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Affecting the Bottom Line
A new study adds to the growing body of evidence that talent management has a profound impact on an organization's bottom line. The question is, what are organizations going to do about it. The study conducted by IBM and Washington-based Human Capital Institute shows that while 84 percent of organizations know that workforce effectiveness is important to achieving business results, only 42 percent of those surveyed found managers devote sufficient time to people management. The study, Integrated Talent Management, was based on research with 1,900 individuals from more than 1,000 public and private organizations around the world. The study focused on talent management practices such as understanding future workforce needs, effectively deploying talent to deliver maximum benefit to an organization and determining how mobility at work can help recruit and retain top talent. "Nothing I see in this study surprises me," says Bob Kustka, CEO of Fusion Factor, a Boston-based workplace-productivity consulting firm. "Organizations still haven't equated talent management with the bottom line. "Organizations need to treat talent management as a major purchasing decision," he says. "You wouldn't go out and build a new manufacturing plant and not maintain it, but that's often what happens with people who are hired." Allan Schweyer, HCI's executive director, says the most revealing part of the study was the lack of talent-management initiatives at what the study's authors described as "corporate adolescents" -- organizations with between 1,000 and 10,000 employees that "appear to be too large to be able to manage informally and too small to have the necessary managerial focus or human capital infrastructure." Yet if HR professionals are well aware of the importance of talent management practices, why aren't those practices widely implemented? Schweyer points to Pfeffer's "Knowing-Doing gap." While most HR leaders know the importance of talent management practices, they often do not have the time, will or executive support to execute them. While HR leaders often hear the need to be more strategic, years of cost-cutting and efficiency measures have burdened many with administrative tasks that consume time, resources and motivation, Schweyer says. Tim Ringo, vice president and IBM global human capital management leader in London, says that HR leaders at adolescent companies need to advocate for a companywide integrated talent-management plan that formalizes how the organization will recruit, develop and retain workers over time. Further, Ringo emphasizes the need for HR leaders to clearly make the case that talent management will deliver a solid return on investment by sharing with company executives internal measurements and external studies that validate the need for an integrated talent-management program. "Think about the measurements a CEO or CIO needs to make strategic business decisions," Ringo says. "How much more effective would an HR operation be if the leaders have the same analytics to make informed HR decisions? HCI and IBM believe the competitive and global environment in which we work today demands the same rigor." To that end, Schweyer stresses that the new study should not be viewed as "shelfware" and includes clear recommendations for HR leaders. Schweyer says that adolescent companies stand to get the most benefit from the recommendations, but the advice is valid for all organizations, large and small. "We tried to identify a lot of low-hanging fruit that can deliver quick wins," Schweyer says. "We recommended things that can be done quickly at a low cost." For instance, organizations can clearly align, or map, performance reviews, goals, expectations and rewards to corporate objectives. In addition, organizations can identify HR and talent management metrics so progress can be measured and investments made based on solid data. "That doesn't necessarily mean a massive effort to track dozens of complex measures," Schweyer says. "A handful of meaningful, measurable metrics are enough to start." Schweyer says the study recommends using software and technology in tandem with talent management practices to achieve the maximum benefit. Other key findings in the study included: * Organizations that apply talent management practices demonstrate higher financial performance compared to industry peers. Leading companies understand and act on employee engagement and align recognition and performance-management systems. * Organizations find it difficult to apply workforce analytics, with only 40 percent accurately forecasting skills needs and 49 percent providing the tools needed to effectively promote collaboration. * Knowledge and service intensive industries, such as electronics, technology and professional-services firms, are more likely to apply talent-management practices, while the public sector significantly lags in such use. "This study clearly calls for the same rigor in talent analytics and management that CEOs and CIOs require to make the strategic decisions their companies depend on," Ringo says. "The challenge laid out to IBM's clients is to treat their most valuable asset -- their people -- as their most competitive edge." HCI's Schweyer cautions that companies that cut back on talent management because of the slowing economy are making a mistake. During the last three recessions, he says, the unemployment rate for knowledge workers has never risen above 3.5 percent, and is currently about 2.2 percent. The good news, Schweyer says, is that many companies have "learned from past mistakes" and are not slashing training budgets. In addition, organizations have become more strategic about who gets a pink slip in tough times. "It's still so hard to get good talent, that many companies are loath to let it go," Schweyer says. Chris Majer, chief executive officer for The Human Potential Project, says the study "validates what informed observers have been saying for the last 20 years" about the importance of talent management. "It's a fairly typical platitude that 'people are our most important asset,' but no one does anything about it," Majer says. Majer advocates a "whole new interpretation of leadership and management" saying that the current model is outdated and irrelevant. "We have to completely change the game when it comes to talent management," Majer says. "If I'm an HR person I'm going to plunk a study like this down on the boss's desk and say we need to do something about this. If you can build a business case, and demonstrate ROI then it should be no problem."
September 3, 2008 Copyright 2008© LRP Publications |
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