Whether or not you've bought into some of the new terms in the field of people management, it's doubtful that you still refer to that part of your business as the "Personnel Department." But here's one buzz term you do need to know: TMO, or Talent Management Organization.

The business of people management is currently undergoing a transformative period of accelerated evolution. This change is being driven by two main factors:

  • An army of commentators, experts, economists and business leaders are warning us of pending labor shortages driven by "locked-in" demographics. In other words, because birth rates are low in comparison to past decades, and our biggest ever generation (the baby boomers) are set to start retiring, worker shortages are inevitable. As such, organizations have to get better at people management and fast.

  • Second, and more importantly, organizations in developed economies worldwide, particularly in the U.S., are increasingly reliant on intangibles. Intangibles include ideas, inventions, brand, and customer good will.

Donald Presson is the Founder and CEO of IC Growth, a California-based firm I spoke with last month. IC Growth is attempting to quantify the "Intellectual Capital Assets" of organizations for their balance sheets. Presson believes that upward of 75 percent of most organizations' value is found within their intangible assets.

David Ulrich, a business professor at the University of Michigan and Norm Smallwood of Results Based Leadership, agree. In this month's Harvard Business Review, they state that "organizational capabilities" - the ability to innovate, acquire top talent, communicate a positive brand and connect with customers, among other intangibles, "makes all the difference in the world when it comes to market value."

McKinsey and Company and Deloitte & Touche have also linked high versus low performing companies (market value) directly with their talent management practices.

More than ever, talent is being measured and reflected in the value of organizations, this trend will continue until it becomes mandatory for publicly-traded companies to provide the results of what will become generally accepted human capital measures.

So how do smart companies respond? For organizations in knowledge intensive industries, the effective management of talent is imperative. As we've seen, competitive advantage rests on intangibles and intangibles rely on human capital. Only companies that master the ability to acquire, deploy, develop, retain and lead (motivate and engage) their workforce will thrive. As such, companies should work to become "Talent Management Organizations" (TMOs).

TMOs have a talent plan they refer to and update regularly. They have determined what skills and competencies are critical to their success and growth. They recruit, retain and develop staff according to this knowledge, and they outsource where competitive advantage is to be gained in doing so. In TMOs, HR is evolving to occupy a more strategic, thought-leadership and partnership-based role with the rest of the business. These strategists work with managers and leaders throughout the organization to ensure that staff selection, hiring, retention, development, performance management and deployment are handled expertly and that these efforts are visibly linked to corporate objectives.

This group must take the lead in demonstrating how talent management initiatives confer strategic advantage and generate better financial performance for the organization - they must think like the CFO and CEO, in other words. Finally, the TMO ensures that talent management is a competency of all of its leaders, from the supervisor to the CEO.

The first step in becoming a TMO is developing a "talent mindset." You must communicate and demonstrate your belief that people are the key to competitive advantage. Prove this to your workforce by offering flexible work policies, performance-based compensation and plentiful employee development opportunities. The CEO must visibly champion the effort, and, it must be integrated with corporate strategic objectives.

Concrete action might start with recruiting. After determining what "talent" means to your company, break down all of the barriers that restrict your ability to acquire and keep that talent (i.e., pay, benefits, flexibility, choice of assignments, etc.). For new hires and existing employees alike, apply the principles of equity over equality - compensate based on performance, period. Invest in employee development; it is the number-one ranked benefit in most employee surveys, far ahead of pay. And plan - always groom successors for every key position and have an overall talent plan that uses at least three company growth scenarios with external (economy/labor force) variables factored in.

Becoming a TMO is an enormous challenge that cannot be described in one article. In the coming weeks we'll look the components and steps necessary in successfully navigating this change. One critical component is technology. Next week we'll look at talent management technologies, particularly for small and mid-sized organizations.


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