Organizations, instead of running themselves, require employees with a diverse mix of “abilities, intrinsic gifts, skills, knowledge, experience, intelligence, judgment, attitude, character, drive, and ability to learn and grow; collectively called talent” (Michaels et al., 2001, cited in Beechler & Woodward, 2009, p. 274)” to do the same. However, “sustaining this talent is more challenging than creating it, considering the dynamically complex and perilous global business environment, that most of the companies operate in, thus, necessitating a carefully crafted talent strategy or talent management process, on their part, that precedes every other organizational strategy, 24*7, regardless of the prevalent business conditions” (Khatri et al., 2010).
“The severity of the 2007-2009 recession, largely attributed to developments in the housing and financial markets” (Shomali & Giblin, 2010, p. 16), “has exposed the shortcomings of the talent planning and management capabilities of many organizations to effectively face and combat the future challenges that lie ahead” (Khatri et al., 2010).
This literature review attempts to provide a bird’s eye-view of those pitfalls, while trying to analyze the nitty-gritties of successfully managing an organization’s talent pipeline amidst such unpredictable business conditions, with an unwavering focus on the required level of strategic thinking, with respect to both people management and fundamentals of HRM practices.
Technically speaking, “talent management, is a framework of tightly integrated HR processes such as recruitment, management, assessment, development and maintenance of an organization’s most important asset or resource i.e. people, that assists in making informed decisions that support the strategic objective of being profitable and successful” (Khatri et al., 2010). Strategically, it is defined “as activities and processes, including the development of a differentiated human resource architecture that facilitates systematic identification of the key positions (including both top management and lower management teams), and filling them up by a talent pool of high potential and high performing incumbents who ensure their continued commitment to the organization and differentially contribute to its sustainable competitive advantage” (Collings & Mellahi, 2009). Though, “the process emerged in the 1900s and continues being used, with more companies increasingly realizing their employees’ talents and skills as crucial to driving their business success, the corporations still have not been able to embrace it fully” (Khatri et al., 2010), primarily due to the following two reasons:
- Firstly, for many companies, “the concept of talent management remains largely unclear, as depicted in both academic and practitioner literature” (Collings & Mellahi, 2009). Lewis & Heckman (2006 cited in Collings & Mellahi, 2009, pp. 306-308) in a recent paper concluded that there is, “a disturbing lack of clarity regarding the definition, scope and overall goals of talent management; identifying three streams of thought revolving around the concept; firstly, those substituting human resource management with talent management by just rebranding HRM practices like recruitment, leadership development, succession planning etc.; secondly, those emphasizing the development of talent pools through focus on management of employee needs and their formal progression using hierchical positions; and finally, those focusing on the management of talented people, arguing that all roles within an organization should be filled up with A Performers or topgraders, while the C Players or consistently poor performers should be managed from outside”. Despite its high appeal, the third definition does suffer from the limitation of “frequently neglecting and reducing individual, team and organizational performance, in the process of taking care of ‘star peformers’, as seen in the case of Enron, which collapsed due to its erroneous policy of inordinately rewarding and promoting, regardless of seniority or experience, its top employees sorted into ‘A group’, against the ‘B & C group’ employees, thus, putting even the customers’ and shareholders’ needs on hold” (Beechler & Woodward, 2009). Another evidence of its conceptual confusion comes from a survey conducted in UK by CIPD (2006 cited in Collings & Mellahi, 2009, p. 306) which found that “51% of the HR professionals surveyed undertook talent management activities, with only 20% of them functioning with a formal definition of talent management”.
- Secondly, “apart from the ambiguities surrounding its comprehensive definition, the concept also suffers from a lack of theoretical development, adding to the convolutedness of the existing talent management literature” (Collings & Mellahi, 2009).
However, these drawbacks do not in anyway lessen the importance of talent management, which, “arguably is the key to maximizing the competitive advantage of an organization’s human capital, especially in the recessionary climate of the latter half of the opening decade of the twenty first century” (Collings & Mellahi, 2009). The fast emerging status of “talent management as an important theme driving strategic HRM, making it to the top of the organizations’ corporate agendas is reflected in the results of IOMA’s HR critical issues survey in 2006, that suggests talent management to be a top issue for 75% of the respondents” (Lubitsh & Smith, 2007, p. 6). “Even the results of a survey conducted by the Economic Intelligence Unit (2006 cited in Lubitsh & Smith, 2007, p. 6) revealed that CEOs assign as much as 50% of their time to talent management”.
According to Lubitsh & Smith (2007), “talent management is becoming an important strategic conversation” due to the following two reasons:
- Firstly, the “demographic war for talent has reduced the supply of talented workers while increasing the cost of employing and retaining them, worldwide, as cited in a global survey of over 9,000 executives, wherein the supply of talented workers was rated as the most significant managerial challenge and factor constraining company growth, along with the cost of hiring and retaining them, which depends on more than money. This shift in the employees’ psychological contract away from a mutually rewarding employment relationship that provided job security to one that now requires self-management of their careers and employability has undoubtedly tilted the balance of power towards talented professionals, who, according to Gratton, Goshal and Berger, respectively (cited in Lubitsh & Smith, 2007, p. 7) can no longer be treated by the companies as malleable resources, since they hold the privilege and luxury of picking and choosing employers offering them the right curency-mix comprising of work-life balance, an effective diversity policy and a strong voice in organizational matters.
