No one is better at generating buzzwords than the human resource community. A ubiquitous buzzword today is “talent management.” It seems obvious that HR is all about acquiring, training, rewarding and motivating talent. Some of the core ideas in talent management have been around for decades, such as the need for different HR practices to be aligned with the business strategy and each other. Is there anything new in the concept of talent management, or is it just more repackaging of old ideas?
In fact, there are some big ideas behind “talent management” that are relatively new to HR. These underlie the many variations and proprietary angles on talent management taken by different authors and consultancies. We explore five of these ideas here.
1. Talent Supply and Demand. Borrowed from labor economics, notions of supply and demand for talent became prominent in the boom times of the late 1990s. Then, the phrase “war for talent” was in vogue, talent demand exceeded supply, unemployment was low, and employee turnover was high.
Experience since then reminds us that the supply and demand of talent ebb and flow. When we are in a recession and unemployment rises, there may be hundreds of applicants for all available jobs, and employees are afraid to quit. Employers have the upper hand in bad times, but employees regain it in expansionary times.
The cyclicality of supply and demand reminds us to avoid adopting overly expensive, inflexible practices in good times that lock in high costs. For example, high salaries and gold-plated benefits may attract talent in good times but be too expensive to sustain in hard times.
2. Workforce Segmentation. By segmenting the workforce, HR abandons its instinct to treat all employees the same. Different segments are identified and treated differently depending on their criticality for the business and their availability in the labor market. The most valuable may receive extra pay, incentives, training and promotions because of their importance and their scarcity.
In manufacturing, the supply of assembly-line workers greatly exceeds demand, while special efforts are needed to attract, retain and develop those with specialized skills, such as toolmakers, CNC operators and engineers. Treating everyone the same risks a production system that is too expensive or one that does not obtain enough critical specialists to operate effectively.
Build vs. Buy & Powerful Analytics
3. Decisions to Build, Buy or Outsource Talent. Traditional HR tended to build a top-to-bottom culture of building talent (emphasizing training and career opportunities) or buying talent (paying a premium for talent developed by other companies but avoiding development costs). Workforce segmentation leads to different choices by segment. For segments where talent is critical and scarce, building may be necessary; for others buying may be possible.
In recent years, companies have shifted further, buying contingent rather than permanent talent for less critical segments in order to remain agile and control costs. Contingent workers—contractors, consultants, temps, etc.—now make up nearly a third of the U.S. workforce, a fundamental shift in hiring patterns.
4. Employee Value Proposition. Employees make decisions about whether join a company, whether to remain at their company, and how hard they will work based on the “deal” they are offered. They consider the starting salary, but also other rewards including incentives, benefits, the work itself, career opportunities, and the degree to which they identify with the company and its values. Cost-effective attraction, motivation and retention require a complex calculus, and different segments of the workforce are moved by different constellations of rewards.
5. High-Powered Data Analytics. HR has made tremendous progress in collecting, analyzing, and interpreting data about the employee costs and the value of different processes and programs. This enables us to understand people costs and the causal connections between different variables in new ways.
For example, what are the most cost-effective ways to increase performance, find technical talent, or train employees? Perhaps the most interesting development is new HR technology that puts data and analytic tools directly in the hands of business leaders.
Talent management represents an important evolution in HR thinking: a set of ideas that make HR more business-based, more thoughtful, and more valuable to the organization.
Gerald Ledford is senior research scientist at the University of Southern California’s Center for Effective Organizations. He is an authority on human capital issues, with over 30 years of experience as a researcher, consultant and author. He can be reached at [email protected].
