June 19, 2025

Talent Management Overview

by Our content team

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This article introduces the concept of talent management and how it has evolved in response to economic challenges and market changes. In the knowledge economy, competitive advantage is no longer derived from capital, assets and geography, but arises from intangible assets such as brands, intellectual capital and talent. [1] Consequently, an organization’s ability to consistently find, attract and keep talent will provide a unique source of competitive advantage. This article looks at the key talent management challenges of the 21st century, and examines some of the strategies and methods that are emerging in response.

Where Did Talent Management Come From?

Talent: 'a special or innate skill, aptitude or ability'. [2]

Talent management has become an increasingly popular phrase since the American consultancy McKinsey and Co wrote the 1997 report 'The War For Talent'. [3] Since then, numerous books, research papers and practical approaches have been produced to help organizations search for and manage talent effectively.

Getting talent management right is far from easy. A dizzying array of tools, models, strategies and methods now exist to help organizations manage and deploy their talent. Some of the most important models and strategies proposed by leading talent management contributors include:

McKinsey and Co. Responsible for popularizing talent management as a ‘critical driver of business performance’, McKinsey and Co argue that organizations need to develop coherent talent identification, retention and development systems and processes if they are to remain competitive.
Jeffrey Bradach. Bradach developed a different model of talent management which is the opposite of the McKinsey model. He proposed a more flexible model, where organizations obtain talent on a temporary, contractual ‘just in time’ basis in response to fluctuating needs.
Jeffrey Pfeffer. Pfeffer presents an alternative approach to talent management, which argues that organizations should recognize and develop high performance from all employees. Pfeffer claims that organizations should not rely solely on buying in talent or developing a small group of high potential individuals.
Tom Peters. Peters developed the idea of ‘brand you’, which can help individuals develop and differentiate their own unique brand of talent.
Robert Goffee and Gareth Jones. Goffee and Jones provide a cultural model which can be used to map and mold organizational culture. [4] This can provide a strong value proposition to attract and retain talent.
Wendy Hirsh and William Rothwell. These succession planning gurus offer best practice advice based on comprehensive research.

Key research findings include:

The Economist. This research maintains that an organization’s senior leadership has a fundamentally important role to play in talent management.
Ashridge Consulting. Ashridge propose ‘13 dimensions of talent management’ which can be used as a starting point to help organizations review the effectiveness of their talent management strategies. [5]

What Is Talent Management?

In its broadest sense, talent management refers to:

The identification, development, engagement, retention and deployment of talented employees.

However, until fairly recently, the term was more commonly used to describe the short- and longer-term resourcing of senior executives and high performers only.

Why Is Talent Management Important?

Effective talent management has become a business make or break issue. In a knowledge economy, placing employees with the right skills and abilities into key roles at the right time generates crucial competitive advantage. [6] Many organizations are now realizing that attracting, identifying, growing and retaining their management and leadership talent is an important business priority.

It is clear that talent management now has a new strategic status. As a recent survey highlights, it is the issue that business leaders and HR practitioners rank as one of the top threats to organizational success. [7] However, competition for talent is intensifying due to changing demographics. The critical leadership and management pool of individuals aged between 25 and 40 has shrunk by around 6% from 1998 to 2008. [8] In addition to a dwindling talent pool, organizations face other challenges when it comes to finding and keeping talent:

The Changing Realities of Talent Management[9]

Old reality

New reality

People need companies

Companies need people

Machines, capital and geography provide competitive advantage

Talented people, ideas and intellectual capital provide competitive advantage

Better talent makes some difference

Better talent makes a big difference

Employees are loyal to their employer and jobs are secure

Employees are mobile, self-loyal and commitment is short term

Exclusive vs Inclusive

The now seminal McKinsey model of talent management proposed that organizations should focus their talent management strategies on leveraging the performance of an elite group of individuals, known as A players. [10] In the past, many organizations adopted a secretive approach to identifying and developing their A-players. However, as talent management challenges have evolved, the war for talent has shifted from the management of a small, exclusive top tier to a more inclusive ‘whole workforce’ approach. [11]

Changing Talent Management Challenges and Priorities

It is clear that prevailing attitudes on how best to manage talent are changing. Many commentators now see the future of talent management as the adoption of a more holistic approach, which recognizes that everyone has talent that can be maximized and leveraged to create organizational competitive advantage. Alternatives to the McKinsey model include:

DeLong and Vijayaraghavan, who argue that the effective development of B and C players is just as important as looking after high potential A players. [12]
Jeffrey Bradach, who proposes a ‘just in time’ model of talent management, where organizations buy in talent on a short-term basis to fill gaps as when and where they arise.
Pfeffer and O’Reilly, who say that organizations should focus on recruiting, retaining and developing internal talent at all levels. [13]

Emerging Trends in Talent Management

Some of today’s most important talent management trends include:

