Sure, by now most of us have heard about the importance of strategically managing talent and human capital, but how many of us are convinced that companies truly buy into those lofty concepts in droves? Some of us will even have read McKinsey’s now classic study from the late 1990 that coined the term “the war for talent.”

In other words, now in the new millennium, we find ourselves in the talent age. The article’s authors claimed that in an environment where competition has become global and capital is abundant (well, at least it was 10 years ago, well before the recent collapse of banking investment giants, and the US and German government interventions), “…all that matters is talent. Talent wins.”

Conversely, during the agricultural and brick-and-mortar age of the 19th century, the economy was based on land, and on truly physical and very tangible assets, whereas people were regarded as a mere labor expense. The industrial age of the 1930 followed with a manufacturing-driven economy and a need for specialized workers. Then came the automation age of the 1960 that introduced the concept of human resources (HR) management. Still, higher business performance was derived through the most effective use of factories and distribution networks, i.e. physical assets, much more than via staff.

The knowledge age of the 1980s moved the basis of economic value to information and knowledge assets through integrated communications and computer technology. That era introduced the concept of “knowledge workers” and people being regarded as “assets” (rather than a necessary evil and expense). Now, post Y2K, the competitive battlefront is for the best people because they are the true creators of value. Nowadays, we are in the age of talent management and human capital management (HCM). Right?

Well, during these days of Wall Street crumbling and “main street” companies struggling to compete globally, it is easy to be cynical about concepts like HCM, while watching on cable TV how ten thousands of former employees are carrying boxes and vacating once coveted premises. Moreover, many of us have also in the past worked for (and with) jerks and felt unimportant and unappreciated by our employers.

How believable are then these platitudes about “people (or their skills, at least) being the most valuable corporate asset?” Yeah right!

True Mavericks Do Succeed

But, like mediocre individuals, mediocre and average companies resort to the usual “hire-and-fire” practices (not to use the currently politically loaded “more of the same” mantra).  One such all-too-common practice is to layoff a number of folks in a knee-jerk fashion (many of whom might be potential talent gems) during the tough times, based on outmoded thinking that equivalent replacements will be readily available in the job market when times improve.

Little do these companies know (or think about) whether they have ever properly aligned their strategic business objectives with the current talent pool and employees’ performances. Do they know who the best performers are (and why, based on which metrics?), and who can smoothly replace whom in case of a departure (as a way of life)? Moreover, workforce planning at such organizations is based on past staff profiles, without the ability to project the needed skills’ requirements and shifts in the future. This makes forecasting workforce supply and demand almost impossible (if even intended).

On the other hand, analyst research has time and again proven that organizations using talent management strategies and solutions exhibit higher performance than their direct competitors and the market in general. For instance, Taleo’s own research shows that from Fortune 100 global enterprise recruiting and performance management to small and medium business, leading companies invest in talent management to select the best person for each job because they know success is powered by the total talent quality of their workforce.

According to Taleo Research and the Human Capital Institute (HCI), over the past two decades, the enterprise value vs. book value of publicly traded companies has increased fivefold. This value “delta” can be justified by the value of their brands, but also by the value of their assembled workforce. At the same time, the tangible vs. intangible assets ratios changed from 62/38 percent in 1982 to 15/85 percent in 2002.

Many of us have heard stories about the hipster companies like Google or Apple nurturing and pampering their talented employees in order to get the best innovativeness out of them. More examples of such environments can be found in William C. Taylor and Polly LaBarre’s acclaimed book entitled “Mavericks at Work”. Perhaps the maverick concept could also work in politics too, but let’s first discern who the real maverick is? But I digress…

Anyway, for ordinary mortals, the chance to work at such a privileged company seems equal to their chance of dating a movie star. Therefore, it is easy to go back to being cynical and dismissing HCM and talent management as just the latest fads.

The Need for Talent Management Seems Real

But, at the recent Taleo World 2008 conference, I was able to witness first-hand that the talent management is a vibrant enterprise software market, and a battleground for both software providers and user companies (employers). In fact, the extraordinary (maverick) companies do not look for ordinary mortals but rather for a talent that is hard to find.

According to sources like The Gallup Management Journal, the United States (US) Bureau of Labor Statistics (BLS), the United Kingdom (UK) Chartered Institute of Personnel and Development (CIPD), Hewitt Associates, and Taleo, there are many challenging workforce issues confront HR departments, including:

• Heightened competition for skilled workers — sure, there is a record high unemployment figure in the US these days, but some sectors have severe shortages of skills such as nurses, petrochemical engineers, renewable energy (green) experts, or stem cell researchers, to name a few. Some stats are showing the figure of 10 million more available jobs than available skilled workforce in highly demanded sectors;
• Impending retirement of the “baby boomer” generation — the folks that are 65 and older, whose number is expected to double in a few years time from currently 35 million to 70 million. While this could be a good sign for senators McCain or Clinton’s voter constituency down the track (in 2012, say), it is definitely not for the US economy and innovative companies hungry for talent and knowledge;
• Low levels of employee engagement – with only 14 percent of employees being highly engaged (feeling fulfilled by and keen on their job), 62 percent moderately engaged, and 24 percent actively disengaged from their job (i.e., looking for something else, while this mundane job beats unemployment and helps with paying bills). This is not surprising, since acording to research published in 2005 by business management scientists and balanced scorecard pioneers David Norton and Robert Kaplan, a mind-boggling 95 percent of employees don’t understand the strategic goals of the company that employs them;
• Acknowledgement of the high cost of turnover – with a whopping 40 percent in the US, whereby 23 percent belongs to voluntary departures. Some stats show the cost to replace an employee going up to one and half of the employee salary. In fact, I recently learned that Starbucks could save US$120 million a year if it could only reduce employee turnover by 10 percent. Now I know what else contributes to my coffee drink price (besides the fair trade beans and employees’ benefits), and will start paying attention to see how long my neighborhood barristas stay at work;
• Arduous demands of managing dispersed global workforces, bundled with offshoring and outsourcing trends; and
• Importance of succession planning, which is a consequence of many other abovementioned issues.

Part 2 of this blog post will continue with the challenge of dealing with the so-called Generation Y’s talent, and will then try to define the scopes of talent management and HCM, while Part 3 will explain my buying into these concepts via some major league sport teams’ examples.

In the meantime, please feel free send me your comments, opinions, etc. I would certainly be interested in your personal work experiences as an employee or employers, as well as with leveraging these emerging software categories per se.