Designing Talent Management - kenan-flagler.unc.edu/media/Files/documents/... · Talent management becomes critical at certain times in an organization’s growth and should be formalized

By: Chris Miller

Program Director

UNC Executive Development

All Content © UNC Executive Development 2015

Website: www.execdev.unc.edu |Phone: 1.800.862.3932 |Email: [email protected]

Designing Talent Management

to Meet an Organization’s

Strategic Needs

http://www.execdev.unc.edu/

mailto:[email protected]

Designing Talent Management to Meet an Organization’s Strategic Needs

All Content © UNC Executive Development 2015 2 | P a g e

Introduction

ill Smith is an HR professional at a quickly growing shoe company, Sandalias. The

founders started the company 10 years ago, and after several years of incubation and

hard work, their market is expanding quickly. While some sales are online, most sales come

from brick-and-mortar stores. Innovative design, great marketing, and an excellent customer

experience have gotten the company to this point.

On a recent Monday morning, Smith received a call from the head of marketing. Some social

media attention the company received prompted a competitor to poach Sandalias’ best

marketer. The head of marketing needs a replacement ASAP. Smith makes a note to talk to

recruiting and heads to the break room for some coffee.

While in the break room, she runs into Steve Palmer, vice president of manufacturing.

Palmer tells Smith that he is worried because his two best managers are nearing retirement

age, and he doesn’t feel comfortable with any of their direct reports ability to replace them.

Returning to her desk, Smith catches up on her emails. She finds a message from a district

manager that says (in all caps) that her region needs three new managers pronto. Smith

cringes at the message. Sandalias will be opening five new stores this year, and only two

assistant managers are ready to assume a manager role, and lately, managers recruited

from outside Sandalias haven’t worked out too well. Smith has raised the idea of a more

systematic approach to talent management in the past, but the founders thought they knew

who the players were in the company, and managers were wary that new, more centralized

programs would constrict their decision making. Smith needs a better way to make the

connection between the success of the company and the need for talent.

This white paper:

Explores why many business executives overlook or underestimate the value

of having a strategic talent management process in place in their

organizations;

Defines talent management and discusses why it makes sense for most

organizations to have a structured talent management program;

J



Frames talent management as part of the natural forces within an

organization’s life cycle in a manner that will help HR and talent management

professionals understand if and when their organization is really ready for a

formal talent management strategy, and;

Identifies the business factors that support the creation of a formal talent

management process and discusses how HR and talent management

professionals can achieve senior leader buy-in for talent management by

proposing it through a narrative and in a business-relevant manner.

The Undervaluation of Talent

Management in Organizations ost business leaders pay little more than lip service when it comes to talent

management. A survey on talent management by Bersin by Deloitte found that only

one-third of employers in the United States said they had identified critical roles or talent

segments in their organizations based on business goals. Further, less than 10 percent of

respondents said they had reached a stage where talent management was part of their

annual business planning process and that talent management was “truly owned by business

leaders and line managers,” and only 7 percent of respondents said they had a strategic

talent management program in place (O’Leonard, 2010).

For many organizations, particularly those in a growth stage, the lack of a strategic talent

management program is costly. Organizations that have a strategic talent management

program in place generate more than twice the revenue per employee than those without

programs, have a 40 percent lower employee turnover rate, and have a 38 percent higher

level of employee engagement (Bersin, 2012).

There are any number of reasons why business leaders undervalue talent management. As

Edward Lawler noted in an article for Forbes, some business leaders believe their

organizations can survive without top talent. Other business leaders may acknowledge that

talent management is important, but not as important as other business functions like finance

or technology. Still other business leaders simply fail to see the link between talent and their

organization’s business strategy because their backgrounds are not in HR and talent

management (Lawler, 2014). As Lawler notes, it is the HR and talent management

professional’s responsibility to help business leaders see—and embrace—that link.

