Tuesday, October 28, 2008

Thoughts about Talent Management

In my role as an HCM strategist for a business software company I’ve been thinking about talent management and have identified what I think of as five popular ‘myths’ about talent management – there are probably more but these are my favorite five:

Myth 1:
Talent Management and Core HR are separate functions – this seems to be the de facto position of leading talent management solutions, but effective talent management requires consolidated access to employee, staffing and business data.

Myth 2:
Executive succession planning is essential for the ongoing success of any company – actually, from an employee performance and retention perspective at larger companies, managers have more direct impact than executives.

Myth 3:
Canned reviews are better than none- actually this is true, but it’s still not good enough and we shouldn’t settle for it.

Myth 4:
Process automation can improve management quality and employee satisfaction – ironically, while the judicious use of process automation may well make good managers more effective, it may have the reverse effect on bad managers.

Myth 5:
Cascading goals help employees feel more aligned with company goals – rarely does a purely top-down approach ensure anyone’s loyalty.

Pay, Performance and Pay for Performance
Let’s dig a little deeper: There seems to be pretty universal agreement that linking compensation management with performance is important and as a compensation specialist I was pleased to see that Yankee Group forecasts a 19.6 percent growth in compensation management over the next several years. Also on the compensation side, we see the need for a streamlined approach, a high degree of visibility into global compensation and the ability to provide managers with clear, consistent compensation guidelines. So, basically everyone agrees that compensation should be easy, consistent and fair.

On the performance management side it gets more interesting, however. To over-generalize everybody into two camps, one camp stresses the need for automation, for example, providing managers with pre-delivered employee review feedback. A few apologetic-sounding members of this camp argue that although personalized feedback would be ideal, canned feedback is better than nothing. Opponents claim that nothing makes an employee feel valued than personal recognition, which is more important than cash in some cases. If we agree with this, it does tend to make the canned review look pretty lame.

When we look at pay for performance there is even more controversy because apparently quite a few managers are either afraid of being disliked and give everyone a raise, or else inflate their performance figures to increase their own budget allocations, so that the average delta between high and low performers is pretty small. How un-motivating.

Despite a certain amount of controversy around whether pay for performance actually works, more than 75% of all U.S. companies connect at least part of an employee's pay to some performance measures. Generally speaking, these companies have either turned to best of breed solutions or built their own, each of which comes with its own set of challenges. Best of breed solutions must be integrated to core business systems in order to link to employee data, staffing processes and business performance results and that can be difficult to maintain. As for home grown solutions, they require a team of people to build, integrate and maintain the solution as well and also come with the risk of losing tribal knowledge when Joe, the guy who built it all without documenting anything, leaves the company due to disagreements with his manager.

Talent MANAGE-ment
Not surprisingly, discussions about talent management always seems to come back to the manager, who is apparently too busy to write an employee review from scratch, or else is too afraid of being disliked to penalize low performers.

So far the leading talent management solutions have not solved the problem of poor management, which seems like a pretty important problem to solve if you want to attract, retain and motivate good people.

Not that this is a criticism of talent management solutions because in all fairness, management of people isn’t a software problem. The criticism is that talent management solutions have implied that it is a software problem and that the solution is to automate talent management processes. The real solution is better leadership, which can’t be installed. To this day the number one reason top performers leave companies is their managers. And given how much attrition actually costs, no one can afford to lose good people to poor management.

So when I see that the main selling points of leading talent management solutions are communicating company goals from on high and automating managers’ jobs, I can’t help feeling like people are missing the point. When companies start holding managers accountable for managing maybe we’ll see some real talent management.

Talk to People
Talent management is a human problem first and a software problem second. If you are a company of any size you will still need some sort of technical solution to support your performance and compensation processes, although in their current form, isolated from core business applications and focused on automation, the long-term value proposition of TM-only solutions may be limited. But even more important is the good old-fashioned, non-technical art of conversation.

Companies that want to encourage good management won’t get very far without talking to people. This means making it a company priority for managers to talk to the people they manage, really talk to them; making a point of soliciting people’s feedback and allowing them to be active in decision making processes for their own careers; and talking to managers and employees about what they need to be successful. And of course, it also means being ready to remove poorly performing managers out of management roles.

Talent management software should be used to facilitate the talent management conversation, not automate poor management.

1 comment:

  1. Clay's comment: I agree that the conversation is everything…and agree with the myths.

    On a side note…a related issue that often causes major problems is that most of the time there zero conversation between an employee and their manager’s manager. This leads to huge problems because bad managers can be great at filtering key information from reaching higher managers…which allows the first level manager to keep problems hidden, causing the problems to fester, and eventually exploding down the line.


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