This article could be very short and pushing at open doors, as the impact of good talent management on a company’s position in the competitive market is fairly obvious.
Rhetorically, demonstrating this impact seems indeed to be common sense:
- The negative: Two hours in contact with a poor call centre is enough to sense the interest in better managing these talents.
- The positive: There is no doubt that a talented business will sell more and better.
- Recap: What’s good for the company, strengthens the company. So, unless there is doubt about the general interest of good talent management, there is no question at all that this will lead to a more or less long-term competitive advantage, and that it’s about customer satisfaction, production cost, corporate image, innovation ability or any other advantage that will arouse the envy of your competitors.
This article could stop here.
However, it is important to dig deeper into the subject in order to place talent management at the heart of the discussion surrounding the company’s competitiveness:
- Despite the growing importance of knowledge and innovation in our economy, talent management does not yet attract the necessary attention and investment.
- The competitive model founded on innovation and talents is slow to take its place in strategic thinking, compared to traditional models based on productivity and economies of scale.
Invoking the competitive argument for arriving at decisions and gaining the necessary support and means for developing talent management demands more concrete elements on measurable metrics, and, ideally, models to quantify or at least evaluate the anticipated benefits.
Therefore, I suggest we approach the relationship between talent management and competitive performance in terms of two models well known to decision-makers: the Marketing Mix model and the Porter’s Five Forces model.
We will then consider how to cement this tie between talent management and performance on a cultural and governance level within the company.
Talents and Marketing Mix
The marketing mix includes the four domains involved in determining a company’s offer and the way in which it is placed on the market.
Product covers both the tangible goods and intangible services offered, but also the associated elements that together form the “customer experience”.
Apart from the very rare exceptions, the human factor is part of the customer experience. Even with e-commerce, the choice of product lines, sales monitoring, e-merchandising, after-sales service, the supply chain or the opening of a credit are all domains for which the human factor is of leading importance. Even when the exchanges are mechanised or automated, such as with EDI transactional chains, the monitoring, measurement and adjustment of the automisations is vital for the company’s competitiveness.
The company’s human factor and talents are at the core of the “Product”. Whether it’s about creating, deciding, monitoring, producing or interacting with the company’s different audiences, one can readily measure the impact of an HR policy which focuses not only on recruiting and retaining talents, but also on developing them for the competitive performance of the company.
One can also measure the “off-balance-sheet” cost that must be covered when a talented employee leaves the company. Unfortunately, human capital and its corollaries, such as the training, are barely, if not at all, taken into account from an accounting point of view.
At a time when innovation counts for so much, we finally clearly measure the importance of recruiting creative talents for designing the Products of tomorrow.
Price, that is, the price paid including the terms, conditions and payment methods, as well as the method for calculating the long-term price, takes into account both the competitor price and the “psychological” factor, as it is so modestly called. The latter element is obviously mastered just as much as the marketing and sales teams have talent. Likewise, price positioning compared to the competition falls within the feedback from the field and monitoring activities.
Talent management once again plays an essential role concerning the cost factor. Without even so much as mentioning the talent of the teams in charge of purchases, “Lean”, or management control, the human cost (salary or equivalent) represents an important part of the global cost. All things being equal, especially from a product point of view, there are five ways to influence the cost of talents:
- Optimising “compensation & benefits”, which requires the talent of HR teams
- Productiveness, which requires the talent of everyone
- Mastering salary costs, which requires long-term and arduous management, and often requires the “Taylorisation” of the company’s processes
- Versatility, which requires remarkable talents and helps with process continuity
- Diversifying sourcing solutions, which is critical to revenue and profit margins and is expected to grow with the arrival of Bid Data as a Service regarding career paths and transferable competencies.
The role of talent management is of course of leading importance for each of these levers.
Promotion includes elements such as image branding, the image conveyed to the customer (conspicuous consumption), the messages communicated by the company given its positioning and the way in which these messages are conveyed to the targets.
Promotion concerns everyone and goes beyond the own talent of marketing and communications team, that of course count for something, and beyond the sales teams that know how to capitalise on the messages. Each individual, within each team, takes part in the company’s image with their own knowledge and expertise. Everyone can also relay, or not, the key messages and do so with more or less talent. Good coordination between Talent Management and Internal Communication therefore optimises this key axis of the marketing mix. Collecting field data prior to the promotion process may be deemed essential for positioning. Once again, mass coordinated efforts are an effective way to increase efficiency and to outrun the competition.
Distribution refers to both the commercial distribution and the physical or digital distribution of the Product. This includes the choice and management of the marketing and distribution channels just as much as “logistics” concepts, such as “Product” availability and delivery.
Of the four Marketing Mix elements, distribution is the most important when it comes to mobilising and synchronizing talent diversity. Though Promotion involves and concerns everyone, the actions of individuals depend very little on each other.