- Secondly, the “economic impact of talent on the bottom-line has recently sought to link the quality of leadership with business performance, as validated by a Hewitt Associates research study (cited in Lubitsh & Smith, 2007, p. 7), that discovered 85% of the top 20 performing business groups out of a cluster of 373, holding their business leaders accountable for developing top talent, as compared to 46% of them from other organizations. As Morton et. al (cited in Lubitsh & Smith, 2007, p. 7) rightly argue, “companies that lack talent suffer where it hurts - the bottom-line”. They further add that, “if companies in the garb of losing a key individual or the cost of underperforming people, calculate the return on investment and the cost of not managing talent, it will give them a compelling reason for effectively managing talent” (Lubitsh & Smith, 2007).
All this gives rise to the following three critical questions that the organizations should ask themselves, as part of a reality check exercise with respect to their existing talent management strategies and practices” (Lubitsh & Smith, 2007):
- Do we know if our current talent management processes are working well?- In the words of Heinen & O’Neill (cited in Lubitsh & Smith, 2007, pp. 7-8), “given the interrelatedness of activities surrounding the talent management function, every organization has its own unique talent management mechanism either by default or design”, which like Adam Smith’s invisible hand, “does the job by drawing conclusions about the talent management, regardless of whether or not one does it intentionally” (Lubitsh & Smith, 2007). Given the truthfulness of such a scenario mandates determining, “if the implicit talent management system is functioning as intended and supporting the company’s key priorities, goals and capabilities”? (Lubitsh & Smith, 2007)
- Can we afford to maintain the status quo? - In other words, “is there an approaching war for talent in which the more forward looking companies will have an irreversible headstart”? (Lubitsh & Smith, 2007)
- Is there scope to improve talent management and is the prize worth pursuing? - In other words, “given the long gestation period of the benefits of talent management and the difficulty involved in measuring them, the business leaders need require committment to build an organization which breeds talent, because it is a prize worth gaining” (Lubitsh & Smith, 2007).
“The 2008/2009 recession has compelled many organizations to re-examine their talent management approach” (Khatri et al., 2010), as revealed by “Deloitte’s Managing Talent in a Turbulent Economy, a five-part longitudinal survey of high-ranking executives worldwide, conducted throughout 2009, that tracked the participating executives’ and talent managers’ approach to maneuver their workforce talent strategies to combat the economic turbulence” (Deloitte Consulting LLP, 2010). This crisis-laden situation, “instead of forcing the most forward-looking companies to elicit a knee-jerk reaction, has rather evoked a balanced assessment of the current talent dynamics affecting them now and those likely to influence them the most in the future” (Khatri et al., 2010), as revealed by their following key learnings:
- Firstly, companies need to understand that, “despite being similar to the 2001-2002 recession, the recent financial crisis still required different solutions due to the drastic change the talent market has undergone in between” (Deloitte Consulting LLP, 2010). Companies today, “require an innovation-driven talent plan to handle international competition, which includes everything from product development and manufacturing to integration of workforce planning and analytical tools, both at the corporate and business level; the results of which, as per the study indicate business and contingency planning done by only 69% of the businesses, while only 39% of them having in place an innovation-driven talent plan” (Deloitte Consulting LLP, 2010). Further, given the resource constraints, “companies need to segment their talent pools for allocating their financial resources, accordingly, thus, facilitating mobilization of funds in areas where it benefits the most. For example, financing the creation of communication, recognition, rewards and training programs to help engage and retain even average performers with a critical skill, that one can’t afford to lose, would be a feasible option. An optimal segmentation approach is dictated by market conditions, and, hence, different for all organizations, but still, it should be able to drive both long-term and short-term investment goals and outcomes” (Khatri et al., 2010). However, “the results revealed a significant 20% of the executives admittedly not updating their retention plans to take stock of the changing economy” (Deloitte Consulting LLP, 2010).
- Secondly, feasible talent management system allows “companies to measure outcomes - whether in production, sales, or talent management - that affect business success, else, it is just a distraction” (Khatri et al., 2010). As Morton et. al (cited in Lubitsh & Smith, 2007, p. 7) rightly opine, “that a true picture of the value of the talented people must involve other measurable outcomes, including; competitive advantage, business results, organizational capabilities, strategy execution, organizational morale, attraction/retention of talent, and employee engagement”.
- Thirdly, every recessionary climate comes with “a paradox of scarcity amidst plenty, in the sense that it tempts the management to think that the talent they need will be readily available whenever they require it, thus, exposing them to a vast talent and skills gap in the future when the economy improves. This is evident from the survey results, which indicated that despite the 2009 economic slump, the employers in the United States itself, were actively seeking candidates for approximately 2.5 million jobs, amidst an unemployed population of 14.9 million workers” (Deloitte Consulting LLP, 2010).
