Strategically Managing Talent
In today's global marketplace, such traditional business weapons as technology, financial capital, and physical resources are within reach of most competing organizations. Human capital, therefore, is one of the few remaining differentiators companies have to distinguish themselves and build real competitive advantage. In fact, organizational survival will increasingly depend on optimizing workforce performance and adopting true performance-based compensation. Accomplishing this, however, will require significantly transforming the role of HR -- traditionally one with a high administrative burden -- by decreasing administrative tasks and increasingly establishing HR professionals as core players in the development and execution of organizational strategy.
Several market forces are rapidly converging to drive such change. Viewed from the perspective of major organization stakeholders who are among its prime movers, these include:
- EXECUTIVES: Due to changing demographics, the U.S. Bureau of Labor Statistics forecasts a shortfall of 10 million workers nationwide by 2010. The most severe impact will be on those in their prime working year, ages 25 to 44. Given the impending talent shortage, protecting existing human capital and attracting additional high performing employees requires quick action if organizations are to remain competitive. To maximize competitive advantage, firms must also continually strive to assure their goals and those of their executives are closely aligned.
- MANAGERS: As the organization's team leaders, managers have a vital part in developing and retaining the skilled workforce that drives organizational performance and consistency. By definition, most of a manager's time is devoted to people-related issues. motivating and developing workers, measuring performance, assuring fairness and respect, creating opportunities for advancement, and much more. Managerial effectiveness, however, depends significantly on the systems and tools their organizations provide.
- EMPLOYEES: Workers are becoming increasingly dissatisfied with their jobs. A recent career.com study shows the number of workers who are satisfied with their jobs declined from 57 percent in December 2003 to 52 percent only five months later. In our experience, organizations' failure to adequately explain their employees' roles in the success of their organizations is a major cause of worker dissatisfaction.
Companies cannot afford to ignore these and other macroeconomic factors that are dramatically reshaping the environment in which they will soon be forced to compete.
The Transformation Imperative
If people truly are an organization's "most valuable asset". an asset soon to be at serious risk, then the role of HR must be transformed to reflect these critical realities. Responsibility for protecting and developing the organization's vital human assets can no longer be left entirely to divisions, departments, and managers motivated by their own unique objectives. Senior management must not only protect and build a talented and highly competent workforce, but must also carefully align its objectives and compensation plan with changing corporate goals. Clearly, the current circumstances dictate change.
The idea of transforming HR is not new. It has been discussed at length for some years, and, in certain respects, the transformation is already under way. Traditional HR administrative tasks increasingly are being performed more rapidly and cost effectively with technology and outsourcing, thereby enabling organizations to reduce HR overhead. However, for a variety of reasons, companies have been slow to transition HR to a prominent role when it comes to strategic talent management. While human factors, real or perceived, may sometimes be obstacles, organizations' abilities to measure and monitor performance against objectives and communicate institutional goals and direction at every level of the enterprise have also proved challenging. Fortunately, recent technological advances have demonstrated a powerful ability to facilitate the transformation process.
Companies that have advanced their HR function to that of a true strategic player have realized substantial benefits, both tangible and intangible.costs decline, productivity grows, customer and employee satisfaction increase, and they enjoy stronger competitive advantage.
The Value of Strategic HCM
- TALENT ATTRACTION: Talented individuals gravitate to organizations where they perceive they can make a difference.
- HEIGHTENED PRODUCTIVITY: Employees are optimally positioned to facilitate the achievement of corporate goals.
- INCREASED PROFITABILITY: Optimal use of talent, skills, and abilities minimizes waste and maximizes ROI of the organization's most vital.and often most costly.resource.
- IMPROVED SATISFACTION: Greater employee satisfaction translates to higher customer satisfaction.
- EMPLOYEE RETENTION: Employees at every level understand the value and importance of their contributions in achieving corporate as well as career goals.
- REDUCED VULNERABILITY: Organizations able to develop, retain, and grow a highly productive and satisfied workforce are more formidable competitors.
Indeed, closely linking talent management to competitive strategy is not only an inherently logical idea, but one that limited capabilities have, until now, made extraordinarily difficult to implement.
Strategic Talent Management and the Technology Hurdle
Managing talent in any organization involves a maze of policies, systems, and processes that assume diverse shapes and forms as companies evolve and grow. In established companies, the result is typically a combination of diverse elements that seldom work in tandem. More importantly, they rarely lead to optimal workforce performance. That is, performance consistent with the organization's strategic goals. A compensation plan, for example, might reward the acquisition of new customers when increasing sales to certain existing customers would be easier and more profitable. Similarly, performance objectives that preclude entrepreneurial thinking and risk-taking can hinder a company's ability to create the new products and services that help sustain competitive advantage.
Strategic talent management requires that performance goals, compensation, processes and policies at every level be closely aligned with an organization's overarching mission and objectives. Anything less translates to suboptimal performance. But achieving this advanced level of congruence and implementing truly effective pay-for-performance systems have generally been hindered by the extraordinary difficulty of communicating performance goals, implementing change, and monitoring performance on a comprehensive basis at every level of the enterprise. To help cope, companies inevitably look to technology. 
In our experience, the most successful companies have recognized that a single technology solution that integrates the key elements of pay-for-performance is critical to success.
In recent years, technology developers have engineered an array of increasingly sophisticated HR solutions designed to help organizations better manage key HR areas. Many employers have adopted advanced solutions to manage more effectively such critical areas as employee compensation, benefits administration, performance management, recruiting, and employee communications. However, while these technological tools provide significant advantages, each typically functions in isolation. We've seen this lead to confusion within organizations as different parts of the organization use different tools.
In our experience, the most successful companies have recognized that a single technology solution that integrates the key elements of pay-for-performance is critical to success. Fortunately, forward-thinking HR software firms are recognizing this critical concept and building comprehensive solutions to address it.
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