8 steps to a profitable talent management strategy
We’re asked a number of times about how to create a talent management strategy. While the strategy itself may be hugely for different companies, even in the same industry, the process it needs to follow remains essentially the same.
A TMS, in brief, is the link between your people and your company’s profitability. It captures the value of your company’s intangibles. In most cases, these intangibles are not so easy to see. As with an iceberg, the part that you can’t see accounts for a big chunk of your company’s worth. A good TMS will make these hidden intangibles less hidden, and more visible and easy to classify, thereby allowing you to manage what you can now measure.
Here are the main components of a great TMS:
1. Start with the customer and work backwards. If your company is medium to large in size, the temptation is to look ‘inside out’ rather than ‘outside in’. This is a mistake. This is where so much starts to go wrong for global businesses. Top-performing companies in their industries such as Virgin Atlantic, Zara and Wells Fargo start at their front lines and work backwards.
2. Identify your customer engagement drivers. These are the emotional drivers that make customers want to stay, say and spend. Once you have identified these objectively, work out who you need in your organisation to deliver and exceed these. Start with your frontline and work backwards. What natural abilities (talents) will those people require to deliver on your customer value proposition? What skill sets? What behaviours? Then set the rest of the organisation up to support them.
3. Identify the key Actions (tasks) and Interactions that link to your customer value proposition and company profitability. Start with each function and then drill down to teams. Then develop the support infrastructure (like career plans, KPIs and variable pay components) to support the experience that links with your customer engagement drivers. We have a methodology that makes this process relatively straightforward. The objective of this phase is to make your company a place where employees want to stay, say and strive.
4. Now start creating your talent management strategy. This needs to be at least a 2 year plan with measurable outcomes. Based on steps 1-3, what are the kind of traits in each function that drives the desired customer experience? How can you attract, and retain employees with those characteristics? How easy is it to source them from the local or global talent pool? At what price? – Great talent management strategies identify the link between people and profits.
5. This leads on to the importance of employee engagement. By creating and nurturing employee engagement, you create the kind of environment that attracts, retains, develops and motivates your top talent. Employee engagement is like the goose that lays the golden egg of financial results. Only, as with any golden egg, there is always a time gap between conception and delivery! Most companies overlook this simple concept. Those that do, as numerous independent studies show, invariably underperform their like-for-like competitors by as much as 30%. Employee engagement is what makes your customer engagement (and their experience) sustainable.
6. A talent management strategy transcends artificial timescales such as quarterly financial reporting. Great companies realise three months is impossible frame of time to achieve any financially measurable progress on the people side of their businesses. In Jim Collins’ words (Good to Great) these organisations ‘build the clock’, rather than ‘tell the time’. Companies with high employee engagement supported by a deliberate Talent Management Strategy routinely outperform their comparison companies by as much as 30% in terms of profitability. They focus on the goose first, not the golden egg; on building the clock, not telling the time. At this stage you need to create goals and expectations for your TMS over a 2 year timescale.
7. If you are a global company, localise your strategy. Empower your local business units. The no.1 mistake global companies make is to centralise their processes and apply the same talent management strategy in Bangalore as they would use in Boston. Yet it’s strange that they usually don’t do the same when it comes to their marketing strategies!
8. Once you have identified a talent management strategy that works, you can measure your human capital sigmas. These are the ‘value-added’ factors your people bring to the table. Human capital is essentially your company’s market value less its book value: that’s the real difference your people make! So work out what drives the increase and decrease in this figure and start managing those drivers. Now you can create your TMS with an action plan targeting adding more of this value.
This is the final phase of your TMS which lets you manage your company over years rather than months or quarters.
If you are interested in creating a talent management strategy or an organisation that fully engages your employees, please feel free to call us or complete the contact form here.
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