M



Talent Management and Strategic Talent

Management Programs

alent management is an organization’s formal plan to optimize its talent pool. It is a set

of processes designed to attract, retain, develop, motivate, and deploy employees with

a goal to create a culture that will meet the organization’s current and future business

objectives (Freschi, 2015). In the recent past, talent management efforts were often focused

exclusively on employees with strategic value to an organization (for example, the C-suite

and high-potential employees). More recently, however, employers have realized that they

should broaden talent management to all organizational levels to develop a deeper talent

pool (Freschi, 2015). Deeper talent pools can help widen an organization’s leadership ladder

and can help channel talent into skill-specific jobs.

A talent management process is

part of strategic workforce

planning, and an exercise that

helps determine the future talent

requirements an organization will

need to meet its strategic

objectives. For most

organizations, strategic

workforce planning is vital

because it helps them anticipate

the changes that may take place

in their marketplaces and the

types of employees they will

need to manage those changes.

Organizations that have strategic

workplace plans are generally

more agile in assessing and

meeting change than their peers, giving them a competitive advantage (Miller, 2012).

T

Key Principles for Successful Talent

Management

In an extensive study, Stahl et al (2012) found that

effective talent management did not come by focusing on

activities like training and development, but rather by

adhering to six key principles:

1. Alignment with strategy

2. Internal consistency

3. Cultural embeddedness

4. Management involvement

5. Balance of global and local needs

6. Employer branding through differentiation

For more information about the study, see “Six

Principles of Effective Global Talent Management.”

http://www.xbhr.com/news/wp-content/uploads/2012/04/Effective-Global-Talent-Management.pdf

http://www.xbhr.com/news/wp-content/uploads/2012/04/Effective-Global-Talent-Management.pdf



Strategic workforce planning is more than just good HR—it’s also good business. A Society

for Human Resource Management survey found that a formal talent management process

was the most important practice employers can engage in to improve workplace productivity.

The international business consultancy, The Hackett Group, found that organizations with

strong talent management programs were likely to see an 18 percent increase in their

bottom-line earnings as compared to organizations without talent management programs

(Teng, 2007). And a survey by Bersin by Deloitte found that organizations that practiced

strategic workforce planning had, on average, a 28 percent higher score in efficiency,

effectiveness, and business alignment of HR functions than their non-practicing competitors

(Miller, 2012)

With all this evidence, one could conclude that each and every company, no matter the size,

should have a talent management strategy. But these studies overlook a key point; the

companies surveyed were larger and more established than most, at least large enough to

house a separate HR function. Talent management becomes critical at certain times in an

organization’s growth and should be formalized when the time is right. To understand when

an organization should create a talent management strategy, it may be helpful to look at

talent management in context of an organization’s life cycle.

Organizational Life Cycles rganizational life cycles have been written about for more than 40 years. There are a

number of organizational life cycle models, but they share the same idea that, like

living organisms, organizations proceed through predictive stages of birth, growth, maturity,

renewal, decline, and death (Costanza and Fraser, 2008). These stages are developmental

and, for the most part, sequential. Organizational life cycles traditionally have been used to

help leaders understand how they must change their organization’s goals and strategies as

they move through each stage, and have been used to inform leaders about when more

formal processes are needed for assets such as logistics, finance, information technology,

finance, etc. They have not, however, been used to inform organizations about how to

leverage their greatest expense—their people.

There have been plenty of organizational life stage models proposed over the years, but one

that has stood the test of time was proposed by Larry Greiner in a widely cited Harvard

Business Review article published in 1972 (Greiner, 1998).

