With everything that's involved in starting up and running a business, it's easy to overlook the importance of talent management, especially when your company is small. But research is identifying some compelling reasons for putting good talent management practices and processes in place, right from the start.
What is talent management? It’s a full set of processes and management practices that support employee performance, development and recognition, from hire to retire. And it’s essential in today’s business world:
• The Hackett Group recently reported that companies with more mature talent management capabilities have on average18% higher earnings, 54% greater net profit margins, and greater return on equity and assets than their counterparts without mature capabilities.
• The Aberdeen Group's latest research finds that companies that integrate their talent management processes see significantly greater performance gains, and can measure a correlation between their talent management efforts and business operational results.
• IBM, HCI, IDC and others have shared similar findings.
Here's why talent management is so important.
* Give Employees the Direction, Feedback and Development They Need to Succeed
Study after study has shown that employees are more productive, effective and engaged when:
• they have clear goals and know what is expected of them in their work;
• they receive regular feedback about their work, what they are doing well and areas for improvement;
• they are given opportunities to develop, to prepare for career progression and to address skill gaps.
Good talent management formalizes these processes and ensures employees have what they need to develop and succeed. It includes the setting of SMART goals, identification of competencies key to the role and the organization, and establishment of development plans. It also provides employees with regular, formal feedback on their performance and encourages an ongoing dialogue on performance between the employee and their manager. All of this contributes to higher employee performance, productivity and engagement
Align Your Workforce
Having goals isn't enough. Effective talent management helps you align your workforce by tangibly linking each employee's goals to the organization's higher-level goals, mission and values. This gives employees a larger context for their work and helps them see the meaning and value of their contributions. For the organization, it ensures that everyone's efforts are focused on achieving the organization's mission, vision and values, not just completing tasks and collecting a pay cheque.
Develop Key Competencies
As our products and services become increasingly commoditized, our people become our only sustainable competitive advantage. In light of this, it becomes all the more important to identify and cultivate key competencies in our employees, right from the start. Mature talent management uses competencies as the keystones for job descriptions, performance appraisals, development plans and management, and succession plans. It helps your organization ensure you have strength in the competencies that set you apart from the competition.
Identify and Retain High-Potential, High-Performing Employees
Even in tough economic times, retaining your high potential and high performing employees can be a challenge. Yet these are the very employees who are key to your organization's continued success. Talent management helps by allowing you to accurately identify your high-potential and high-performing employees, and then enabling you to effectively challenge, reward and develop them, so they remain happy and engaged.
Address Performance Gaps
If you don't know what your weaknesses are, how can you address them? Mature, integrated talent management processes allow you to effectively identify and measure performance gaps, take actions to address them, and then monitor the effectiveness of your actions in terms of improved performance. It allows you to do this for individuals, for departments or groups and for the organization as a whole. It prevents challenges from going unnoticed or unaddressed, and helps you to foster a culture of continuous improvement and development.
Drive Focus, Accountability and Efficiency
Mature, integrated talent management processes help keep individual, group and organizational performance top of mind. Everyone is accountable for goals, competencies and development plans. This encourages managers and employees to regularly discuss progress, opportunities and challenges and improves focus, accountability and efficiency.
As entrepreneurs, we're all focused on the success of our business. By ensuring our companies adopt best-practice talent management processes right from the start, we set ourselves and our employees up for success.
Paul Loucks is President and CEO of Halogen Software, a talent management software provider based in Ottawa, Ont.