1 Nov 2018

Strategy-based and capability-driven talent management

Strategy-based and capability-driven talent management

In their article "Are we there yet? What's next for HR?, Dave Ulrich and James M. Dulebohn have claimed that focusing on individual talent or competencies is insufficient, and instead "to support organisational strategy and add value, future HR work needs to focus on identifying and building organisational capabilities" (2015: 195).

In line with their argument and to support the company's competitive advantage in a constantly changing business environment, we suggest that talent management needs to be closely aligned with its strategic capabilities. Motivated by our academic research, but first and foremost building on our practical experience, this article discusses how talent management practices can support strategy-based capability development.

Capabilities–based strategies

Capabilities-based strategies have gained momentum among academic researchers and practitioners alike. Strategic capabilities, called for by Ulrich and Dulebohn, reflect the company identity, i.e. what the company is known for and comprise of the organisational competencies, processes, systems and knowledge. These capabilities may include for example, data-based customer management, user-driven innovation, ecosystem management, or operational excellence if the company can perform them better than its competitors. Capability development is subject to many external and internal forces, the strategy being a key driver. A misalignment between strategy and its underlying capabilities has been proven to significantly undermine strategic change (Kilpinen, 2013). Although strategic capabilities stretch beyond individual competencies, these do have a central role. Competence development can be supported by many organisational activities, such as formal training programs, on the job learning and talent management. At best, the organisation's talent management architecture reflects the organisation's strategic capabilities and provides the foundation for strategy-based competence and talent development.

Capability–driven talent management

Competence development and talent management are closely interlinked, and strategic competence can be developed systematically by designing a talent management architecture that connects organisational-level capabilities and individual competencies. It also enables communicating and building a shared understanding of the future skills and competencies needed to support business development. At best, talent management can bring business strategies to the practical level, enabling each individual to understand their own role in supporting the business strategy.

The traditional questions within talent management are how to attract the best potential and nurture and retain this talent, giving guidelines to recruitment processes, development actions, rotation and exit policies in line with business needs. Besides these questions, talent management should be closely related to competence development, considering where the needed strategic competencies reside within the organisation, which groups or individuals have the most business-critical competence and how it can be further developed. There should also be an action plan for renewing organisational competencies.

Strategy-based talent management is not only an essential part of business-oriented HR but is also crucial for meaningful work. In their article, Ulrich and Dulebohn (2015) call for more meaning-making capabilities on behalf of leaders and HR to help employees find a sense of contribution in their work. Traditionally talent management has mainly focused on leadership skills with the aim of recognising future management potential. Digitisation will have an increasingly profound impact on the nature of work and require a change of focus for talent management. Learning ability, ability to reinvent one's work and meaning-making capabilities are essential criteria in defining talent. Today's talent management cannot only focus on developing management potential or specific technical skills but should also enable continuous learning and provide tailored solutions and career paths for individuals.

Demystifying talent management

Too often, especially in traditional talent management, selection criteria are somewhat opaque, especially when it comes to rotation and career steps. When talent management is based on clearly defined strategic capabilities and competencies and is openly communicated and discussed, it helps people understand the selection criteria for key potential and the guidelines for career management. Strategy-based talent management is increasingly open and agile, making connections between business success and talent development at every company level. It also challenges managers to be accountable for making it happen. To respond to the changing work-life, some companies have opted for defining whole personnel as "talent", giving each individual the opportunity to develop to their full potential aligned with business goals.

In the rapidly changing business environment, talent management, including the traditional career paths and ladders, needs reinvention. An inflexible rotation model does not serve business needs anymore. Talent management should be strategy-based and capability-driven, but it is also increasingly about empowering new career models that benefit both the individual and the company. This also promotes self-management, requiring every individual to take care of their own development and be aware of the needed meta-skills, such as the ability to learn and be involved in various learning networks.

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Mari Tasanto
Growth Area Director, Customised Solutions
+358 40 048 8004 mari.tasanto(a)
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