- Fourthly, another risk-prone thinking fallacy to which most of the companies fall prey when the economy contracts is, “believing that they can use the recession as a retention strategy by thinking that the feeble economy leaves their employees with fewer options, thus, implicitly or explicitly communicating to them that they should feel fortunate to have a job even in such turbulent times” (Deloitte Consulting LLP, 2010). However, an improving economy makes these companies vulnerable to “the risk of facing a ‘resume tsunami’, which leaves them in a lurch, when those already willing to switch jobs do so taking advantage of better times and a budding talent marketplace” (Deloitte Consulting LLP, 2010). This fear was proved true by the survey results that found “30% of the employees were actively working the job market, and 49% at least were considering leaving their current jobs; while academic research suggested that 44% of them would actually act on such turnover intentions. To avoid such a precarious situation, it is suggested, that the organizations use even the recessionary phase as an opportunity to implement a meaningful retention plan aimed at identifying, developing, and retaining key talent” (Deloitte Consulting LLP, 2010) that stays for longer time periods.
- Finally, “Deloitte’s survey revealed both the executives and employees holding drastically different beliefs with respect to the efficacy of the particular retention strategies and tactics that form a crucial component of a talent plan, thus, questioning the talent leaders’ ability to not only correctly map the employees’ needs but also tailor the company’s talent management systems to clearly address the generational and geographical diversities of their workforce. Though, the inclusion of financial incentives in a talent plan was agreed upon by everyone, but interestingly, the corporate leaders participating in the study tended to discount the effectiveness of strong leadership as a retention tool, something, which was ranked highly, both by the baby boomers and veteran participants” (Deloitte Consulting LLP, 2010). However, in the process, “the non-financial incentives critical to the employees and offering opportunities to the organizations to differentiate themselves in the talent marketplace should not be ignored” (Deloitte Consulting LLP, 2010), as pointed out by the results of the survey, which indicated that though, “the financial incentives led the way by a significant 15-point margin, but when asked about the factors that would cause them to leave their current employers, employees ranked highly two non-financial factors, namely lack of job security (36%) and lack of career progress (27%), which is particularly true during tough economic times, when companies are trying to squeeze more out of their workforce and the employees have reached their workload limit” (Deloitte Consulting LLP, 2010). Another crucial aspect of talent management in recession, which the companies learned during the financial crisis, is “to build adaptable skills, because for decades, talent searches focused on generic leadership skills: driving results, overcoming adversity and demonstrating superior communication abilities. However, the recession taught them that almost everyone could communicate, and more importantly, communication skills might only make the employees more effective in their jobs, but other skills and competencies like demonstrated leadership in any situation are more directly tied to business results” (Khatri et al., 2010).
The current literature review was intended to understand the intricacies of successfully managing the organizational talent pipeline, especially, during the economically turbulent recessionary climate, characterized by unfavorable conditions, and that too, without losing the strategic focus on both people management and the fundamentals of HRM practices. The discussion so far, leads us to the following conclusions:
- Firstly, talent management, though, a globally acknowledged and recognized concept, but only on face value. It’s correct implementation is devoid of any set rules, largely due to its lack of consensually agreed upon definition in the corporate world, and an absence of any theoretical model to guide its functioning, thereby, making most of the organizations, carry it out “just for the sake of it”, as part of routine HR activities, which is incorrect. In fact, turbulent recessionary conditions actually give a strong reason to the business leaders to take stock of the situation, and get serious with respect to managing their talent pipeline.
- Secondly, not practicing it well in advance, to imbibe it in the organizational bloodstream, and instead using it only as a crisis management tool often leaves the talent management system of many companies without any maintenance and repair, that is required to deliver the best results in such crisis-laden situations. Consequently, companies frequently flout the basic rules of HRM and people management while dealing with their employees, who often experience getting “pushed against the wall”, in such trying times. The next step is a ‘resume tsunami’ faced by the companies from the same workers, who are quick to depart as soon as the talent marketplace improves, economically.
- Finally, since, ‘talent management’, both as a concept and a process, revolves around people or employees and ironically is also designed by people (business leaders) only, who are hierarchically placed above them (employees), makes it obligatory on their (business leaders) part, to secure their (employees) end-to-end buy-in and involvement in framing of the talent policy, to enable its increased acceptance and intended success.
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Deloitte Consulting LLP, 2010. Has the great recession changed the talent game?[pdf] Available at: < http://www.deloitte.com/assets/Dcom-Austria/Local%20Assets/Documents/HCAS/Talent%20Management/at_TalentPulseWrap.pdf> [Accessed 16 February 2013].
Khatri, P., Gupta, S., Gulati, K. & Chauhan, S., 2010. Talent Management in HR. Journal of Management and Strategy, Available at: < http://www.sciedu.ca/journal/index.php/jms/article/view/64> [Accessed 16 February 2013].
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