In brief
- There are three crucial tipping points that will shape the future of talent management. These include (1) a responsive and reactive approach to talent management, (2) little consideration of how careers are changing, and; (3) it cannot be the catch-all practice of the past. t
- In its current state, talent management will not rise to future challenges. Only 13% of HR leaders rate their talent management practices as ‘excellent,’ while 70% of HR leaders rate their organization’s ability to address their talent needs as ‘mediocre.’
- We propose four shifts for talent management to move into the next era of work that will be characterized by AI, labor shortages, work without boundaries, and workforce ecosystems.
It is estimated that the global talent shortage will continue to rise to an 85 million person shortfall by 2030. This could lead to over $8 trillion loss of revenue, placing further strain on the economy. Talent management has never been more critical for organizations than now. In fact, 78% of business executives rank talent management as high on the business agenda.
Yet, to date, talent management has done little to ensure that organizations can access, nurture, and retain the talent they need. We see this in low engagement rates, high turnover and attrition, and over 50% of employees browsing for opportunities outside of their organization. Our approach to talent management has not evolved to meet the demands of business and the complexity of the labor market. This calls for a critical review of our talent management practices and making the necessary shifts to remain relevant in the future.
This article will reflect on the evolution of talent management over the past few decades and the turning points that have led to this evolution. We also critically examine traditional talent management approaches’ current pitfalls and limitations. We also propose a way forward to shift the dial in response to the changing talent landscape.
The evolution of talent management
Since the Second Industrial Revolution, talent management has been critical to business success. This evolution can be viewed as four eras that are loosely aligned to how organizations developed with environmental and economic changes.
Era 1: Establishing headquarters and office-based skills
The origins of talent management can be traced back to the Industrial Revolution when labor moved into factories and administrative support became necessary. This resulted in the creation of headquarters and a need for new skills.
Companies soon realized a lack of office-based skills and executive roles, prompting them to acquire smaller businesses for their managers and executives. This led to the emergence of talent management with a strong focus on filling vacant roles through external talent.
Era 2: Predictable leadership development
As external talent pools started depleting, the focus of talent management shifted towards talent development. Organizations started implementing plans to build sustainable talent pools for the future, reducing the reliance on external hires for senior positions.
The emphasis also shifted internally to forecasting talent and creating career paths for long-term employees in line with this predictability. Talent acquisition was only focused on lower levels leading to gaps at the senior and executive levels, as the talent landscape became more unpredictable.
Era 3: The war for talent
In the 1980s, high levels of market competition and a short supply of talent led to organizations competing for talent externally. Organizations became flatter and jobs became broader, with employees taking control of their careers due to uncertainty about continued employment.
The infamous 1997 McKinsey article on the “War for Talent” highlighted the need to compete for knowledge-based talent. However, this focus on winning talent has overshadowed the importance of accessibility to talent. It’s crucial to ensure a steady flow of access to talent pools, even if they are not owned permanently (e.g., gig workers).
Era 4: Skills shortage and fire fighting
In the past decade, work, workforces, and workplaces have been disrupted, but talent management has not kept up with these changes. Most organizations are stuck in a “war for talent” mindset, even though the challenges they face have evolved. Instead of proactive planning, talent management has become a reactionary response to skills shortages. Short-term tactics are used instead of long-term planning, and talent pooling and succession planning are only used to fill gaps. This fragmented approach leads to reactive measures and firefighting to deal with economic and organizational pressures.
3 tipping points that will shape talent management
Exploring the evolution and current state of talent management reveals three crucial tipping points that will shape the future of talent management:
Tipping point 1: Reactivity is not a winning talent management strategy
Talent management has become responsive and reactive, especially in uncertainty. Even though the future is uncertain, we should become more proactive in predicting and managing the demand and supply of talent. Talent management should shift from “things to do” to “strategies we employ” to sustain and enable the business into the future.
Tipping point 2: Talent management and careers deliver one human experience
Talent management has evolved mainly without much consideration of how careers are changing or how talent management practices and decisions impact careers. Careers have become self-directed, boundaryless, and focused on increasing employability.
This means that talent is seeking opportunities to contribute, learn, and access meaningful experiences. The talent experience has to be top of mind in how we think about talent management practice implementation to deliver these experiences. At the end of every process, decision and data point, there is an experience impact that either supports or diminishes our talent supply.
Tipping point 3: Talent management cannot be the catch-all practice of the past
Talent management has become broad, diluted, and a catch-all practice. Over time, we have responded to skills shortages and labor market pressures by trying to become “more” instead of “better.” This has led to talent management practices being reduced to talent management activities and talent management as a function expanding to integrate efforts to attract and retain talent.
