· 8 min read · Features

Talent is driving the global economy and HR directors need to ensure they keep their competitive advantage in the boardroom

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Talentism is the new capitalism: that is the message of a research report by Mercer and the World Economic Forum, unveiled in Davos this year.

It concludes that talent is 'the fuel that drives the engine of the global economy'. Talent is an enabler for private companies, governments and academic institutions to close skills gaps and remedy talent shortages, while also moving more to employability and employment. The report continues: "In response to particular labour market failures, talent mobility practices can effectively boost labour supply, stimulate demand, or better equilibrate supply and demand through changes in the cost or quantity of labour - all of which lead to growth."

And putting this into the context of HR, other than the loss of the very people that keep them in business, the customers, there is no bigger risk to leaders of global organisations than a shortage of talent.

When it comes to business, a knowledge of talent management is of major competitive advantage in the boardroom for any HR director, because, as the research proclaims in bold print, business success fundamentally boils down to talent. "There is self- evidently a link between a country's GDP and the size of its working population," notes Sue Brooks, MD of talent management specialists Ochre House.

In this tough environment, businesses have to adapt not only to survive but to bring innovation and creativity to the table - impossible without the right talent.

But assigning responsibility for talent management - in that it might not be up to HR directors to devise a talent strategy any longer - poses challenges to businesses, not least because the nature of talent is changing.

Traditionally, responsibility for talent lay with the HR department, as part of its overall people remit. But it is impossible for HR directors to have a detailed working knowledge of every individual in a company numbering hundreds or even thousands of people.

"There is a question about what kind of capabilities you will need in the future, and how you will develop them," says Ed Griffin, group HRD at Chime Sports Marketing. "This is particularly pertinent if these capabilities are not necessarily valued right now. For example, a lot of organisations currently have a focus on digital skills, but if you go back five years, digital skills were a luxury, a 'nice to have'. Now they are essential, but you will have to pay a lot more for them than you would if they were already in place."

HR then turns to line managers to utilise their in-depth knowledge of the workforce, but as research from Roffey Park, published in HR magazine in February, revealed, the line resents 'extra duties' being foisted upon it, and can often view talent management as simply one more thing getting in the way of the day job.

"We in HR constantly think 'why aren't line managers doing this?'," says Hannah Sandford, head of business psychology at HR consultancy, ETS. "We don't give them enough credit for the fact that it is really difficult, and line managers are not experts in talent management. For the line, it is just an extra thing to do."

Andrea Ranyard, L&D director at ITV, says HR must help line managers take ownership of the talent management agenda. "It is essential to involve line managers and they are very much central to the success of our talent strategy at ITV," she says. "Managers are in the best possible position to nurture talent," she says.

Niki Rouse, head of people at training venue supplier, etc.venues, an employer of 250 staff in London and Birmingham, agrees. "In some of the more corporate or public sector organisations, HR tends to sit in an office, as opposed to being on the floor operationally and understanding what is happening in the business and seeing staff," she explains. "Then you will rely on data that's coming out of performance management or talent systems.

"You are always going to need line managers' input, as they work with people in the day-to-day business."

But Matthew Mellor, MD of search consultancy Armstrong Craven, has reservations that involving line managers in planning a talent pipeline might lack a strategic imperative. He fears using the line for talent management can be more of a cost-cutting exercise than a decision prompted by the needs of the business.

"In this climate, we have seen a lot of businesses cut costs, and where departments - including HR - have been rationalised and resized, talent management has been put to the line," he explains. But he adds: "Where businesses do this well, it is an opportunity to improve talent management." According to Chris Phillips, VP for EMEA marketing at talent management consultancy Taleo, the ratio of line managers to employees is likely to be 1:5 or 1:10, whereas for HR staff it is more likely to be 1:100. So a realistic and effective talent-management solution incorporates both HR and the line. "HR's role is to support and facilitate the process," says ITV's Ranyard.

But HR also needs to have accountability for talent management, and make sure it is being performed effectively.

Without support from HR, there is a threat managers could home in on individuals who remind them of themselves in some way - the 'like me' approach.

"This can be challenging," says Sandford at ETS. "You end up with people being evaluated and identified as talent on the basis of their personality, not what they deliver."

Jason Miller, founding partner at business coaching consultancy Tinder Box, agrees line managers are prone to subjectivity and cites his own experience as an example.

"Working on the operational side at BP, I had a team of 250 people and had complete autonomy. But I don't know if my view of talent was the right one in terms of what was right for the business. I could take a much more parochial view and only take an interest in people who were like me, rather than thinking about the company as a whole." He adds: "The reality is, there's probably a lot of that going on."

Managing talent within the organisation doesn't stop at identifying the future stars of the business. They also need to be persuaded to stay. Miller advises 're-recruiting' talent each year, sitting them down and explaining that they have been earmarked as future leaders within the organisation and asking what it will take to make them stay. "We often assume people are going to stick around, but has anybody actually asked them?" he muses.

The HR role also encompasses developing what Griffin calls "talent pools outside the organisation". This involves identifying individuals that the organisation will need to recruit in the future, and finding ways to get to know them and connect with them to make the process of recruitment easier - and cheaper.

