A talent management strategy can help you attract and retain skilled workers.
Here’s a 6-step strategy for effective talent management.
What Is Talent Management?
Talent management is a systematic approach to recruiting, developing and retaining skilled workers. It focuses on attracting and retaining talent to fill the most important positions at your company. It includes tactics for recruiting skilled applicants, onboarding them, training them and persuading them to remain with your company.
A comprehensive talent management strategy includes procedures for handling talent transitions when a key employee gets promoted to a different position, retires or leaves for another reason.
The Steps in the Talent Management Life Cycle
The talent management process can be broken down into 6 steps:
- Setting talent management goals: Identifying key positions, setting priorities and establishing metrics
- Attracting talent: Recruiting skilled workers
- Onboarding talent: Transitioning recruits to your team
- Developing talent: Training and promoting workers
- Retaining talent: Providing incentives for employees to stay with your staff
- Transitioning talent: Planning for situations where key employees need to be replaced
A comprehensive talent management strategy seeks to optimize the execution of each of these steps. Talent management also can focus on a particular area that is a high priority.
Why Does Having a Talent Management Strategy Matter?
The practical importance of talent management stems from several key benefits it provides. These include:
- Closing skills gaps
- Lowering recruitment costs
- Increasing productivity
- Improving succession planning
- Increasing business performance
Closing Skills Gaps
One of the biggest challenges in attracting and retaining employees is closing skills gaps. According to an annual report by job website operator Monster, the top challenge recruiters face in 2021 is the skills gap and the obstacle it presents to finding qualified applicants.
Monster’s research found that 40% of employers expect closing skills gaps to be a challenge this year. A third say difficulty filling positions has increased since last year, and 80% say they have trouble filling positions compared with a year ago. By helping employers attract, develop and retain qualified workers, talent management strategies help close skills gaps.
Lowering Recruitment Costs
By making it easier to attract and retain qualified workers, a talent management strategy can reduce the cost of recruitment. Recruiting a new employee or finding one to replace a departing worker can be expensive. On average, hiring a recruit takes 42 days at a cost of $4,129, according to a report by the Society for Human Resource Management, a membership organization for human resources professionals.
Increasing Productivity
By maintaining a skilled workforce, a talent management strategy can increase productivity. A study by the Massachusetts Institute of Technology Sloan School of Management found that investing in soft skills training yielded a 250% return on investment in productivity gains.
Improving Succession Planning
Talent management strategy can help businesses prepare in the event key talent leaves. Many companies lack succession plans for this type of contingency, according to research by benchmarking provider American Productivity & Quality Center summarized by corporate news provider CFO.
Whereas 94% of top-performing companies have succession plans in the event that top executives leave, this drops to 56% among bottom-performing companies. Figures drop considerably for middle management and operational staff, with 8% of top performers and 1% of bottom performers having a plan for what to do if key operational staff leave. A talent management strategy that includes succession planning can help you prepare for this type of emergency.
Increasing Business Performance
The benefits of talent management combine to promote better business performance. A survey by management consulting firm McKinsey found that companies that excel at talent management outperform ones that lag in this key area.
Among companies that are very effective at talent management, 81% succeed at attracting talent needed to achieve key strategies, 78% succeed at retaining required talent and 99% succeed at improving overall performance. Among companies that are very ineffective at talent management, these numbers drop to 51%, 44% and 16%, respectively.
Talent management makes a difference.
How Do You Develop a Talent Management Strategy?
A comprehensive talent management strategy should optimize each step in the talent management process. This objective can be broken down into 6 imperatives corresponding to the steps in the talent management process:
- Establish your talent management priorities
- Refine your recruitment strategy
- Improve your onboarding process
- Cultivate rising talent: training, on-the-job training through workflows and software, measuring performance
- Aim to increase employee retention
- Prepare for transitions
Depending on what you determine your priorities are in the first step, you may choose to place more emphasis on some of these steps than others. Here are some guidelines for pursuing each of these steps.
1. Establish Your Talent Management Priorities
A preliminary step is to decide what priorities to pursue with your talent management program. Start by identifying and ranking which positions are most important to your business operations.
Most companies can’t afford to pay top talent for every available position, so the strategic approach is to focus on filling your most essential positions first. Go through your organizational chart, identify your most critical positions and rank them in terms of priority.
You can then determine which of these positions are in most immediate need of talent management applications. For example, if you’re about to lose a key manager in a couple of weeks, recruiting for that position becomes a high priority.
