Human Capital Management Update

With offices in 25 countries throughout the world, few consulting firms are as closely connected to the challenges and opportunities of HCM as Towers Perrin. The firm's work with large, multinational clients and the recently completed Global Workforce Study show that talent management—the identification and cultivation of key workers—is becoming a key concern among growing companies. In the following interview, Max Caldwell, principal and leaders of Towers Perrin's Organizational Change practice, discusses the reasons for the rising importance of talent management and how this area fits into larger HCM strategies.

Oracle: How significant is talent management to your clients today?

Max Caldwell: Talent management is hot right now. When we talk to companies across regions and industries, they say they're trying to grow top line revenue, and they're trying to expand into new product lines into new geographic areas. But that growth is dependent on having a pipeline of great leadership talent that can step into new roles and fuel this expansion. We work with many clients who are constrained in their ability to grow, not because of marketplace forces, but because they just don't have enough management talent. The supply-demand dynamics when it comes to talent are very challenging for growing organizations.

Oracle: What are the warning signs that a company isn't doing enough to develop talent?

Caldwell: I had one recent client say recently that it is filling only 50 percent of its more senior-level jobs with internal candidates. It looks for the other 50 percent outside the firm. But the company feels it should be sourcing 80 percent of the candidates from its internal talent pool, and then go outside when it needs a particular technical specialization. A lot of organizations just don't have robust internal processes to build and sustain a pipeline of leaders. And it's not just leaders—depending on the industry, the talent needs could be just as acute for nurses in healthcare, engineers in manufacturing, or R&D folks in pharmaceutical companies.

Oracle: What role can technology play in helping companies address this challenge?

Caldwell: Technology isn't something that just supports HR's ability to gather and leverage data. It's something that employees, managers, and senior leaders should use with HR to identify and develop high-performing, high-potential, highly capable people.

But organizations feel constrained if they don't have well-integrated technology to access data and keep it fresh. To make good judgments about people, organizations need a seamless way to synthesize information so they can look at high-potential employee Jane Smith with a 360-degree view of her as a professional—her performance ratings, her competency assessments, her development history, her past assignments—and then leverage that data to make judgments about ways to further leverage her skills and give her the next opportunity to grow as a leader.

The other area where technology is really coming into play is the notion of a free market for internal talent. Let's say you have a really talented engineer who is looking at her career path. Can she use technology as an enabler to understand the skill set and the competency profile of a new job? And then virtually throw her hat into the ring? Right now, organizations essentially harvest people out of the high-performer group in what is a pretty top-down process. We are moving to a world where individuals are going to be empowered to initiate that dialogue, so the great performers have the means of saying, "Here I am, and here's the employment experience I am after."

Oracle: How does talent management fit into a larger HCM strategy? It sounds like cultivating talent is a growing piece of that larger puzzle.

Caldwell: It really is. Talent management strategies are very much connected to broader workforce effectiveness programs and practices. You need an effective performance management process. You need highly capable managers in place. You need to have a career management framework that gives people a clear view of how they can progress in terms of their career growth. You need a rewards system that is aligned with the desires of the workforce as well as the needs of the business. Companies must look holistically at all of these processes as they focus on segmenting the top 10 to 15 percent who are going to be particularly critical to drive the future of the business.

In our research, the number one concern on the minds of senior HR executives and line executives is the development of existing leadership. That issue is key, but I think that next generation of leadership talent that's coming up over the next three to five years is also a very critical issue—these people are literally the future of the company.

Alan Joch is an independent writer focusing on business and technology.

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