6 takeaways for talent planning
A new study from Vistage Research and the National Center for the Middle Market (NCMM) reveals that talent planning plays a critical role in the growth and performance of companies in the middle market.
Talent planning is a broad category that includes activities such as succession planning, talent review, human resource planning, bench strength analysis, staffing development and performance management. It encompasses identifying key positions and players, understanding skills gaps, and creating succession plans to keep crucial roles filled.
The middle market is defined by companies with annual revenues between $10 million and $1 billion. These companies are both publicly and privately held, and include family-owned businesses, sole proprietorships and private equity companies.
The Vistage-NCMM study, conducted in October 2016, surveyed more than 400 C-level executives from middle-market companies who are actively engaged in attracting and retaining talent for their organizations. The survey was designed to assess talent planning performance, identify challenge areas and determine the importance and prevalence of various talent planning activities.
Key takeaways from the survey:
1. Talent planning is a powerful business driver.
The survey found that the fastest-growing, best-performing middle-market companies place more importance on talent planning than their slower-growing peers. These companies were also more likely to engage in a full suite of talent planning activities.
Researchers found that companies with an annual revenue growth of 10% or more were significantly more likely than slower growing organizations to say they performed “very well” or “extremely well” at talent planning initiatives. Those initiatives include identifying critical positions and can’t-lose players within the organization and engaging senior and line management in the talent planning process.
Fewer than half of middle-market firms reported that they are currently implementing critical talent planning strategies.
2. The size and structure of an organization has a significant impact on how talent planning is conducted.
The survey found that, as firms grow, they tend to put greater emphasis on talent planning and to adopt more formal talent planning processes. Businesses with private equity investment were more likely to follow guidelines for talent planning. By contrast, many family-owned businesses reported that they have kept their talent planning processes relatively informal.
Researchers found that challenges among firms vary by revenue segment. Large middle-market firms tend to be more concerned with aligning talent and business strategy. Smaller middle-market companies tend to focus more on identifying and retaining their can’t-lose players.
3. There is room for improvement in the talent planning process.
On the survey, many middle-market leaders gave their companies less-than-optimal ratings on their current talent planning programs. Only 14% of firms gave themselves an “A” grade for overall talent planning effectiveness. More than four in 10 companies graded themselves a “C” or lower.
The most common weaknesses reported were succession planning, identifying skills gaps, and having processes in place for identifying/developing high potential employees.
4. The single most important thing companies lack is a systematic framework for talent planning.
The study found a clear correlation between process formalization and how well companies perform at talent planning. It also discovered a well-defined link between the number of activities implemented and overall talent planning performance.
Only 22% of all middle-market firms reported having a formalized talent planning process in place. Among companies that considered themselves the best at talent planning, 39% said that they relied on a formalized process.
The survey also found that the fastest-growing, best-performing middle-market firms are more likely to have a defined process and to coordinate multiple talent planning activities.
5. Successful talent planning involves four core elements.
Based on survey results, the researchers developed a framework for effective talent planning. This framework includes a comprehensive list of talent planning activities, which can be divided into four main categories:
• Aligning talent strategy with corporate strategy
• Building sufficient processes to ensure systematic talent planning efforts
• Involving leadership in the process as opposed to handing off to human resources
• Engaging employees in talent planning and ensuring they recognize the value of the process
6. Succession planning, programs for high potential employees, and identification of skills gaps are critical areas for improvement.
The study found that middle-market companies view these activities as important to the success of talent planning. However, the performance of companies in these areas was found to be lacking. Researchers concluded that making improvements to these aspects was likely to have the greatest overall impact on talent planning success in middle-market companies.
Download the whitepaper and read more from the NCMM and Vistage Research.