Performance Management

What Is Talent Management and Why Does It Matter?

July 19, 2023
November 7, 2023
  —  
By 
Camille Hogg and Sarah Lindenfeld Hall
Lattice Team

Talent management is a holistic way of looking at the employee lifecycle that helps you fuel growth, drive productivity, and motivate employees to contribute to your organization’s long-term success.

“It’s a constant process that involves attracting and retaining high-quality employees, developing their skills — and the biggest and hardest thing — continuously motivating them to improve their performance,” said Jacob Darr, president at Jacob Darr Associates, which specializes in recruiting and HR training and consulting. 

Key Takeaways:

  • Talent management enables you to nurture high-performing employees, provide development opportunities, and keep retention high.
  • Without talent management, you risk high turnover, hampered growth, and severe losses to productivity and performance.
  • You don’t have to go 100% asynchronous to reap the benefits.
  • Constant re-evaluation and measurement are key to adjusting your talent management strategy as your organization grows.

Defining Talent Management

Talent management encompasses your organization’s entire talent lifecycle. It integrates elements from a number of key HR processes, including human resource management, performance management, talent development, and talent acquisition.

When human resources teams have a strong talent management strategy in place, it provides a long-term outlook on what skill sets and competencies the organization will need in the future, and keeps organizations aligned to a talent strategy that will help them reach their strategic objectives.

Talent management is a structured approach to workforce planning — but it’s not a monolithic process, and it doesn’t just involve the HR department. As your organization scales and matures, the market shifts, and new business priorities come to the fore, your talent priorities will naturally shift alongside them. As such, constant re-evaluation and measurement are key to adjusting your talent management strategy as you grow.

5 Reasons Why Talent Management Matters

For some, the short-term return on investment may be hard to see when implementing a talent management system. But the long-term gains of a robust talent management strategy outweigh the short-term resourcing and budgeting requirements — especially when it comes to driving organizational performance and productivity.

1. Keep employee engagement high.

Your talent management strategy and employee engagement are intrinsically linked. Employee engagement is critical to employee performance, profitability, and job satisfaction. Engaged employees are also more productive, putting in more discretionary effort than disengaged peers.

“Every leader should want to make their employees happy and blossom. If not, they should not be a leader.”

When employees know their contributions to your organization are valued and fairly rewarded, they’re more likely to stay motivated and engaged over the long term.

2. Retain top talent.

According to a 2019 report by Gallup, employee turnover costs US businesses $1 trillion each year. So it’s little wonder that in our 2023 State of People Strategy report, we found 61% of HR directors reported that employee retention is becoming a strategic priority over talent acquisition.

Engaged employees are likely to be high-performers. High-performers experience higher levels of job satisfaction and productivity, meaning they’re less likely to leave. This makes retaining your best talent a key priority for business success.

When you have strong talent management processes in place, you’re better able to identify your best talent, correlate performance and engagement metrics, and spot when your high-performers become a flight risk.

3. Nurture talent development.

Employee growth is a key building block of employee engagement that positively influences job satisfaction. But when the path ahead is unclear or career development feels difficult to reach, employees are more likely to leave in search of opportunities where their learning and development needs will be met.

Enabling growth from within can help provide this sense of direction. Implementing career paths will give employees a roadmap for the future that aligns with strategic objectives, while other initiatives, like regular growth conversations and performance management processes, will surface any short-term emerging learning and development needs.

4. Increase operational efficiency with strategic staffing.

As layoffs, workforce restructuring, the macroeconomic climate, and employee resignations continue to present a challenge across all sectors, organizations need to be more strategic about their human capital decisions.

“Look for people who have not just done the thing you’re hiring for but [other] expertise that might fill a need.”

“In that environment, you need really thoughtful long-term planning around talent,” said Jonas Bordo, CEO and cofounder of Dwellsy, a rental listing service.

Companies should avoid scenarios where managers cut workers only based on their immediate needs right now, potentially stymying business plans for a future quarter or losing skills required for strategic pivots as in an unstable market.

5. Align talent strategy with business goals. 

Without talent management strategies in place to ensure people are motivated to do their best, your employees may struggle to connect their day-to-day work with your organization’s strategic objectives. It may also impact work product quality, brand representation, and customer satisfaction. Once product quality, customer service, and company reputation plummet, it can be difficult to recover.

“The worst is [when] your customers are affected and the quality is not up to standard,” said Belinda Wee, Ph.D., Associate Professor at the College of Business at Husson University. “Your reputation and goodwill are spoiled.”

Key Components of Talent Management

Recruitment: Identifying and Sourcing Skills

The talent management model begins with finding the right people for the job, including analyzing the skills and competencies required (both now and in the future), sourcing candidates, and onboarding new hires successfully.