Apart from meeting immediate needs, you can set priorities for each of the other phases of the talent management process:
- Recruiting
- Onboarding
- Talent development
- Retention
- Transition planning
For best results, establish measurable key performance indicators (KPIs) you can use to track your progress toward your goals in terms of numerical benchmarks or other objective benchmarks. For example, let’s say you’ve identified improving employee retention as a priority. To measure your success at achieving this goal, you can track your employee retention rate and test how your efforts to improve retention affect your results.
If one of your goals doesn’t lend itself to quantification, you may be able to measure it in terms of discrete results and benchmarks. For example, if your goal is to fill a specific position with a candidate possessing certain qualifications, a preliminary benchmark might be scheduling an interview with a candidate possessing suitable qualifications, while a follow-up benchmark might be conducting the interview and a third follow-up might be actually hiring the candidate.
2. Refine Your Recruitment Strategy
In most cases, improving your recruitment strategy for attracting qualified candidates will form an important part of your talent management strategy. Goals for improving recruitment can include:
- Attracting qualified candidates for a specific position
- Increasing your volume of applications
- Improving the quality of candidates possessing specific skill sets
- Increasing the speed or cost-efficiency of your application process
You can use a number of tactics to improve your ability to hire talented employees. These include:
- Recruiting from within your own company
- Hiring a staffing agency
- Improving your online job descriptions by incorporating better keywords
- Creating a scoring system for evaluating candidates
Review your existing recruitment strategy, and identify places where your current procedures might benefit from improvement.
3. Improve Your Onboarding Process
Your onboarding process consists of the steps you take to transition new hires to your company. How efficiently you do this helps determine how much value new employees add to your team.
A smooth onboarding process can speed up how quickly your new hires become productive team members, while a poor process can have them looking for another job in a short time.
Steps in your onboarding process can include actions such as:
- Completing human resources paperwork
- Introducing new hires to supervisors and coworkers
- Assigning mentors to new employees
- Setting up digital profiles and workflows for new workers
- Introducing new employees to standard operating procedures
- Communicating company policies to new hires
Review the steps in your current onboarding process and identify places where improvements might increase your efficiency. For example, you might determine that adopting onboarding software could increase the efficiency of your process.
4. Cultivate Rising Talent
Developing talent that you’ve already hired forms a critical part of talent management. The better you can cultivate talent from within, the fewer resources you have to expend on recruitment.
You can develop talent through means such as:
- Mapping out career advancement opportunities for specific positions and employees
- Assigning mentors to employees
- Upskilling your workers through on-the-job training
- Introducing workflows and software which give employees opportunities to practice desired skill sets
- Investing in employee training opportunities such as seminars, certification programs and accredited courses
For measuring the success of talent cultivation programs, performance reviews play a key role. Use periodic performance reviews as opportunities to track how well employees are progressing in developing their potential.
5. Aim to Increase Employee Retention
Employee retention forms another key component of talent management. Improving your employee retention prevents skills gaps and reduces your recruitment costs.
You can improve employee retention through steps such as:
- Rewarding top talent with raises, bonuses, promotions and other incentives
- Using performance reviews and other opportunities to discuss employees’ career goals and opportunities
- Creating paths for career advancement within your company
- Giving employees opportunities to practice career skills which they want to develop
- Building a company culture that promotes employee satisfaction
- Using employee satisfaction surveys
- Adapting Net Promoter Score (NPS) surveys to measure employee sentiment
- Eliciting suggestions from employees on how to improve the workplace environment
- Creating good communications procedures for voicing complaints and resolving disputes
- Conducting exit interviews with departing employees to find out why they’re leaving
To measure your success at employee retention, you can use means such as tracking your retention rate, results of employee satisfaction surveys and how often employees leave voluntarily versus involuntarily.
6. Prepare for Transitions
Even with the best employee retention strategy, you’ll encounter situations where employees can no longer continue in their current positions.
Employees may be promoted, fall seriously ill, retire, die or move on to other employers for any number of reasons. Having a succession strategy can help your business persevere through these types of transitions.
Strategies you can use to prepare for transitions include:
- Documenting procedures so that knowledge isn’t lost when key personnel leave
- Cross-training employees to fill in on key tasks and roles when another employee is absent
- Requiring employees to give notice when quitting
- Having departing employees train their successors
Build succession planning into your talent management strategy so that sudden talent transitions don’t become crisis situations.
Manage Your Talent to Optimize Your Workforce
An effective talent management strategy helps you recruit skilled workers, develop their potential and encourage them to remain with your company. A strong talent management strategy should be rooted in clear priorities and measurable goals.
To be comprehensive, a talent management strategy should encompass recruitment, onboarding, talent grooming, employee retention and transition planning. Developing good standard operating procedures for each of these areas will help ensure that your key positions are always staffed by skilled workers.
