Understanding the Basics: What Is Talent Management?
In this article, we give an overview of what talent management is, why it’s a key aspect of human resources, and how talent management systems help companies develop an engaged, skilled, and productive workforce.
This article was updated to reflect new information on January 5, 2023.
“Understanding the Basics: What Is Talent Management?” is part of a blog series explaining the technologies that help companies manage their people, budgets, and processes.
In this article, we discuss:
Managing talent—meaning, the workforce—has always been an important function of human resources (HR). But the rapid pace of change in recent years has shed new light on how talent management impacts every aspect of the business.
The widespread shift toward remote and hybrid work, the movement toward skills-based hiring, and the need to provide employees with greater flexibility are just a handful of the changes companies must consider when designing a talent management strategy.
But here’s what hasn’t changed: Employees, wherever they work, want to feel connected and engaged. They want the potential for career growth and to know they add value in their role. Employees still want to remain relevant in today’s changing world, so they seek continuous learning and development opportunities to acquire new skills. And companies, as always, want to hire the best talent and remain nimble amid changing business conditions.
Now more than ever, talent management strategies need to be flexible and agile—not only to best manage the talent life cycle but also give organizations instant insights into the power of the workforce.
That’s what talent management processes and systems help companies achieve. This article provides an overview of talent management and how it has changed, why it’s a key aspect of HR, and how talent management systems enable companies to develop an engaged, skilled, and productive workforce.
Talent management is about taking a strategic approach to attracting, retaining, and developing a workforce—because running a company requires more than just hiring people who can perform specific tasks.
Companies need to build a competitive workforce by sourcing in-demand skills, investing in continuous learning and skills development, and managing and optimizing performance.
The skills that a company needs evolve as the company grows. At Workday, we believe that applying a skills-based lens to optimize talent enables workers to meet changing business demands. At the same time, the approach to workforce management also needs to change.
Now more than ever, talent management strategies need to be flexible and agile—not only to best manage the talent life cycle, but to also give organizations instant insights into the power of the workforce.
In other words, talent management is less about management and more about enablement. Companies that invest in the employee experience, from retention to development and more, enable their employees to not only successfully complete tasks but also achieve business outcomes.
Talent acquisition and talent management are closely connected, but there are important distinctions.
Talent acquisition focuses on sourcing talent outside of the organization, and it involves everything needed to recruit, interview, hire, and onboard talent. Talent management, on the other hand, focuses on nurturing talent from within the organization and providing employees with skills development opportunities, as well as measuring their performance. A good talent management plan brings out the best in employees. It helps them build career paths that enable them to flourish, identifies needed skills with jobs and particular workers, and ensures that learning is targeted and continuous.
In other words, talent management shouldn’t be a separate business process—it needs to be integrated with most activities across the company. Talent management can include such things as connecting people to development opportunities, as well as companywide programs designed to elevate talent through training, learning, mentoring, and personalized workplace experiences. In other words, people don’t just want jobs anymore—they want an employee experience.
While retaining and growing talent is widely considered a top HR priority, that isn’t HR’s only function. At a foundational level, HR institutes workplace policies, benefits, and payroll. And although these tasks are sometimes considered transactional, they are foundational operations of every HR department at any company. Sometimes, depending on the company, HR responsibilities can also include talent acquisition, compliance tracking, and workforce planning. But when operating as a strategic function to the business, HR typically takes an active role in the organization’s people strategy, such as building the employee brand and engaging the workforce.
Despite having many responsibilities, HR collectively places a priority on growing talent and improving performance, increasing employee engagement, shaping company culture, and understanding business needs.
Business and human capital management (HCM) practices have evolved significantly over the past decade. A shift in the fundamental nature of work, new technology, and the demands of younger workers are changing how work gets done, how employees engage, and how organizations operate.
As a result, companies are reimagining performance management by moving past annual performance reviews and employee rankings. Instead of focusing on what employees have done in the past, attention is turning to what employees can do to increase their future contributions. At Workday, we believe this means a shift from managing performance to enabling performance.
Consider this: Unprecedented disruption in the past few years necessitated a huge shift to remote work. Then, as companies and workers adjusted, the shift became the new normal. Now, many workers continue to expect at least some flexibility to work remotely, reinforcing the outlook that career opportunities are no longer tied to geographic location.
When talent management and HCM are in the same system, companies get richer and deeper insights into their workforce.
That outlook is the same for companies: There are more opportunities to source talent from all over the world, requiring companies to revise their talent management strategy to engage and enable a remote or hybrid workforce. This likely includes providing more remote learning and development opportunities, and leaning into digital tools that foster remote collaboration.
People are the heart of a company. Without the right talent, companies risk a disengaged culture, low customer satisfaction, and most importantly, a lack of innovation. Employers today face a more complex talent management landscape than ever before, and those that manage talent well will have a competitive edge over those that do not.
Traditionally, expenses related to employees were viewed as a cost to the business. But to keep up with the rapid pace of change, companies must be able to nimbly leverage the skills of their employees for innovation and growth—so companies must continually invest in employee development. What’s more, investing in employee development helps to foster employee retention, which reduces the high financial cost of frequent employee turnover.
In other words, talent management matters because more engaged employees are more productive employees, and this improves the company bottom line. According to the “State of the Global Workplace: 2022 Report” conducted by management research firm Gallup, “Business units with engaged workers have 23% higher profit compared with business units with miserable workers.”
