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We all know the demands of starting up and running a business. With so many things to focus on, delegation and prioritization become important from an early stage. But many entrepreneurs mistakenly give low priority to talent management practices, relegate them to an HR administrator or even ignore them altogether, thinking they’re unimportant administrative activities.
Before we look at why that’s a mistake, let’s start by defining what we mean by talent management. Talent management encompasses the set of management practices and processes that support employee performance, development and recognition, throughout the employment lifecycle, from hire to retire. Talent management includes things like: job descriptions, goal setting/alignment, performance appraisals, competency assessment, employee development, compensation management, succession planning, etc.
Here’s why talent management is so important.
Good Talent Management = Better Business Results
More and more research is showing that mature, integrated talent management practices have a direct impact on corporate performance.
- 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 those without mature capabilities.
- The Aberdeen Group’s latest research finds that companies who 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.
When you think of it, these findings are not all that surprising. At their core, talent management practices are designed to help you get the most out of your only sustainable competitive advantage, your workforce.
Keep Your Employees Engaged and Productive
Study after study has shown that to be engaged and productive, employees need to have:
- Clear goals and know what is expected of them in their work;
- Regular feedback about their performance, what they are doing well and areas for improvement;
- Opportunities to develop, prepare for career progression and address skill gaps.
We’re also hearing almost daily that employee engagement is at an all time low.
Good talent management formalizes the practices that ensure employees have what they need to be engaged and productive. It includes the setting of SMART (specific, measurable, achievable, relevant, time-bound) goals, the identification, assessment and development of competencies important to the role as well as to the organization, and the assignment of development plans to expand knowledge, skills and experience. It also provides employees with regular, formal and informal feedback on their performance and encourages an ongoing dialogue on performance between the employee and their manager. All of these management best practices are known to foster higher employee performance, productivity and engagement.
Align Your Workforce
Simply making sure your employees have SMART 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 every employee much needed context for their goals and helps them how their work directly contributes to organizational success. 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 check.
Develop Competencies as a Competitive Differentiator
As business cycles shrink, and products and services become increasingly commoditized, your people become your only sustainable competitive advantage. Given this reality, it becomes all the more critical to identify the key competencies that differentiate your business, and cultivate these in your employees. Integrated talent management practices use competencies as the foundation for job descriptions, performance appraisals, development activities, and succession plans, and foster their continued development. In this way, they help your organization ensure its competitive advantage.
Identify and Retain High-Potential, High-Performing Employees
Identifying and investing in developing and retaining your high performing, high potential employees is key to your organization’s continued success. Even in tough economic times, retaining these employees can be a challenge. Talent management practices help you to more objectively and accurately identify your high-potential and high-performing employees, and then challenge, reward and develop them, so they remain happy, engaged and loyal to your company.
Identify and Address Performance Gaps
If you don’t know what your company’s weaknesses are, how can you address them? Mature, integrated talent management processes allow you to effectively identify and measure performance gaps by evaluating employees’ performance of goals and demonstration of key competencies. Armed with this data, you can take action to address performance gaps at the individual, departmental or organizational level, and then monitor the effectiveness of your actions in terms of improved performance. Identifying and addressing performance gaps in this way helps you to foster a culture of continuous improvement and development. It also helps prevents performance challenges in any part of the business from going unnoticed or unaddressed.
Drive Focus, Accountability and Efficiency
Having mature, integrated talent management processes help keep individual, group and organizational performance at top levels. Everyone is accountable for their personal goals, competencies and development plans, as well as those of the organization. It encourages everyone to regularly discuss progress, opportunities and challenges and improves focus, accountability and efficiency.
Conclusion
As entrepreneurs, we’re all focused on the success of our business. By ensuring our companies adopt talent management best-practices right from the start, we set our employees and our business up for success.
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