To ensure a holistic talent experience, we must redirect our efforts to integrate and align practices internally and foster a talent mindset across the organization. These tipping points reflect the need for change in how talent management is positioned, the activities we prioritize, and how practices are integrated and aligned to deliver a meaningful talent experience while becoming more intentional about our boundaries.
The future of talent management: 4 shifts needed to rise to the challenge
In its current state, talent management will not rise to future challenges. Only 13% of HR leaders rate their talent management practices as ‘excellent,’ while 70% of HR leaders rate their organization’s ability to address their talent needs as ‘mediocre.’ We propose four shifts for talent management to move into the next era of work that will be characterized by AI, labor shortages, work without boundaries, and workforce ecosystems.
1. Talent management needs to reclaim its identity
To refocus and redefine boundaries, we must look at our purpose critically, why we exist, and how talent management contributes to business outcomes and sustainability. This includes internally clarifying our beliefs about talent and talent management, as this sets the tone for how we operationalize talent management and the boundaries we put in place.
Practically, this means that a clear talent philosophy has to be defined, which addresses the talent needs that have been identified and reflects the internal values and culture of the business, as well as the desired career experiences.
This guiding philosophy is the litmus test against which all talent activities are measured. If our philosophy indicates that the term ‘talent’ is reserved for high performers, then we need clear talent segmentation activities that differentiate these groupings. Similarly, if everyone is considered ‘talent,’ we require inclusive career practices that lead to advancement. While neither approach is right or wrong, there must be clarity to a best-fit solution for the organization and its requirements.
For example, Starbucks believes that baristas are critical to the business’s success, as they directly deliver the customer experience. The company believes that baristas are a key talent segment to manage. This clear definition of talent reflects what the business needs to achieve and what it prioritizes in its talent management approach. Aligned with this belief, they offer great benefits to both their full-time and part-time baristas and have focused development efforts to upskill and retain this talent.
2. Talent management has to become more proactive
Much of what hasn’t worked in talent management is a result of reactivity. We might not be able to predict the future, but we can anticipate it. Workforce and scenario planning must be non-negotiable inputs into our talent management strategy. If we can reasonably anticipate how talent demand and supply will change, we can better respond with appropriate strategies.
Practically, using data and technology to support and inform talent management decisions is critical. Talent management has to be a data-driven and business-focused practice to remain relevant.
Microsoft has already shown great initiative in this area. With more than 120,000 employees, the organization harnesses the power of data and technology in its workforce planning to recruit and redeploy skills and use data to drive its talent management practices forward. As a result of this proactive, data-driven approach, Microsoft has multiple early career programs aimed at nurturing the talent required within the organization in the future.
3. We need to ditch the maturity models
We have become obsessed with achieving predefined levels of maturity in talent management. It sounds counterintuitive, but if we want to move forward, we have to shift from aiming for a desired level of maturity to getting better at making calls about what is fit for purpose.
Ultimately, organizations are only interested in a talent management approach that meets their needs and gives them a competitive advantage. This does not require the most sophisticated practices, technologies, and channels but rather an approach that delivers impact.
This approach might look different for different organizations. Non-traditional talent management practices, such as skills-based approaches, deconstructing of jobs, and non-traditional talent pools, are necessary and viable alternatives for some to include in talent management. For others, more traditional strategies are the best fit.
This shift also implies that we have to continuously monitor and measure the impact of talent management and link this to business outcomes; reaching the benchmark will no longer be an indicator of success.
Apple’s “lean” talent management approach is a good example of ditching a maturity model to focus on an approach that delivers business impact. To drive innovation and encourage creativity, the company frequently shifts teams, has no pre-defined career paths, and changes the scope of roles and responsibilities of individuals. This approach has reinforced the culture of innovation and high performance, leading to product innovation.
4. We need to acknowledge the human experience
Organizations that get talent management right are strategic in their approach, targeted in their execution, and intentional about the experiences they create. There has to be close alignment and integration of practices that deliver on the talent experience, such as learning and development, career management, performance management, and employee experience.
Booz Allen Hamilton is an American professional services firm with an innovative approach to creating meaningful career experiences through talent management practices. They have implemented an alumni program specifically focused on harnessing the value of returning talent.
To build future-ready skills, they partner with learning providers to collaboratively build these skills. They also have redeployment and referral programs that actively manage and support careers while creating access to talent – all of which create an authentic and memorable employer brand externally supported by an aligned internal lived employee experience.
It’s time to shift
As organizations grapple with uncertainty and complexity, talent practices must adapt. Business leaders are looking toward talent management to ensure that organizations can deliver on their strategic intent, show shareholder value, and remain competitive in an increasingly constrained economy.
With data and technology opportunities, we are primed to advance talent management meaningfully. This doesn’t mean we must do more in talent management to show our value. Rather, we must start doing less with more intention and invest our efforts aligned to business priorities.
