Who Owns Talent Management?
The best-performing organizations have joint accountability between the HR leader and CFO in overseeing talent management, experts say.
By Katie Kuehner-Hebert
A new survey of C-suite executives shows there's a great divide between who should lead an organization's talent-management strategies: human resource leaders or chief financial officers.
According to a report released last month for Chartered Global Management Accountants by the American Institute of CPAs and Chartered Institute of Management Accountants, 83 percent of HR directors responded that they should be the ones to take overall responsibility for measuring the effectiveness of their organization's talent management strategy, but only 30 percent of the chief executive officers and CFOs responding to the survey agreed with that. In fact, 65 percent of the CEOs and CFOs said that the CFO and the finance team should take the lead.
No matter who ultimately oversees an organization's talent management strategy, HR and CFOs should work together, says Arleen Thomas, senior vice president for management accounting at the Durham, N.C.-based AICPA.
"HR leaders should meet with their CFOs to better understand the true drivers of their business to put them at a competitive advantage," Thomas says. "CFOs have the business acumen and ability to partner with business unit leaders to drive business objectives. With their financial background, they can also be a partner in devising accountability measures that tie talent management to business goals."
Indeed, improving the bottom line should be main driver behind talent management strategies, according to the report titled "Talent Pipeline Draining Growth: Connecting Human Capital to the Growth Agenda."
In the report, 43 percent of the CEOs, CFOs and HR directors surveyed said their companies have missed financial goals in the past 18 months because of inadequacies in human capital management. Almost the same number, 40 percent, indicated that such shortcomings -- including insufficient systems, processes or management information -- have hindered their ability to innovate.
James Donohue, a partner at Aon Hewitt's performance reward and talent organization in Minneapolis, says that in his firm's experience, the best-performing organizations have joint accountability between the HR leader and CFO in overseeing talent management.
"HR leaders need to understand what is important in their business, and they need to be able to develop metrics that are aligned with those business requirements," Donohue says. "They should report on those metrics just like financial metrics, and on a weekly, monthly and quarterly basis."
Examples of good talent management metrics include the ability to fill key positions with bench strength, the ability for the organization to resource growth initiatives and the strength of succession planning and filling the leadership pipeline, he says.
"These metrics should be jointly owned by HR and the C-suite," Donohue says.
Steve Joyce, a principal of The Hackett Group Inc. who is based in Boston, agrees that there needs to be greater collaboration between HR leaders and the CFO in devising talent management strategies. Hackett had similar findings in its Judy study, titled "Cracks in the Foundation: Closing the Critical Skills Gap Undermining Business Capabilities."
"We believe the business leaders need to take an ownership role in leading talent management within an organization; however, they don't always have consistent tools to do that," Joyce says.
"HR can provide them those tools and framework, to help clarify the talent management philosophy of the organization."
This coordination helps in situations when business unit leaders "hoard" their best talent, to the potential detriment of the organization as a whole, he says. However, HR leaders can foster a talent management approach that the entire organization "owns" the best talent, and not just particular business units.
"HR can help prepare that philosophy, but they cannot do that by themselves," Joyce says. "Their CEO needs to help them and set an example for broader business leaders to support that philosophy."
Jason Jeffay, global practice leader for Mercer in Atlanta, says that no matter who ultimately leads talent-management strategies, it's important to gather the right metrics from all parties. CFOs can provide discrete, "activity-based" metrics such as turnover rates, number of training course, pay-for-performance metrics, but that HR leaders can often bring a more strategic view to metrics, such as when it's best to tap in-house talent for promotions, and when it's best to look outside the organization.
Moreover, both HR leaders and CFOs need to make sure they are measuring the right variables when looking at the organization's business objectives.
"If you want to try and measure the impact of your talent management strategy on the organization's stock price and total shareholder return, that might be problematic because so many variables can impact those," Jeffay says. "It's better to break down what drives return to the various components, such as customer service, customer retention and sales per customer."