Human capital is not just an HR issue: Why talent management should be interwoven in your business strategy

(As originally appeared in FEI Canada F.A.R. member e-newsletter, May 2010)

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By Ronny Aoun, Executive Director, Human Capital, Ernst & Young LLP

Finding ways to attract and retain talent is becoming an increasingly important issue on the corporate agenda today — particularly now that the economy is recovering. EY’s recently launched Managing today’s global workforce report confirms that today’s economy demands a sophisticated approach to talent management. Leading companies are aligning talent management programs with their overall business strategy, and integrating them with their human resources initiatives to increase competition and drive revenue.

Canadian organizations must understand the needs and motivations of their people in order to provide opportunities that appeal to different generations and cultures to help them retain the necessary skills and competencies they need to emerge stronger down the road.

Companies that overlook talent management risk losing those high performers — including members of leadership — that allow them to achieve its goals. People are the competitive differentiator and key to success when it comes to being a leader in today’s marketplace.

Attract and keep talent through targeted programs

Companies are already making changes to manage future skill gaps. Programs centered on training and development, mentoring, succession planning and other areas of people management are vital to help employees build the skills they need to make the company a success over the long term. The top three talent management initiatives include:

  • Building the internal talent pipeline to fill critical future needs (64%) 
  • Understanding and coordinating global talent resources to fill key positions (33%) 
  • Offering flexible work strategies such as job sharing, telecommuting, flex hours and phased-in retirement (31%)

In addition, the global workforce is accommodating an influx of younger workers, causing many companies to respond with new programs. Fifty-six percent of respondents reported that their companies currently consider launching internal diversity or inclusiveness initiatives aimed at Gen X and Y employees (11%), Baby Boomers (6%) or the entire organization (39%) in order to uncover talent in every area of the labour market. Potential initiatives include:

  • Performance management. Two-thirds (66%) of respondents said that their company’s talent management initiatives include performance management, a program of actions to ensure that organizational goals are met. 
  • Recognition, rewards and engagement. Sixty-one percent of respondents said that recognition and rewards programs are among the talent management programs most often used by their companies. These programs provide employees with a direct incentive to do their best and encourage high performers to stay with the company; however, the current economy challenges this concept.
  • Internal training. Fifty-seven percent of our survey respondents said that leadership development and internal coaching are key to their companies’ talent management programs. More than half (55%) cited learning and training as part of their solutions.
  • Leadership development and succession planning. Forty-four percent of respondents said that leadership development and succession planning are among their main concerns related to talent management, and nearly half (49%) indicated that succession planning constitutes an integral part of their talent management program.
  • The majority of succession management plans reported focus on senior management (88%) and executive management (74%). This focus is insufficient to ensure a robust internal talent pipeline. Research suggests that pushing the focus of succession management from the upper tiers of the company down into middle management is the most efficient practice. This practice is also an opportunity to mine internal talent cost effectively and to develop employees in a way that makes them more likely to stay with the organization. 
  • Flexible work arrangements. In preparation for economic recovery, companies have implemented flexible work arrangements, rather than cutting staff. These arrangements include offering employees the opportunity to take an unpaid leave, or work a reduced week, and provide them with remote access to company servers.

Coordinate global talent resources and build internal talent for the future

In response to an uncertain economy, companies are focusing on developing recruitment, training and retention programs to help ensure that skills are available in the future. The greatest concern of survey respondents is potential talent gaps among both technical (28%) and middle management (26%) positions. The economic downturn slowed the process of globalization, causing a drop in international trade and temporarily halting the global expansion plans of multinational corporations. However, the long-term trend is toward renewed worldwide integration in trade, capital, labour, technology and culture.

This means that, as companies incorporate international assignments into their overall business strategy, the issue of career management for their people cannot be ignored. Yet results of the survey show that only 32% of respondents integrate talent management globally. Long-term globalization requires effective talent management initiatives as companies incorporate international assignments into their overall business strategy.

It is critical for companies to understand and meet the needs of these mobile employees, while maintaining a strong grasp of relevant labour laws, legislation, regulations and demographics unique to each jurisdiction where they conduct business. There should also be a system in place to capture the knowledge of these employees. Many respondents indicate that repatriation or post-repatriation of these employees is not a priority, and as such, companies end up losing much of the value they bring to the organization. This could result in disenfranchised people who leave the organization and take their international experiences with them.

The issues global businesses need to focus on today include:

  • Global mobility and growing complexity. Companies must deploy talent where necessary. To achieve true integration, companies need to ensure their programs are aligned with the company’s overall talent management strategy. 
  • Recruitment and retention. Twenty-seven percent of respondents are bracing for a period of widening knowledge gaps as older employees retire, taking with them important skills that are hard to replace. Organizations must refocus on recruitment, development and retention of middle managers and technicians — roles currently not addressed by traditional succession planning. They must also address a changing, younger workforce.
  • Talent management and enhanced business results. Survey data found that companies whose talent management programs are aligned with their business strategy deliver a higher return on investment — on average 20% higher than companies without such alignment. Companies that integrate key elements of their talent management programs average a 38% higher return on investment than those who do not.

EY’s Managing today’s global workforce report addresses the current concern of talent management and offers insight into the effective practices currently executed by leading organizations. Successful practices ensure that talent management processes align with corporate strategy. Enterprises that pay insufficient attention to these practices may fail to anticipate important demographic shifts and changes in the talent management landscape.

Talent management is a process that connects a company’s strategy with its mission, vision and values, and the way it manages and develops its people. Forward-thinking global companies have talent management programs that are aligned to business strategies, integrated globally and customized to address the needs, issues and demographics of their workforce. If Canadian companies want to get ahead, and plan for significant future growth, they should follow suit.


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