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 (See 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 (See 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’ (See Exhibit 3). They are also 2.5 times more likely than others to rate their organizations’ overall talent-management efforts as effective.

Rapid allocation of talent

Only 39 percent of respondents say their organizations are fast or very fast at reallocating talent as strategic priorities arise and dissolve—a practice that leads to a 1.4-times-greater likelihood of outperformance. And while it is well established that companies with rapid capital allocation are likely to see higher TRS, our findings show that the same holds true for talent allocation. At public companies that quickly allocate talent, respondents are 1.5 times more likely than the slower allocators to report better TRS than competitors.   The link between rapid allocation and effective talent management is also strong: nearly two-thirds of the fast allocators say their talent-management efforts have improved overall performance, compared with just 29 percent of their slower-moving peers.

To allocate talent more quickly, the survey results point to three specific actions that meaningfully correlate with the practice (See Exhibit 4). The first of these is the effective deployment of talent based on the skills needed, which has a direct impact on the speed of allocation. Respondents are 7.4 times more likely to report rapid talent allocation when their organizations effectively assign talent to a given role based on the skills needed.

Second is executive-team involvement in talent management. Respondents who say their leaders are involved in talent management are 3.4 times more likely to report rapid talent allocation at their organizations. The frequency of leaders’ involvement also makes a difference. At organizations that quickly reallocate talent, executive teams usually review talent allocation at least once per quarter (Exhibit 5). Finally, the results suggest that organizations where employees work in small, cross-functional teams are more likely than others to allocate talent quickly.