How Important is Talent Management to Business Success?

How Important is Talent Management to Business Success?
While this question seems pretty absurd to those of us in the “people business,” from a business perspective companies and their leaders answer this question each and every day by the decisions they make and the actions they take.  And we know from decades of employee engagement research that many employees certainly do not feel like their company’s greatest asset.

So how important is talent management to business success?  Should people really be your company’s most important asset? Let’s start with some definitions and research results.

The Definition of Talent Management
We define talent management as the proactive and thoughtful attraction, development, engagement, and retention of the talent required to execute your strategic plan in a way that aligns with your corporate culture.  While the overall functions of attracting, developing, engaging, and retaining top talent are quite similar across companies, what makes talent perform at a high level is unique to each company’s marketplace, strategy, and culture.

In a nutshell, talent management is all about planning your human resources strategically to build business value and support organizational goals.  If you believe as we do that having the right people in the right place at the right time can be your greatest competitive advantage, then make sure you are taking the right steps to make that happen.

Talent Management Research
Our organizational alignment research found that talent accounts for 29% of the difference between high and low performing teams and organizations in terms of revenue growth, profitability, customer loyalty, leadership effectiveness, and employee engagement.  So talent matters right?  Not so fast.

Our research also found that:

• Strategic clarity (where and how you plan to win) accounts for 31% of the difference between high and low organizations
• Workplace Culture (how things truly get done) accounts for 40% of the difference between high and low organizations

So how important is talent management to business success? Does it really come in third place when compared to strategy and culture?  It depends.

Our research found Talent Management can make an enormous difference as long as people strategies are aligned with business strategies and cultural norms. Companies that do this well:

• Grow 58% faster
• Are 72% more profitable
• Retain customers 2.23-to-1
• Engage employees 16.8-to-1

Companies that attempt to attract, develop, engage, and retain talent within unclear business strategies or misaligned cultures struggle mightily to perform.

So What Does that Mean?
Now that we have a common definition of talent management and know how it fits in with business strategy and culture – how important is talent management to business success?  In our opinion, talent management is critical to long-term business health and performance. We can only think of three instances where talent investments may be comparatively less important — especially in the short term.

• You Are a Product-Driven Company
  For example, when Apple came out with the iPhone, their business was dramatically pulled forward by the demand for their product. While Apple still needed to attract and retain enough people to meet demand, they could theoretically under-invest in people compared to other areas in the short-term and still be a success.

  While this approach would most likely have negative people and business implications in the long-term, it may work in the short-term.

• You Are a Business Model-Driven Company
  For example, when Netflix disrupted the media and entertainment industry with their subscription-based streaming video and home-grown content, their growth became exponential.

  While Netflix also seems to invest heavily in sound people strategies, they could theoretically succeed in the short-term by comparatively underinvesting in people based solely on demand for their offerings.

• Your Strategy is Not Clear Enough or Your Culture is Misaligned
  Unclear strategies and misaligned cultures make it almost impossible to get the most out of your people investments. Ambiguity allows underperformers to hide, resources to be misallocated and teams to suffer.

Your Next Steps to Maximize Talent Management Investments
To put forth a plan that will create high performance through people make sure you:

1. Have a Clear Enough Business Strategy
   Make sure you have high executive-level alignment, agreement, and commitment to the business strategy. For a strategy to be clear enough to wisely invest in talent management, it must be understandable enough, believable enough, and implementable enough to fully rally leadership and their teams behind it.

   Without a clear business direction to link to, people strategies, which often take longer to deliver results, can become quickly minimized and diluted.

2. Align Your Culture to Your Strategy
   Once your strategy is clear enough to move forward, your culture must be healthy enough, consistent enough, and aligned enough with the business strategy to get the most out of your people investments. Because people and business strategies must go through culture to get results, talent management initiatives can be brought to a standstill by an unhealthy or misaligned culture.

   Make sure you assess and align your culture before finalizing plans to hire, develop, engage, and retain your top talent.

3. Establish Capability Needs
   After your strategy and culture are aligned, your next step is to identify the critical capabilities required for the company to achieve its business goals. Top talent companies use leadership simulation assessments for high stakes roles.

   Then determine whether those skills and competencies are present, need to be developed in existing employees, or must be hired in from the outside.  This capability gap analysis provides the input to your Talent Management Plan.

4. Assess Priorities and Agree Upon Next Steps
   Resources are finite and people strategies often take time to come to fruition. Based upon the critical few strategic business priorities over the next 12-36 months, identify the major strategies, goals, and success metrics for how you plan to attract, develop, engage, and retain to execute current and future plans.

   Then ask for what you need to confidently make it happen.

The Bottom Line
So back to our initial question — “How important is talent management to business success?”  Talent management can provide you with a competitive edge as long as it is aligned with a clear business strategy and supported by a healthy, high performing, and strategically aligned culture.  Otherwise, your talent plans are probably just wishful thinking.

To learn more about how to align your talent strategies with business priorities and your culture, download The Research-Backed Talent Management Recipe for Success