the overall human capital management market is worth more than $US3 billion per annum and is growing faster than 7 per cent a year. Specific talent management solutions account for a relatively small 9 per cent of that sector, but are growing much faster, at more than 20 per cent a year. “Performance and talent management is the hottest segment,” Hammerman notes in a 2006 report.

Rival analyst IDC sees a slightly more modest growth rate of 10 per cent a year for the segment, but still predicts significant activity. “The focus will turn to managing talent as a key area for expertise,”says IDC analyst, Lisa Rowan, in a research note on the market. “With a scarcity of resources in both the North America and Asia-Pacific regions, buyers of HR services will seek consulting services to better scope their talent risks and identify top performers and look to outsourcing as a strategy to do more with less.”

One other factor driving the use of talent management is the necessity of complying with legal and business requirements in the area of compensation, particularly with senior executives. Companies are also increasingly boasting of the role talent management plays in employee satisfaction as they promote themselves to shareholders. Comments from the Commonwealth Bank’s annual report are fairly typical in this respect: “There have been solid people engagement improvements driven from the ‘Which new Bank’ program. This result is supported by enhanced employee satisfaction readings, key culture change measures, a continuing safety improvement focus and the implementation of enhanced leadership, performance management and talent management frameworks”.

Technology evolution

While the broader HR management software arena has increasingly been dominated by a handful of major players, talent management still remains a vibrant market, with numerous specialist providers. However, there is an increasing trend towards talent management suites being created, which incorporate multiple aspects of talent management in a single package (see the side box on page 12 for listing of core elements that should be included in such a package).

Such suites may take time to be adopted. “Initially, this functionality will be most appropriate for sophisticated buyers,” Gartner notes in a recent commentary. “Simple buyers will wait for solutions to become more proven and for costs to decrease. However, within five years, we expect that this will be required functionality for all mid-market organisations.”

Online delivery in a services model is also becoming common. “We are seeing significant adoption of SaaS [software as a service] in compensation management,” Gartner’s Holincheck says. “Historically, talent management applications, such as succession management and learning, have been primarily perpetual licence buys with on-premise implementations. The merging of performance management and succession management solutions has made SaaS more accepted in succession management.”

The use of external providers can also help speed delivery of a service, as well as providing easier access to external data to benchmark progress. ANZ, for instance, is working with Alexander Mann Solutions to roll out its talent management and recruitment solutions.

Redeveloping approaches to software delivery can also lead to a quicker project payoff. National Foods’implementation of Taleo’s talent management software achieved ROI in less than six months.

The talent management software deployment process can still be time consuming, especially in larger companies. Hewlett-Packard’s selection period for a global talent management solution for its workforce took over seven months. Multi-country deployments are particularly challenging, as these will need to take account of differing language requirements and cultural factors.

Talent management at Dell

PC manufacturing giant Dell prides itself on its employee retention strategies, and boasts of its appearance on the Hewitt Best Employer in Australia and New Zealand list for two years in a row. Talent management software systems - delivered largely via a web-based interface - have played a crucial role in that strategy.

"As you'd expect from a technology company, web-based tools play an important role - we pride ourselves on eating our own cooking," corporate communications manager Paul McKeon explained. "Arguably the most important of these supports our six-monthly employee opinion survey, called Tell Dell. We also use web-based tools for a variety of other people management functions, including performance planning and management and career development."

"The web allows us to survey each and every employee in the world at the same time, twice a year. We're able to see the results of the survey virtually as soon as the survey closes and begin to review the feedback and make plans to address the opportunities and challenges it represents. That would be difficult, if not impossible, on this scale without technology."

However central, the technology is only viewed as a means to an end. "Dell managers understand this feedback from teams is an important factor in how the business assesses their own performance," McKeon said. "They understand that how they achieve targets is considered as important as achieving the target itself."