O



Greiner identified five stages of organizational growth each characterized by evolution and

revolution:

Creativity

Direction

Delegation

Coordination

Collaboration

The Creativity Stage

The creativity stage (also often called the birth stage) is characterized by a focus on creating

a product or service and a market for that product or service. The organization’s prime

concern at this stage is to acquire the resources it needs to survive. The organization’s

founders are usually technically or entrepreneurially oriented, and as a result, formal

business practices are few and far between or nonexistent. Communication among

employees is infrequent and when it does occur, it is informal. These characteristics work at

this stage because there are not many employees and everyone is concentrated on a

common goal—to launch the product or service for which the company was formed and to

survive long enough to reach the next organizational life cycle stage. This stage is also

characterized by long work hours and minimal pay in exchange for stock in the company.

Eventually, however, the very traits that lead to success at this stage—creativity, innovation,

and informality—begin to cause problems as the organization grows. Eventually, as the

company adds employees, it becomes impossible to continue working in the informal way.

Processes must be put in place to manage finances and people. The founders, though,

started the company because they were entrepreneurial, innovative, and had a product or

service they believed in—not because they wanted the day-to-day managerial

responsibilities now thrust on them because of their success.

This leads to a crisis of leadership and causes the fledgling organization’s first revolution—

the admission that to continue to grow, the company has to find a leader who is a strong

business manager. It is this revolution that leads the organization into the next stage,

direction.



The Direction Stage

If the company survives the revolution in the first phase and installs a leader with business

acumen, they will move into a period of sustained growth. Characteristics of this evolutionary

period include:

Establishing a functional organizational structure;

Specializing jobs;

Introducing formal accounting systems;

Adopting budgets and work standards, and;

Communicating more formally and impersonally as hierarchies are created.

These more formal functions help channel employees’ energy. This more directive approach,

though, eventually breaks down because employees start to feel restricted by the more

centralized hierarchy. A crisis of autonomy occurs among employees, unleashing another

organizational revolution in which managers must learn how to give lower-level employees

the ability to make decisions. This revolution leads to the next stage, delegation.

The Delegation Stage

Decentralization is key to this stage. In this evolutionary phase, responsibilities are

decentralized to allow managers to take on more responsibility. Bonuses are used to

motivate employees and senior leaders “manage by exception” based on reports they

receive from the field. Communication from the top is infrequent, but when it occurs, it is

formal. This stage allows the organization to grow by motivating lower-level managers.

The revolution in this stage happens when senior leaders begin to feel that they are losing

authority of their operations, leading to a crisis of control. To regain a sense of control,

additional formal systems are introduced that allow senior leaders to realize growth through

more efficient allocation of the organization’s resources. These additional formal systems,

however, add more layers of procedures that start to take precedence over problem solving.

This leads the organization into the next life cycle stage, coordination.



The Coordination Stage

This stage is characterized by the implementation of even more formal systems that allow

better coordination among senior leaders. Where the last stage decentralized systems and

managers took a more hands-off approach, the coordination stage requires senior leaders to

accept more responsibility for the administration of the new, more formal systems. At this life

cycle stage:

Formal planning procedures are established;

More staff is hired to develop company-wide programs intended to control

line managers;

IT becomes a centralized function but daily operating decisions remain

decentralized, and;

Stock options and profit sharing plans are offered to increase employee

loyalty and retention.

These more formal systems help managers look beyond the needs of their individual units,

and they begin to learn to justify their decisions to senior managers.

The revolution at this stage occurs when lower-level managers and employees begin to feel

that these formal systems are overkill. A red-tape crisis occurs. The system has become too

bureaucratic and innovation is stifled. The organization, as Greiner notes, has become too

large and complex to be managed by the formal systems put in place. This leads to the next

stage, collaboration.

The Collaboration Stage

This stage tries to minimize the red-tape created in the coordination stage. This stage is

characterized by more spontaneity and innovation through the creation of teams. Employees

are taught how to minimize interpersonal conflict and differences through skillful

confrontation. Social control and self-discipline replace formal control, and problem solving is

done through unit and cross-functional teams. Rewards are geared toward teamwork rather

than individual accomplishments.