Sinéad Hasson, MD of market research recruiters Hasson Associates, says: "On a day-to-day basis, attracting talent should be the responsibility of hiring teams and HR. HR should identify the correct channels - recruiters, job boards and events, for example - and line managers can then work to help direct HR and support their recruitment goals."

But Phillips warns the tools and processes put in place around talent management should be tailored to the needs of the line manager - not to the convenience of HR. "In the past, this hasn't been done very well," he observes.

"HR has either put in processes and systems that are there to suit its own needs, rather than those of the line manager. Or, it has introduced self-service tools that push a lot of work into the line manager role. Neither solution is effective."

HR needs to think carefully about how much time it is spending on processes, and how much time it is spending connecting with the business leadership.

Says Miller: "It is all about execution. I would rather have a mediocre tool with outstanding execution, than the other way round."

The risk for HR is that incorporating the line into talent management risks the much-prized seat at the board table. Nick Holley, director of the Centre of Excellence at Henley Business School, says ultimately HR should not be put off by this. "What really matters is, are you influential?" Holley says. "Are you building the capability of your organisation? Sometimes that can be done more effectively behind the scenes, rather than at the boardroom table."

A survey of global business leaders carried out by the Economist Intelligence Unit for Lloyds last year found talent management had shot up from the 22nd priority in 2009 to the number two priority in 2011.

In some industries, this is caused by a hangover from the dotcom bubble, when previously fast-growing companies battened down the hatches and stopped hiring at graduate level. More than 10 years later, the impact is being felt at the very senior level those would-be graduate trainees should now have reached.

So while the importance of talent for business has reached the top table suddenly, nor is it a fly-by-night buzzword. Talent strategy, like people strategy, needs to evolve - but Valerie Scoular, group HR director of Aegis Media, explains this doesn't mean that HR directors need to be left out in the cold.

"In a world where talent is mission-critical for business success, line managers need to lead the charge on attracting and retaining top talent. Talented people want to work for inspirational leaders," she says.

"HR's role is to provide thought leadership and exciting talent opportunities to support managers in getting the best out of their people," Scoular added.

"The best talent work happens when the individual, the manager and HR all work in partnership."

Talent Pools

"There are a couple of schools of thought on the talent pool system," says Hannah Stratford, head of business psychology at HR consultancy, ETS. "Some organisations would say everybody is talent and just focusing on specific people doesn't work.

"Other organisations have a clear idea of who their talent is and promote and invest in them more than other employees."

Talent pools continue to divide opinion. While they can make sense on a business level, allowing HR directors and CEOs to focus resources upon those who display the most potential, having a select group of individuals labelled as 'talent' can have a polarising effect upon the rest of the workforce. Those not identified could struggle with morale and professional confidence.

"We believe that everybody has potential and therefore everybody should be in your pool," says Jane Sunley, CEO of Learnpurple. "Not everybody aspires to lead, but everybody wants to learn and develop. Organisations should value each person on their individual skills and attributes and develop them according to their goals and ambitions, in conjunction with organisational needs."

Traditionally those with 'star potential' are put into the talent pool. But the process of deciding who should be labelled 'talent' is in itself fraught. Difficulties occur when decisions are made subjectively. Managers may favour those who remind them of themselves in some way - the 'like me' factor.

"A much fairer assessment is where performance is measured consistently and fairly," says Sunley. "It is better if the employee and his or her manager decide on potential future paths together in an honest and frank discussion. Taking this approach stops people 'playing God'."

Stratford says it is helpful to identify talent, but warns against putting all budget and spend into developing only a select few. These high-performing individuals are in high demand and could be poached by a rival, leading to a wasted spend.

Cast study: Alcatel Lucent

Global telecoms giant Alcatel-Lucent found its line managers wanted HR to help give them the ability to find talent across the organisation.

Talent management is a big focus for the company, as its growth comes from innovation and creativity. The company needed to be able to stimulate and drive the management of talent across the company through the line, looking at hiring policies and where to place talent within the organisation.

"The company wanted a focus on how to understand the skills and capabilities it had across the group and how best to deploy it," says Chris Phillips, VP for EMEA marketing at talent management consultancy Taleo. "It wanted to be able to develop and progress key skills to become more innovative overall." Using tools and processes that would help line managers identify talent, the company was able to become more creative and increase the pace of innovation.

The strategy connected a business goal with talent - galvanising the whole organisation to hire the right people with the right skills, and move them around to the right places. By directly linking talent to business success, the value of talent management was demonstrated to the whole organisation.

Laurent Geoffroy, VP human resources at Alcatel-Lucent, says: "Our solution proved to be very effective. Using talent intelligence gives us a powerful strategic platform for the management of talent."

Talent - the stats

13.5%

of European business leaders say talent is a 'very high' priority for their business

11.6%

of European business leaders say they are 'very well prepared' for a talent shortage

70%

of office-based workers are actively or passively looking for a new job - now

22%

of office-based workers believe their line manager understands their professional capacity the best; just 1% say HR software understands their capabilities the best

86%

of businesses globally have processes in place to capture talent analytics data - but less than 50% use it to make informed business decisions

39%

of companies don't have formal processes in place to engage and keep staff within the company

Sources: Lloyds Risk Index 2011; SHL Global Assessment Trends Report 2012; Taleo UK Social Talent Management Report