Why effective talent management matters

According to the survey responses, there is a significant relationship between talent management—when done well—and organizational performance. Only 5 percent of respondents say their organizations’ talent management has been very effective at improving company performance. But those that do are much more likely to say they outperform their competitors: 99 percent of respondents reporting very effective talent management say so, compared with 56 percent of all other respondents.

What is more, the effects of successful talent management seem to be cumulative. Like an overall effective talent-management program, the abilities to attract and retain talent appear to support outperformance (Exhibit 1). Among public companies, we see a similar effect on total returns to shareholders (TRS). At companies with very effective talent management, respondents are six times more likely than those with very ineffective talent management to report higher TRS than competitors.

Three drivers of successful talent-management strategy

To support these outcomes, the results suggest three practices that most closely link with effective talent management: rapid allocation of talent, HR’s involvement in employee experience, and a strategically minded HR team (Exhibit 2).

Respondents who say all three practices are in place—just 17 percent—are significantly more likely than their peers to rate their organizations’ overall performance, as well as TRS, as better than competitors’ (Exhibit 3). They are also 2.5 times more likely than others to rate their organizations’ overall talent-management efforts as effective.

In summary, effective talent management—and the practices that best support it—contributes to a company’s financial performance. No one approach works for every company, but the survey results confirm that rapid allocation of talent, the HR function’s involvement in fostering positive employee experience, and a strategic HR function have the greatest impact on a talent-management program’s effectiveness.

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