Life Cycles and Talent Management hen Greiner proposed his life cycles in 1972, talent management as a strategy was

yet to be created. But thinking of talent management in terms of where an

organization is in its life cycle can help HR and talent management professionals determine

if, when, and what type of a talent management strategy would benefit their organizations.

Businesses in the creativity and direction phases are typically growing rapidly. In turn, the

complexity of the business begins to outstrip the ability of senior leaders to effectively

manage it. Just like the formalization of other organizational processes and systems Greiner

wrote about, the need for talent management is a direct result of this new business

complexity. Every organization will eventually need a talent management strategy, whether

formally or informally. As organizations grow, they hit a wall where there are not enough

leaders to manage the new business. They need new leaders to continue to grow and

evolve, but there are none in the pipeline because talent management has not been part of

the business strategy.

Most organizations neglect talent management through the delegation stage. The

formalization of the business processes during the direction stage (finance, logistics,

operations management) may have caused decision-making bottlenecks, and there is little

appetite for formal HR processes when delegation to regional and departmental leaders is

the more pressing need. It is this delegation, however, that allowed the organization to grow,

and by doing so, increased complexity to the point that a return to more centralized

coordination is needed.

The collaboration stage is typically the place where an organization is ready to accept the

strategic importance of talent management. At this stage, it becomes apparent to senior

leaders that some talented employees are being underutilized and that their skills would be

valuable in other areas. Senior leaders also realize at this stage that the focus on each unit’s

own needs has led to silos that have damaged the organization’s overall health.

Organizations with highly complex, uniquely-skilled positions can be stymied by talent issues

regardless of their size or speed of growth. When an organization is in the creative stage of

its life cycle, the founder and a few key employees may have the necessary technical skills

grow the business, but as the organization expands, those technical skills may need to be

added to or replaced. Larger, more mature organizations can also be affected by the loss of

W



highly specialized people (for example, employees who manage their research and

development or employees with skills that the national market for employees with those skills

may number in the tens).

It is also important for HR professionals to recognize that for some organizations, the best

advice is, “if it ain’t broke, don’t fix it.” For organizations experiencing slow growth, with low

turnover and easily replaceable employee skills, a formal talent management process may

not be necessary. In those organizations, HR and talent management professionals should

keep close tabs on where the organization is in its life cycle, however, and be prepared to

propose a talent management strategy well before the organization is negatively impacted by

a talent scarcity.

Making the Talent Management Strategy

Pitch lthough a talent management

strategy may not have to be

implemented immediately in all

organizations, HR professionals

should have one in their back

pockets because organizational

change is inevitable. All

organizations that grow will move

from a relatively stable, evolutionary

stage into a revolutionary one, and

HR and talent management

professionals should use these

stages to frame a relevant business

case.

The challenge for HR and talent

management professionals is to

convince senior leaders of the value

and necessity of having a talent

management strategy. As Lawler

A Company Spotlight: Right Management

Management consulting

firm Right Management

has developed a talent

management strategy

that works well for them. The process starts annually in

July and begins with a review of their “strategic execution

framework.” The framework includes the organization’s

goals and initiatives identified in their three- year

strategic plan. As part of the review, senior leaders divide

business objectives into five main sections; revenue,

business development, profitability, thought leadership,

and organization and culture. From there, HR leaders can

analyze the implications of those business objectives on

talent management strategy and planning and

communicate those implications to the team. From there,

they can identify their “talent commitments” for the

year. Talent commitments may include communicating

with and engaging employees, developing and launching

new programs for high-potential employees, and

expanding the company’s succession plan.

Source: O’Leonard, 2010.



pointed out in his Forbes article, most executives lack a human resource background and

often feel their organizations don’t need a formal talent management strategy or don’t realize

when the time has come.

