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How to Develop a Talent Management Strategy

Donna Fuscaldo
Donna Fuscaldo

Here's everything you need to know about talent management.

  • Regardless of your business's size, talent management can't be overlooked.
  • An effective talent management strategy can increase your ROI, reduce turnover and improve the bottom line.
  • Small business owners have to focus on the critical roles and develop those key employees.
  • This article is for business owners who want to build a pool of talent within their company.

Small business owners spend a lot of time making sure their finances are in order. However, far too often developing and maintain talented employees falls to the wayside. Often there isn't an official plan or policy on the books to recruit and retain top talent. But the cost of doing nothing can be astronomical. Turnover within an organization can cost one-half to two times the employee's annual salary.

The good news: talent management doesn't have to be overly complicated. Business owners who understand their operations and know the critical roles can easily devise an effective talent management plan

What is talent management?

Talent management is the process of recruiting and retaining top talent. It involves identifying the right people for your business, onboarding them into the organization, and devising a plan to grow their capabilities and responsibilities. Through talent management, you are grooming your workforce to move up within the company or take on extended roles.

Talent management is an ongoing process of attracting and retaining high-performing employees, providing the tools to develop their skills, and keeping them engaged and motivated. Retainment is a big part of a talent management strategy. You don't want to spend the time and money to train someone, only to see them walk out the door.

"Small businesses that win on talent are actually going to be ones that think extensively about their talent needs," Emily Field, an associate partner at the consulting firm McKinsey, told Business News Daily. "Put the same rigor into talent as you do into your business strategy because talent will help you achieve your business goals."

Key takeaway: Talent management involves identifying, recruiting and retaining talent. It's an ongoing process that requires business owners to develop their employees and keep them engaged.

What are the talent management processes?

To keep turnover at bay and productivity high, small business owners must devise an effective talent management process. It needs to map out the path from recruitment to retainment and beyond. To be a success it should include:

  • Key roles: Budget-conscious business owners can't hire the best of the best for every role. They have to choose. That's why it's important to determine the critical roles and focus your talent acquisition strategy there. Think about those jobs that would hurt business if they were left unfilled. Tap your existing workforce to get a sense of the attributes you want from future employees. That will help you narrow your search.

  • Recruitment: Armed with a list of key roles and characteristics you want in employees, you can start the talent acquisition efforts. That could include posting ads on job boards, scouring LinkedIn, or participating in virtual job fairs. Figure out where your ideal candidates are most likely to be and target recruitment efforts there.

  • Onboarding: It's important to consider how to best introduce an employee to your company during the onboarding process. Taking the time to create a development plan for new employees goes a long way in building goodwill. It shows you care and are willing to provide access to the tools that will help the individual succeed.

  • Development: Development is a big part of a successful talent management solution. It's the reason why employees stay. The development plan should include identifying tasks the employee could advance into and ways to use the employee's talents and skills to their fullest. Motivation is a big part of developing employees. That includes transitioning employees to higher positions once they amass the knowledge and skills.

  • Retainment: Retainment is just as important as recruitment and is a culmination of the efforts to train and develop your workforce. The average employee stays in a job for less than five years. Your job is to hold onto them for longer. The more engaged they are, the greater the likelihood of that happening.

Key takeaway: Creating an effective talent management strategy is a process requiring you to think about all aspects of an employee's journey from recruitment to advancement. You have to identify the critical roles, the characteristics you want in an employee and how to lure them your way. Once in the door, you must develop their skills and talents and advance them within the business.

What are effective talent management strategies?  

Effective talent management isn't something you create and forget about it. What works can change over time. To boost your odds of recruiting and retaining top talent there are some effective strategies you can employ.

  1. Focus on key employees: To maximize the return on your talent investment, it's best to focus on the three or four critical roles within your company. The jobs that keep your business humming along and growing. Those are the roles you want to keep filled.

    "When I talk to small business executives, I start by understanding what are the critical roles that create the disproportionate amount of value," said Field. "Typically, they say about 2% of roles create upward of 80% of the value."

    Field said to ask yourself what those positions those are, do you have the right people in them and who is going to be the next person in those roles.

 

  1. Develop the ones you bring in: Recruitment is only half the battle; retainment wins the war. Small business owners can't afford to lose key workers, especially if they've invested time and money in finding and training them. Developing critical employees can reduce turnover, at least in the roles that matter most to your business.

    "Your talent strategy has to include how you develop these individuals and how do you get the right people in the roles in the future," said Field. "Are we making sure leaders in critical roles are getting the right career, leadership and management development?"

    It's also important to have ongoing conversations with employees in those critical positions to ensure they are engaged and have the development and tools they need.
  1. Always be on the hunt for talent: Whether you are fully staffed or don't have the budget right now to fill open roles, it's important to be looking for talent. You don't want to settle because you need to fill a position fast. Build a pipeline of potential candidates who would be a good fit. Those are the individuals you can target when you're ready to hire. Recruiting is an ongoing task, not a one-off when a job position opens.

  2. Be open-minded: When it comes to identifying talent it's important to cast a wide net. Don't let preconceived notions or biases get in the way of hiring someone. The COVID-19 pandemic has opened the talent pool, with many businesses still operating remotely. That provides you access to workers previously out of your reach because of location or time constraints.

    "Small business owners might have confirmation bias where they look for somebody exactly like them," said Vibhas Ratanjee, a senior practice expert at Gallup. "You want a level of control, but you really want somebody with different ideas and perspectives. Be open to the diversity of talent."

Key takeaway: When it comes to talent management it pays to focus on the key employees who fill critical roles in your organization. Develop them, keep them engaged and think creatively when it comes to finding them.

Why is talent management important?

Small businesses face an uphill battle when it comes to acquiring talent. They don't have the budgets of large companies, making it difficult to lure talented employees their way. That results in unfilled positions that can hurt sales and hinder growth. Without a plan, it's almost impossible to compete with deep-pocketed competitors for the necessary talent.

"Small businesses don't have the luxury of being able to hire ahead of a need or have ten people that can play the role as some large businesses are able to," said Field. "Having a high performer can create ten times the value compared to an average performer."

That's particularly true at the management level. Ratanjee said 70% of how engaged an employee is falls on their manager.

"Small businesses have to do more with less, but they can't stinge on hiring the right talent, specifically manager talent," said Ratanjee.

Recruitment efforts also benefit twofold from talent management. It helps identify the right candidates and gives job candidates a reason to want to join your organization. An employee may take a lower salary if they know there are opportunities to move up within the company. Opportunities to develop skills and advance often trump higher compensation.

Talent management is also necessary to retain employees once you get them through the door. If you don't have a plan in place to keep them engaged and growing, they're more likely to jump ship to a rival.

"Talent development is not a discretionary expense," said Ratanjee. "It's extremely important to keep focusing on the right talent, development, and training."

Your return on investment for talent acquisition improves when you have a strategy in place. Small business owners don't have a lot of cash to throw around hiring and training the wrong candidate. If you hire individuals who have a better chance of thriving in your business environment, you'll save money in the long run. Not to mention boost sales if the employee turns out to be a standout.

Key takeaway: Creating a talent management strategy is important to successfully recruit and retain top talent. It can also improve your ROI.

Image Credit: vladans / Getty Images
Donna Fuscaldo
Donna Fuscaldo,
Business News Daily Writer
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A lifetime New Yorker, I am a veteran finance and business journalist that has contributed to several national media outlets including Forbes, Investopedia, and Bankrate.com. I have spent my career providing consumers and business owners with advice and guidance to help them navigate the world of finance. As a senior finance writer, I report on all aspects of finance from managing cash flow to choosing the best accounting software.