A Blueprint for Getting the Maximum Impact from Your Talent Management Planning Process

Amy Armitage
June 18, 2008 | COMMENTS

Talent management planning, an integrated process for aligning business strategy with people systems, can have a powerful impact on business performance and the effectiveness of the HR function. When done correctly, it can leverage the investment in your talent supply chain. If used incorrectly, without a focused methodology and the active engagement of employees and managers, talent management (TM) initiatives can drain time, energy, enthusiasm and productivity.

To get the most impact from TM planning, senior executives, including HR, must align a business' core value drivers with the day-to-day activity of how business gets done. Your company's value drivers are the foundation for how you achieve strategic objectives and a means to ensure continuous improvement through people. For HR to be successful, these value drivers must align with HR system architecture, HR functions, and employee behaviors.

Follow the ten steps below to get the maximum impact out of the TM planning process.

1. Identify the value drivers of your organization.

Strategic HR begins with understanding and building a consensus among your senior team about what really drives your business success. Before you can develop HR performance drivers, senior managers need to agree upon the value drivers of the entire business. Typically, consensus-building consists of tightly orchestrated and focused brainstorming exercises based upon the customer value proposition.

2. Prioritize value drivers.

As a second step, a senior team needs to develop and prioritize the key value drivers. These may include, for example, innovation, speed to market/cycle time, recruiting and retaining top talent, effective use of resources (cost control), and customer service and support. One very important deliverable of this step is constructing a "strategy map” or visual blueprint, linking the interconnectedness of the value drivers.

3. Specify top-level metrics.

Once the value drivers have been identified and prioritized, senior management needs to appoint work teams to identify the "top-level" metrics ( typically one work team per value driver ). Work teams then employ a score-carding process to develop the "vital few" three to five critical outcome metrics for each value driver. While traditional scorecards include financial, customer, operations, and learning and growth categories, many variations exist. (For more information see Kaplan and Norton's The Balanced Scorecard or The HR Scorecard Linking People Strategy and Performance by Becker, Huselid, and Ulrich.)

An HR focused scorecard, for example, may begin with the identification of the "vital few" or acid test measures that truly define success for the HR related value driver. For example, for "Recruiting and Retaining Top Talent" such measures may include "Retention Rate" or "Employee Survey Index" or "Percent of Offers Accepted." The "vital few" metrics are identified and, where needed, better defined for effective communication and reliability across the organization. Other common high-level HR and people productivity metrics at this stage might include:

• Revenue factor or pretax income per person. Sometimes called the revenue factor, revenue per employee is a good basic indicator that can be used against industry benchmarks to measure historical performance.
• Voluntary or involuntary separation rate/retention ratios. This calculation reflects the turnover of people you need to run your business and is especially critical if your value driver is retaining and motivating high-level talent. It's a good window into the power of senior leadership to motivate and engage.
• Return on human capital. Revenue returned for every dollar invested in employee compensation and benefits.
• High performance work system metrics or CEO oerformance audits. Composite indices of HR system functions and business practices that drive performance. May include such areas as clarity of strategy, goal alignment, feedback processes, coaching and development, hiring and selection, rewards, communication, learning systems, etc.
• Employee engagement/satisfaction index . These composite measures are useful—especially where statistical links to financial, customer and operational performance can be demonstrated.

The real trick, for just about every company, is narrowing the list to the "vital few." Coming up with the initial list, in fact, is often easier than prioritizing it. Several cost ratios may also make it to the list of "vital few" measures and be tracked. However, unless they are out of line with industry benchmarks, and therefore indicate that HR outsourcing may be a viable path, these cost ratios may offer limited insight into the effectiveness of the HR function. HR outsourcing, on the other hand, is often driven by cost considerations and the need to target limited investment capital to core business functions. (Administrative functions in particular are more likely to be outsourced.) A sampling of cost-efficiency metrics includes:

• HR expense per head—dollars spent per full-time employee (FTE)
• Cost per hire
• HR expense as a percent of total operating expense

4. Define specific objectives.

As a next step, senior managers should set targets—usually both long-range and short-term targets—for each of the "vital few" measures. Benchmarking ("look around"), historical data ("look back") and forecasting ("look ahead") data are used to establish numerical targets.