To convince senior leaders about the value of a formal talent management process, HR and

talent management professionals should consider the following steps:

1. Create a narrative.

2. Create absolution.

3. Identify current and future business needs.

4. Find champions.

Create a Narrative

HR and talent management professionals should prepare to win executives over by creating

a narrative that offers talent management as a solution to the pain of a given revolutionary

cycle. Like Smith in the example on

the first page, HR is in a unique

position to capture business-relevant

stories related to talent across

multiple business units. In telling the

story, HR and talent management

professionals should weave together

the frustrations that keep the

business from achieving its goals into

an understandable story where talent

management is the tie that binds.

People make sense of their reality

through narratives, and HR

professionals who can describe

accurately the evolutionary phase the

company is in will have an advantage

when creating these stories.

Hallmarks of Future-Focused Talent

Management

All aspects of talent management—recruitment,

development, retention, and transition—are integrated

in advance of any need. Successful future-focused talent

management strategies:

1. Continuously monitor workforce demographics,

costs, and issues with an eye on the future.

2. Have clearly defined roles and competencies that

align with business objectives.

3. Include a process for effective recruitment and

onboarding and hire the right people for

knowledge, skills, experience, and cultural fit.

4. Include a strong focus on leadership development.

5. Have a strong succession plan.

Source: Leisy, n.d.



Create Absolution

When creating the narrative, it is important that HR and talent management professionals

also offer absolution. The lack of a formal talent management process is not a poor reflection

on existing leaders. There may have been many piecemeal attempts at talent management

in the past, perhaps during an annual meeting where the organization’s top ten performers

were recognized. HR and talent management professionals should acknowledge past

attempts, but explain why those attempts are no longer sufficient. In fact, HR and talent

management professionals should point out that the need for a formal talent management

approach is a testament to senior leaders’ abilities to get the organization to this point of

complexity that a formal talent management process is part of the next phase of the

successful organization.

Identify Current and Future Business Needs

To convince senior leaders of the value of a talent management process in the organization,

HR and talent management professionals should be prepared to offer several examples of

failed initiatives or the loss of key employees that restricted growth. In addition, offer senior

leaders a glimpse into the amount of money the organization spends on its people compared

to other cost centers.

When identifying current and future needs, ask the following questions to HR, peers, and

senior leaders with talent management firmly in mind and share those answers with senior

leaders:

1. Where has our organization been?

2. Where is it now?

3. Where do the answers to these questions mean for where we are going?

(Greiner, 1998).

Other questions to ask when identifying current and future needs may include:

1. What are the growth strategies and services that will drive our future growth?

2. What competencies do we need to keep, develop, and/or acquire to meet this

growth?

3. How can we make our HR function more strategic, effective, and efficient to

support these growth initiatives? (Leisy, n.d.).



The responses to these questions when asked across the organization, will help frame the

talent management strategy and create buy-in for the process.

Find Champions

There are powerful and influential people in every organization who “get it” and will support

the development of a talent management process. They realize that they can’t achieve their

goals without the right people in the right places. It is the job of HR and talent management

professionals to find those people and educate them about the benefits talent management

can bring. Talent management should not be sold as an HR process, but rather a business

practice facilitated by HR. HR can guide the process, but the knowledge of current talent and

many of the future solutions will come from managers.

In making the pitch, HR and talent management professionals should feel free to include HR

data that illustrates key points. The most powerful data, though, will be found in the sales

and production numbers of the leaders who cannot complete their goals because of a lack of

talent. The wise HR practitioner should not even pitch talent management to executives

themselves, but rather create a core set of enlightened operations managers to explain why

they need better talent to execute the company’s strategy.

Conclusion

ll organizations will need a formal talent management process at some point during

their life cycle. HR and talent management’s role in developing that process is to be

able to recognize when the time is right and to make the business case that a process needs

to be executed. HR and talent management professionals should be prepared to make the

case for talent management, achieve senior leader buy-in, and be ready to help link talent

management back to an organization’s bottom-line.

A



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Cost-saving measures developed

Silos leveled

Teams aligned

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organizations.

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mailto:[email protected]



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