The level of employee engagement is one of the biggest indicators of high or low productivity, innovation, customer satisfaction, and profitability. But to strategically drive employee engagement, organizations need insights into the business, their people, and their skills.
Cue the modern talent management system. Historically, talent management systems focused on integrating talent practices around job competencies. However, a progressive talent management system supports and facilitates the employee experience and then connects those experiences to the business strategy. The employee experience is every interaction with the company—from the candidate experience to hiring, professional development, wellbeing programs, and more. Using the insights gained from supporting and facilitating the employee experience, companies can hone business strategies across the organization, including identifying skills gaps and retaining high-potential talent.
For instance, every company leader wants to strategically retain top talent and build high-performing teams across the organization. But where do you start? And how do you know if you’re on track? A talent management system empowers leaders with the insights they need to create an environment for employees to do their best work, and it provides the analytics to measure success. Some talent management systems may utilize employee surveys to measure sentiment on workplace culture and experience, which significantly contribute to employee retention and performance.
Strategic talent management helps an organization better understand, align, and develop its workforce. With detailed insights into the workforce—such as behaviors, productivity, skills, and aspirations—leaders can better drive company growth and help the organization realize the full value its workers can deliver.
When talent management and HCM are in the same system, companies get richer and deeper insights into their workforce. A single system allows companies to more easily align and analyze workforce trends and goals with an organization’s targets and initiatives. Workday Human Capital Management (HCM), for instance, incorporates talent analytics within transactions to provide relevant insight and inform decisions in real time. Workday HCM also combines talent data with other worker information, such as last promotion, vested stock, or management changes, to provide a more holistic view of retention risk, employee potential, or organizational health—and it even recommends appropriate actions.
With people, business, and talent data all in a single system, Workday HCM gives the insight and agility businesses need for a world-class workforce. In contrast, legacy and other cloud-based systems often include tools that are disconnected from central HR information, introducing another source of fractured talent information. Workday brings people data together to better manage HR, talent, and performance.
Strategic talent management helps an organization better understand, align, and develop its workforce. With detailed insights into the workforce—such as behaviors, productivity, skills, and aspirations—leaders can better drive company growth and help the organization realize the full value its workers can deliver. Good talent management also helps an organization:
Lead change. By understanding workers’ skills and capabilities, company leaders can better inform global business planning and achieve strategic objectives.
Empower employees to drive their careers. When people are enabled to do their best work and discover new opportunities, it has a positive effect on overall company performance and delivers the best results for colleagues, customers, and the organization.
Engage people. When employees feel connected to their work, their colleagues, and the wider business, they often perform well beyond their required duties and show a high degree of commitment.
As indicated in the Workday “Employee Expectations Report 2022,” the employee engagement score for employees who remain with a business is 13% higher than the average score of departing employees.
Continuous and periodic feedback, as well as regular check-ins, are talent management strategies that can drive engagement and enhance workforce development.
Talent management processes include any procedure related to attracting, developing, and retaining workers. These processes are at the heart of company success because they focus on the biggest asset for every company: its people.
Talent management processes are used in the following areas:
Onboarding. A process that acclimatizes new employees to company culture and provides training on various company procedures and systems.
Performance enablement. Traditionally, organizations have managed employee performance by focusing on the past and monitoring performance. However, companies are starting to shift toward performance enablement—a forward-facing approach designed to empower employees to drive their career progression. Performance enablement processes emphasize ongoing dialogue and development (continuous performance management) and a greater focus on building career experiences.
Training and performance support. Training, online learning, and other tools enable workers to reach their full potential, expand their skills and capabilities, and prepare for new career opportunities. Learning and talent mobility are especially critical for companies that want to keep their employees engaged and close the skills gap within the organization through reskilling or upskilling.
Succession planning. This ensures that the company has capable managers and leaders moving up and through the ranks.
Compensation and benefits. Often what attracts employees initially to a company, a robust compensation and benefits program helps ensure that top talent remains with the company.
Critical skills and gap analysis. Many organizations are going through a transformation, particularly in the area of digital skills essential for increased organizational agility. By assessing the skills of today’s workforce, and the projected skills and capabilities needed in the future, companies can better plan for and prepare a workforce that fills the gaps and roles the company needs in order to take full advantage of available opportunities. For instance, Workday’s skills cloud is a universal skills ontology that cleanses, understands, and relates job skills data. Built into the underlying framework of Workday HCM, the skills cloud foundation leverages machine learning and uses graph technology to maintain this growing list of skills and map how closely skills are related to each other. Companies can use the insight into skills data to identify the skills gap in their organizations, and workers can use the data to identify the skills needed by the company—knowledge that can be used to foster internal mobility and career growth.
Talent management processes contribute to workforce planning and strategic planning. While workforce planning determines the what, where, when, and cost of employees needed to execute the business plan, talent management addresses how a company develops and maintains the talent needed. The same goes for how talent management relates to the company’s strategic plans—talent management shapes the talent strategy to meet performance goals that will support company objectives.
An agile, people-first talent management strategy will enable workers to be their best selves and encourage career mobility via continuous learning and access to information. Enabling that strategy requires the support of a talent management system that can access skills data. Then with the insight into their workforce, company leaders understand what talent and skills are needed for their organization to address challenges, seize growth opportunities, and remain competitive.
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