Typically, senior executives set long- term targets and, later, short-term targets in a facilitated process. In larger company environments, numerical targets may differ, while the critical outcome measure stays the same. So, for example, retention rate targets may take into account local job market conditions, but the issue is still of critical importance as a "top agenda" concern.

One concept that's been used very effectively is establishing a "Point of Arrival" target (POA). This is a target that is not time-bound, but defines the end game or perfect state. For instance, the POA target for "Retention Rate" may be 90 percent. The organization may never get there, but it puts a stake in the ground and makes it easier to establish short-term and long-term targets in relation to it.

HR outsourcing discussions should begin at this level—typically where cost, quality (the need for system upgrades) and reliability of HR services are issues of concern. Where the senior team requires lower target or fixed costs from the HR function or enhanced levels of service (integrated web self-service delivery portals, for example), target setting may promote the exploration of outsourcing.

5. Develop strategic initiatives.

A senior management or functional team next develops a list of strategic initiatives or process changes based on the value drivers in order to meet the target objectives.

Strategic initiatives in the HR function may involve organizational restructuring (such as the move to shared service models), new functions (web-based self-service or manager self-service), program enhancements/integration (new rewards plans, talent management programs, talent acquisition processes, business literacy programs, etc).

Value drivers such as "customer service and support" or "speed to market" may require new goal alignment, performance management, or communications initiatives. Turnover issues might lead to "on-boarding" initiatives and training coordination.

6. Estimate impact/return on talent investment (ROTI).

A next step is to determine the business case for various interventions and the requirements for change management. Focus in HR is typically on balancing value creation (measures that can be linked to ROI and adding value) and cost control.

7. Create performance action plans.

The next critical item is to develop a process for getting commitment to follow through. Performance action plans link strategic initiatives with the daily tasks that people need to do—at all levels—to get the job done. These plans define outcomes, activities, tasks, milestones and resource requirements. They address, for example, what needs to be done differently to improve customer service or quality. What type of communication and feedback are needed? What measures and support are needed at the line level to get people's attention.

8. Allocate resources.

After that, links to budgeting and staffing processes need to be established to ensure that resources match strategic imperatives and the overall value planning blueprint. The importance of this step can't be stressed enough. If strategic initiatives and performance action plans do not have resources allocated to them through the formal budgeting process, they won't be implemented.

9. Align rewards and accountability.

HR executives have a clear requirement to align rewards (broadly defined as pay, non-financial rewards, recognition, benefits, learning and development, and work environment) programs with the value planning system. Personal accountability systems and development plans may also need clarification and definition through performance management processes.

10. Monitor, review, report, and reinforce progress.

The need for ongoing monitoring and review of progress is critical. Systematic reporting and review of progress, problems, and plans ("the 3 Ps") should occur monthly—and in some cases even more often! Monthly scorecards ought to be used to maintain focus on the "vital few" measures.

Reporting and feedback systems—especially at the line level—don't have to be boring. Some of the best we've seen include themes, contests (structured correctly), highly visual graphics and fun. Increasingly, web and software based enterprise-wide business planning systems are establishing new standards for planning, data consolidation, reporting, and review.

And remember: People resist measurement when they associate it with punitive consequences. Monitoring and reporting requires that managers also reinforce and recognize progress—as often as possible!

Proper talent management planning can offer a powerful way to impact your business performance and truly fine-tune how you run your HR function. As we all recognize, this is especially critical during challenging economic times. However, the effort put into step "A" in the outline above will result in greater organizational efficiency, greater employee engagement and a framework for continuous improvement.

Amy Armitage is an HR specialist with Capital H Group, an HR consulting firm based in Chicago, Illinois. Contact Capital H Group at info@capitalhgroup.com.