  • Workforce planning: Analyzing your current and future skills needs is a critical part of any talent management strategy, because it helps you identify future talent gaps, and see how your existing employees can step in. When planning new roles, employers should ask themselves what skills the employee will need to support the company’s growth plans, Bordo said. “Look for people who have not just done the thing you’re hiring for but [also] bring other expertise that might fill a need down the line,” he said.
  • Recruitment: Being strategic about the right skills you need for upcoming and future roles helps you better identify the type of candidate that will complement your existing team. Darr says that now’s the time to be targeted and proactive with your talent acquisition strategy, and reach out to potential candidates already working in similar roles or comparable organizations within your sector to gauge interest. Wee noted that the interview is key, too. As part of the evaluation, she advised coming up with a list of must-have qualities. For example, for an administrative job, this might include things like emotional intelligence and an understanding of the company’s culture.
  • Onboarding: Start new hires off on the right foot by equipping them with the equipment, resources, colleagues, and knowledge that will help them start being productive members of your organization. Make sure you provide clarity around expectations, and help them contribute to your culture.

Retention: Nurturing Employee Growth

The talent management process doesn’t stop once you’ve hired the best candidate for the role. Instead, it’s time to put in the work to retain your employees and prepare them for the next steps in their careers. This helps employees see a clear path forward for development and gives organizations a clear view on how to best support their employees and proactively identify talent gaps.

  • Performance management: Regular performance reviews and check-ins will help employees identify their areas for improvement, see their progress, and set structured, measurable goals aligned to business objectives that keep performance high. Organizations can also encourage employees to go the extra mile by leveraging pay-for-performance initiatives, scheduling regular compensation reviews, and co-creating individual development plans.
  • Talent development: To retain employees long-term, you need to provide them with ample growth opportunities. This includes promotions and progression, but also includes regular growth conversations and opportunities to develop skills in other areas. Organizations can also nurture talent development with mentoring and reverse mentoring to expose employees to new perspectives and learning opportunities.
  • Talent reviews: Talent reviews are a process where organizations evaluate their current team’s performance and future potential. They’re helpful for identifying skills gaps, attrition risks, and critical points of failure that may impede the business reaching its goals.

Managers play a key role in guiding some of these processes at the team-level. According to Wee, supervisors should have a curiosity about their direct reports as individuals, and learn about what drives them and what their aspirations are. Signs that they might want more responsibility include when they ask for tuition reimbursement for an academic program, or regularly volunteer for extra work. When they start looking for ways to expand their knowledge or skills, find out what their goals are, she said.

Bordo recommended the use of HR business partners — employees who are assigned to departments and work directly with managers on talent management strategies such as retention — so managers can focus on team-level growth and performance processes.

“This will be the person who will call you to talk about an exit or promotion,” Bordo explained. “This is going to be the person more actively thinking about your team’s needs than you are, so that you can be a fabulous manager.”

Exit: Easing the Transition for Everyone

When employees choose to leave, a key part of talent management is easing the transition — both for the departing employee and their team members. From an organizational perspective, having structured processes around employee exits will help teams return to productivity faster, and mean they’re less likely to lose morale.

And for the departing employee, managing an exit gracefully may help establish goodwill, and could mean that employee may be more inclined to return with new skills and knowledge when a new role opens up, said Bordo: “Once they depart, you have a natural pipeline of people who might be interested in coming back.”

  • Succession planning: Preparing for vacancies enables organizations to think ahead and identify and develop future candidates to fill business-critical roles. This means organizations can think more strategically about their existing workforce, create opportunities from within that nurture existing talent, and stay more nimble to unplanned departures.
  • Exit interviews: Identifying why employees quit is vital information that will help you build and adjust key talent management processes. For example, if employees continually cite low growth opportunities, it’s a signal that organizations need to focus on nurturing skills development. Wee recommended having a neutral party conduct exit interviews in a private space outside of the usual office setting, where the employee may be more comfortable to talk freely. Ensure the interview remains confidential, she said, so employees aren’t fearful that they’ll ruin their chances for a future return if they raise concerns.

Getting Started With Talent Management

Ultimately, implementing a talent management strategy takes a collaborative effort across your whole organization. It requires the input of the HR department, senior leaders, managers, and key stakeholders at a departmental level to help scaffold the core processes that enable you to proactively monitor and measure performance, engagement, future talent and skills needs, and align them to your organization’s strategic vision. 

“When talent management is done well,” Darr said, “it creates a motivated workforce who will stay with your company for the long run. As a leader of a business, I’m in the business to make money and profit. But as a part of that, every leader should want to make their employees happy and blossom. If not, they should not be a leader.”

But the results of this collaborative effort can pay dividends. Organizations can identify top performers, develop future leaders, and make more informed decisions about upcoming skills needs to stay competitive. And employees benefit too — with continuous performance management and growth processes in place, they get the best out of their time at your organization, meaning they’re more likely to give their best each day. 

To find out more about how Lattice integrates your performance and talent management strategies, schedule a live demo.