Devising new ways to attract, retain and engage multiple generations of talent, particularly Generation X and Generation Y. For example, employer branding can influence different intergenerational groups of talent and help organizations bridge the generational talent gap.
Creation of robust leadership and management pipelines by developing effective succession planning strategies. The work of succession gurus Wendy Hirsh and William Rothwell has strongly influenced the development of succession planning strategy.
The globalization of talent management as new markets and competitors emerge from developing countries. For example, competition for foreign talent and remote, outsourced and offshore forms of working are intensifying. This means that management of talent in virtual workplaces and across different cultures, languages and locations are increasingly important issues.
Changing career attitudes mean that the previous ‘job for life’ outlook is replaced by a more flexible approach where people regularly change employer or pursue a portfolio of career interests. Individuals are likely to take their talent elsewhere if they are not appropriately challenged, motivated, developed and rewarded. Using a range of financial and non-financial talent retention strategies can help organizations engage and motivate different talent pools effectively.
As talent pools shrink, the ability to recognize and utilize the latent talent of minority groups (e.g. female returners, ethnic groups, individuals with disabilities, older workers, migrant workers, temporary workers, ex-offenders and the long-term unemployed) will become increasingly important.
Changing economic and market conditions mean that the ability to retain talent in an economic downturn will give organizations a competitive edge. Developing a bespoke, flexible approach to talent management can help organizations keep their talent during times of economic uncertainty.
Line managers have an important role to play in developing and retaining talent. Managers who can take responsibility for developing, guiding and maximizing the contributions of others will add real organizational value. For example, managers can make the most of each employee’s talent by providing regular development discussions, identifying relevant training and skills development opportunities and using coaching, mentoring and informal learning techniques.
Without support and effective leadership, talent management is at best patchy and piecemeal. The senior leader’s role is therefore fundamental in creating a supportive culture and effective strategy to lead, engage and nurture talent.

Summary

Because organizations have many choices to make when it comes to talent management there are no easy answers or magic formulas. However, meeting this challenge presents new opportunities for organizational leaders, line managers, HR and OD practitioners and employee development functions to work together on talent management. The recipe for effective talent management involves a unique combination of:

a strong, attractive organizational culture and values [14]
the ability to recruit, develop and retain talent to fit with the organizational culture and values [15]
a commitment to investing in people development
sharing and transferring knowledge widely across the organization
aligning reward and recognition to promote retention, engagement and motivation

References

[1] Popularized by management theorist Peter Drucker in his book The Age of Discontinuity, the ‘knowledge economy’ describes important economic changes. Soon the majority of UK jobs will be professional or managerial and the most productive economic sectors are knowledge-based.

[2] Chambers 21st Century Dictionary 2008 (Chambers Harrap Publishers Ltd. 2008).

[3] Chambers et al, ‘The War for Talent’, The McKinsey Quarterly, No 3 (1997) pp 44-57.

[4] R Goffee and G Jones, ‘What Holds the Modern Company Together?’, Harvard Business Review (November-December, 1996).

[5] Devine, M, Glanfield, P, Lubitsh, G, Orbea, A, Talent Management – A Strategic Imperative (Ashridge Consulting, 2007).

[6] Chris Ashton and Lynne Morton, 'Managing Talent for Competitive Advantage: Taking a Systematic Approach to Talent Management', Strategic HR Review, (2005) Vol 4, Issue 5, pp 28-31.

[7] Accenture Newsroom, ‘Top Executives Cite Competition, Global Economy, Attracting and Retaining Talent as Top Threats to Their Companies’ Success’ here (accessed 05 August 2023)

[8] 'The Business Case for Performance and Talent Management' at www.mariner7.com.

[9] The Aging US Workforce, Trends and Challenges, the John J. Heldrich Center for Workforce Management (Rutgers University, June 2006) at http://www.heldrich.rutgers.edu/.

[10] Ibid.

[11] ‘A’ players describe an organization’s best and brightest talent – usually a small group of high-performance, high-potential people who are hand picked and fast-tracked into key positions.

[12] CIPD, 'Talent Management: Understanding the Dimensions' at www.cipd.co.uk/subjects/recruitmen/general/_tlmtmgtdim.htm (October, 2006).

[13] Thomas DeLong and Vineeta Vijayaraghavan ‘Let’s Hear It For B Players’, Harvard Business Review (June, 2003), pp 96–102.

[14] J Pfeffer and C O’Reilly, Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People (Harvard Business School Press, 2000).

[15] Goffee and Jones’s cultural model provides a useful basis for mapping an organization’s culture. For more information see R Goffee and G Jones, ‘What Holds the Modern Company Together?’, Harvard Business Review, (November-December, 1996).

[16] Pfeffer and O’Reilly argue that it makes more sense for organizations to recruit, develop and grown their own talent rather than buying it when and where it is needed. For more information see J Pfeffer and C O’Reilly III, Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People, (Harvard Business School Press, 2000).