Talent management is the process through which employers anticipate
and meet their needs for human capital. Getting the right people
with the right skills into the right jobs - a common definition of
talent management - is the basic people management challenge in any
organization. Talent management often focuses on managerial and
executive positions, but the issues apply to all jobs that are hard
The decisions you make about talent management will shape your
organization's competencies and its ultimate success; from the
perspective of the people who work for you, these decisions
determine the path and pace of their careers. Talent management
practices also can have a crucial effect on society. The lifetime
employment model of the post-WWII generation, for example, provided
the economic stability that created the American middle class.
Failures in talent management may be more recognizable than the
concept itself. Those failures include mismatches between supply
and demand: having too many employees, which leads to layoffs and
restructurings, and having too little talent, which can lead to
talent shortages. These mismatches are among the biggest challenges
that employers face. Over the past generation, corporations in
particular seem to have lurched from surpluses of talent to
shortfalls and back again. Something is wrong with this picture.
Talent management practices, especially in the United States, fall
into two equally dysfunctional camps. The first and most common is
to do nothing - making no attempt to anticipate your needs and
developing no plans for addressing them. This reactive approach,
which effectively relies on outside hiring, has begun to fail now
that the surplus of management talent has eroded. The second
strategy, which is common among older companies, relies on complex
bureaucratic models of forecasting and succession planning from the
1950s - legacy systems that grew up in an era when business was
highly predictable. These models fail now because they are
inaccurate as well as costly.
Indeed, a recent survey reported that roughly two-thirds of U.S.
employers do no planning for their talent needs. For such
organizations, every new need for talent presents a serious
disruption. Every employee who quits represents a calamity, and
every new demand for skills represents a crisis. A company that
does no planning - does not manage its talent - basically waits for
a need to develop or current employees to leave and then hunts for
We need a new way of thinking about the challenge of talent
management. The first step is to be clear about the goal. Talent
management is not an end in itself. The goal of talent management
is to help the organization achieve its overall objectives. In the
business world, that objective is to make money. And making money
requires that you understand the costs as well as the benefits
associated with your talent management choices.
Helping the organization achieve its goals begins with recognizing
that the most important problem faced by virtually all employers is
the need to respond quickly to changes in competitive environments.
Employers now change strategies, structures, and operations quickly
and repeatedly in response to customer demands, competitor
innovations, regulatory changes, and other outside factors. The
developments driving these responses are difficult to predict, and
mistakes in responding - waiting too long to change or planning for
circumstances that fail to pan out - are costly.
In this context, the fundamental problem for organizations is to
manage risk, which we can think of as the costs associated with
events that are uncertain or at least difficult to predict.
Business risk, driven especially by uncertainty about business
demands, translates directly into risk for talent management.
The greatest risks in talent management are, first, the costs of a
mismatch in employees and skills (not enough to meet business
demands or too much, Continuedleading to layoffs) and, second, the
costs of losing your talent development investments through the
failure to retain employees. These risks stand in the way of the
ability of your organization to meet its goals.
The new way of thinking about talent management is neither the
bureaucratic models of planning from the 1950s nor the free agency
model of the 1980s and 1990s, both of which were rooted in unique
and transient circumstances. This new approach represents a
balancing of interests - between internal development and outside
hiring, between the interests of employees and those of the
Fundamental to this new model is acknowledging the uncertainty that
appears to be a permanent part of the business world and being able
to respond and adapt to it. That acknowledgment means that you
cannot rely on the assumption that drove the old models of
workforce planning and talent management - the assumption that you
can forecast away the uncertainty and plan years or decades into
Fortunately, you do not have to invent a set of new practices for
responding to uncertainty and risk. Many of the challenges in
contemporary talent management are analogous to problems already
analyzed in the field of operations research. For example, the
issues in managing an internal talent pipeline - the ways employees
advance through development jobs and experiences - are remarkably
similar to those involved in moving products through a supply
chain. In both cases, the significant challenges are to reduce
bottlenecks that block advancement, to speed processing time, and
to improve forecasts of need and thereby avoid mismatches.
Other techniques from economics allow you to better manage the
return on your investments in development, especially in an
environment where employees have a market for their skills and your
key concern becomes retention. One of the great conundrums in
business is that even though executives acknowledge the importance
of employees in theory - "people are our most important asset, and
we really mean that" - in practice they often disparage, or at
least ignore, the management of people. It has been difficult for
them to see how most human resource practices relate to the issues
on which they focus: the business strategy challenges that define
the direction of organizations and the ways they compete.
Traditionally, internal talent development practices have been so
long term in their orientation that they are disconnected from the
immediacy of contemporary business strategy decisions; the outside
hiring model is reactive (after problems occur), becoming an
execution issue that often disappoints not only because of its
costs but also because it lags the need for talent.
This new way of thinking about talent management connects it
directly to business decisions. In virtually every organization,
people are the biggest component of costs and the source of the
most important competencies, so it is crucial to adopt approaches
to manage the risks associated with talent issues in helping your
organization manage overall business risk. The ability to get the
right people with the right skills into the right jobs in a
cost-effective way makes it possible for an organization to adjust
and respond in the strategy arena.
This approach to talent is strategic in the two most important uses
of that term in business: it involves choices or strategies about
managing human capital that must be made based on each
organization's needs, and those choices also relate directly to
business strategy. If done correctly, talent management feeds into
the process of strategy formation by outlining the possibilities
for those who are making business decisions.