1 Nov 2018

Strategy-based and capability-driven talent management

Strategy-based and capability-driven talent management

Digitisation, automation, artificial intelligence and other technology-driven developments are increasingly disrupting traditional business models and highlight the importance of strategic workforce planning. This ‘digital disruption’ impacts learning and development needs, and has to be taken into consideration when attracting, nurturing and retaining talent., 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 competences is insufficient, and instead “in order to support organizational strategy and add value, future HR work needs to focus on identifying and building organizational capabilities” (2015: 195).

In line with their argument and in order to support the company’s competitive advantage in a constantly changing business environment, we suggest that talent management needs to be closely aligned with the company’s 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 organizational 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 is able to 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 organizational activities, such as formal training programs, on the job learning and talent management. At best the organization’s talent management architecture reflects the organisations' strategic capabilities and by doing so 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 makes a connection between the organizational-level capabilities and individual level competencies. It also enables communicating and building a common understanding about 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 his/her own role in supporting the business strategy.

The traditional questions within talent management are, how to attract the best potential and how to 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, taking into account where the needed strategic competencies reside within the organization, 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 organizational 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 in order to help employees find a sense of contribution in their work. Traditionally talent management has mainly focused on leadership skills with the aim of recognizing future management potential. Digitisation will have an increasingly profound impact upon the nature of work and will require a change of focus for talent management. Learning ability, ability to reinvent one’s own work and meaning-making capabilities are important criteria in defining talent. Today’s talent management cannot only focus on developing management potential or certain 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 it 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 level of the company. It also challenges managers to be accountable for making it happen. In order 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 his or her full potential aligned with business goals.

It is evident that in the rapidly changing business environment talent management, including the traditional career paths and ladders, need 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 kinds of career models that benefit both the individual and the company. This also promotes self-management, requiring every individual to take care of his or her own development, being aware of the required meta-skills, such as the ability to learn, and being involved in various learning networks.

Text: Mari Tasanto, D.Sc (Admin), Growth Area Director, and Paula Kilpinen, PhD, executive advisor


Kilpinen, Paula (2013), Capability Development within the Multinational Corporation, Doctoral Dissertation, Aalto University School of Business

Ulrich, Dave and Dulebohn, James H. (2015), Are we there yet? What’s next for HR?, Human Resource Management Review, 25: 188-204

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Mari Tasanto
Growth Area Director, Customised Solutions
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