On the contrary, actions are often mutually dependent regarding Distribution, from sales to after-sales service and all along the supply chain. Despite the implemented automatisations, the close and coordinated management of competencies and practices remains essential. An incorrectly applied standard, a little known product line or a rupture in the chain can also have negative consequences on the distribution channel. In fact, from a competitive point of view, rivalry on the matter expands to encompass the extended company, which represents a strong differentiation axis and poses a number of challenges for HR.
Talents and Porter’s Five Forces
Coined by strategy professor Michael Porter, the Five Forces of Competition model offers an expanded view on competition, or the economic forces likely to reduce your company’s capacity to generate profit.
Porter’s five forces include:
The intensity of competitive rivalry depends on factors such as the number of competitors in the market, the degree to which products and services differentiate between competitors, the cost of changing supplier, or competitors’ ability to diversify themselves.
In this context, talent management first plays a protective role in order to retain talents within the company. This protection is crucial in certain sectors where many competitors happen to be former employees.
Talent management also plays a prospective and preventive role to identify opportunities through Talent Pipelining, reflecting the changing supply and demand in terms of talent, and anticipating risks thanks to strategic human resource planning and the succession plans.
Finally, it also plays an offensive role in training and in the valuation of competencies by stimulating innovation, differentiation and the ability to diversify.
Buyer power is driven by elements such as the number of buyers in the market, the size of demands, client dependence on offered goods and services, and, more generally, by the relationship that competitors maintain with their clients and prospects.
The influence that talent management has on buyer power is exercised primarily through sales forces that are able to maintain a diversified customer portfolio and develop a strong client relationship. It is also exercised by the development of Talents for all employees with direct customer contact, and by adjusting training, compensation, and incentives policies to consider priority business targets and key factors in customer satisfaction. Thus, based on managerial models such as Robert S. Kaplan’s Balanced Scorecard, which organises performance as a causal succession of informal and leading indicators, compensation and incentives policies will encourage teams to place their effort onto fixed objectives.
Supplier power is driven by factors such as the number of suppliers, the size of the demand, your dependence and your competitors’ dependence on the supplier’s product or service, and the relationship maintained by the different competitors with their current and potential suppliers.
For widespread companies, maintaining a good relationship with suppliers is important in order to make the most of their products and services, negotiate particular conditions, collect information on the market, etc. Thus, Talent management for teams with direct supplier contact influences supplier power. But beyond these teams, when it comes to services, supplier power can be influenced by talent management as a whole. Indeed, by extending the scope of information outside the company to include suppliers and partners, talent management is able to develop internal alternatives in case of supplier failure, and participates in feasibility studies to internalise an activity. This feasibility study reduces dependence on the products and services offered, and leads to more favourable supplier power.
Threat of Substitution
The threat of substitution depends on the uniqueness of your product or service, and on the flexibility of demand regarding variations in the precise nature of the offer. A good example of this is the transportation of passengers, where the threat of substitution depends on a number of factors, especially travel time.
It is easy to see the impact of talent management by looking at the uniqueness of the offered product or service. In our global economy, products and processes can be quickly limited and customers can find and compare available offers quite easily. This transparency creates a faster erosion of margins, which, in order to be rebuilt, will need either economies of scale, which is only possible for some, or innovation, an activity that inherently requires talent.
We face a certain paradox, as the uniqueness of the offered products and services does not only stem from the creative genius. In the age of cybernetics and the “commoditization” of goods, the human factor, the service, and the spirit and culture of the company are key which in turn also create a bond with the brand, or, in other words, increase the flexibility of demand to external influences.
A good example of this is the “social code” and the very distinctive language of the French burger restaurant, Big Fernand. You either love it or you don’t, but the concept has found its place and acquired fans. Maintaining this dining experience from one restaurant to another, taking into account the different shifts, is a true HR challenge.
Threat of New Entry
Finally, the threat of new entry depends primarily on the different entry barriers, such as financial, legal or technological barriers.
It also depends on the ability to attract and retain key players, develop competencies and ensure the dissemination of good transversal practices, particularly concerning security and confidentiality.
How to Bring Change to Your Company
Placing sustainable talent management at the core of a company’s strategic thinking may require a certain form of activism. As we have seen, the dominant strategic, financial and accounting models leave little room for the human factor. These models thus offer a greater degree of certainty and comfort, assuming everyone competes using the same models.
A good first measure to take when preparing for change is to observe and monitor. If competitors or other particularly successful companies change the game, certainties erode and the situation initiates discussion. We live in a period of change where innovation is on everyone’s mind, even if it is not fully developed and finalised. This period is full of disruptive examples both within startups and mature companies; it is conductive to change.
The second step consists in adopting the standards and codes already in place. This article offers several links between talent management and competitive thinking, which all serve as different angles of approach. You only need one to start with. For example, reworking the compensation policy to align individual and group efforts with the strategy. When beginning with a case containing objectives that are measurable according to the standards of traditional strategy, it becomes possible to set a precedent, a “success story “.
The third and final step is maintained over time. Driven by success, it’s about obtaining a mandate and the authorisation from management to drive the change through the cycles of improvement, coupled with formal change measures and effective communication with the different stakeholders. This stage may draw from methods applied in the context of quality management policies or sustainable development.