Talent management as a competitive advantage

talent management development

The topic could be dealt with in a few sentences, the influence of well thought-out talent management on the positioning of a company in relation to the competition seems so obvious.

The positive effects can indeed be easily proven with common sense:

  • Using a negative example: 2 hours in an average call center would be sufficient to show interest in better talent management.
  • Using a positive example: without a doubt, a talented salesperson will sell more and better
  • In short: the good strengthens the company. Apart from a possible general doubt about the benefits of good talent management, there is no question about the long-term competitive advantages be it in terms of customer satisfaction, cost price, corporate image, innovation capability or any other strength that makes the competition sit up and take notice.

However, a closer look is still a good way to put the topic of talent management at the centerĀ of competition considerations:

Despite the significant increase in knowledge and innovation in our economy, talent management does not always attract the necessary attention and investment.
Competition based on innovation and talent is only slowly taking a firm place in strategic thinking compared to traditional models of productivity and economies of scale.

In order to obtain decisions, support and resources for talent management based on the argument of competition, more concrete, measurable elements and evaluation models are needed.

It therefore makes sense to look at the relationship between talent management and business success in comparison to competitors using two well-known decision models: the marketing mix and the five competitive forces according to Porter.

It then discusses how the link between talent management and business success can be sustainably anchored in corporate culture and leadership.

Talents and marketing mix

The marketing mix is known to comprise four areas to describe the range of services and their marketing.

The product describes both the scope of the goods or services offered and other elements that make up the customer experience.

Apart from a few exceptions, the human being is an integral part of this customer experience. Even in online sales, the product range, performance measurement, marketing strategy, customer service, delivery and payment conditions are all largely determined by the customer. Even with the most extensive process automation, e.g. electronic data exchange, control, monitoring and adjustment are decisive for competitiveness.

Accordingly, people and their talents are the focus of the “product”. Whether it is about design, decision making, implementation, monitoring or interaction, human resources policy has a significant impact on competitiveness and goes far beyond recruiting and retaining talent.

The “unrecorded” costs in connection with the emigration of a talent must also be considered. Unfortunately, from an accounting point of view, human capital and its further training are still hardly or not at all taken into account.

In view of the great influence that innovation has on the success of a company, the importance of recruiting creative talent is nevertheless more than clear.

The price, i.e. both the amount to be paid and the terms of payment as well as the price development, depends on the production costs, the competition as well as psychotactic and psychostrategic possibilities. Of course, the more talent there is in marketing and sales, the better the latter can be mastered. Similarly, price positioning in comparison to the competition depends on good market analysis and observation of the competition.

Talent management also plays a key role in terms of costs. Regardless of negotiating skills in purchasing, lean management or competence in controlling, human capital accounts for a significant proportion of total costs. This can be influenced as follows:

  • Optimization of the remuneration policy on the part of HR
  • Productivity in all areas
  • Control of wage costs through long-term management and Taylorism of company-wide processes
  • Adaptability thanks to exceptional talents
  • Diversification of sourcing as a critical success factor especially against the background of Big Data

The role of talent management is crucial for each of these points.

Communication includes brand image, prestige effects and brand message depending on the positioning and communication tools of the company.

Communication policy does not only concern marketing and sales experts. Every single employee, every team contributes its know-how to the company image. Everyone can carry the brand message more or less to the outside. A good coordination between talent management and internal communication helps to optimize this. Before defining the communication measures, it is essential to gather market information. Only in this way can a successful differentiation from the competition be achieved through company-wide coordination.

Distribution encompasses all sales activities both in terms of logistics and the design of the sales process. The aim is to define and design suitable sales channels and to control the availability and delivery of the product.

Among the four elements of the marketing mix, distribution is the most important for the most diversified talent management possible. Although communication concerns everyone, individual decisions on action are only slightly interdependent.

The individual actions along the entire value chain from sales to customer service are in turn closely linked and can only be handled through good coordination of competencies despite automation. An incorrectly interpreted standard or an interruption in the production chain can have a negative impact on the entire sales process. From a competitive point of view, this is a unique selling point, but it presents HR with numerous challenges.

Talents and the 5 competitive forces according to Porter

In his five-power model, economist and management theorist Michael E. Porter examines the competitive conditions to which a company is exposed under the influence of external factors.

The following 5 forces are distinguished:

The intensity of the existing competition depends on the number of competitors on the market, the degree of standardization of the offer, the switching costs and the differentiation ability of the competition.

Within this framework, talent management is responsible for talent retention. In highly competitive industries, where many competitors are former employees, this can be decisive for success.

In addition, talent management also has a future-oriented pioneering role in which it is important to build a talent pipeline with promising top performers and to be able to respond to the development of personnel requirements with well thought-out career development and succession planning.

In the field of continuing vocational training, talent management ultimately stimulates innovation and diversification by promoting skills.

The bargaining power of the customers is determined by their number, the quantity they buy and their dependence on the offer and the existing customer relationship.

Talent management works here mainly through the ability to build close and diverse customer relationships and to promote them throughout the company through a corresponding training and remuneration policy. With the help of Robert S. Kaplan’s Balanced Scorecard concept, measures can be aligned with the desired goals.

The negotiating strength of suppliers is defined analogously by their number, order quantity, substitution probability and relationship management.

It is important to establish a good relationship with the supplier in order to benefit as much as possible from their products and services and to negotiate special conditions, etc. Talent management also influences this type of bargaining power by reducing dependency on the supplier through the consideration of the company’s own alternatives and opportunities.

The threat of substitute products is caused by the unique selling proposition of the supply and the elasticity of demand. The best example is passenger transport, where the risk of substitution depends on numerous factors, in particular travel time.

The importance of talent management becomes more than obvious. In today’s globally networked economy, it is easy for customers to compare offers. This transparency leads to lower margins, which require economies of scale and innovative strength, i.e. talent, to be maintained.

Paradoxically, the unique selling proposition of an offer is not determined by creativity alone. Corporate culture, service and human factors now contribute significantly to differentiation and brand identification.

Finally, the risk of threat from new entrants is influenced by market entry barriers of a financial, legal or technological nature, but also by the potential to attract and retain talent, reliability and trustworthiness.

Driving change forward

To permanently anchor talent management at the heart of corporate strategy requires a certain amount of activism. Many of the dominant models leave little room for the human factor, even if they offer a certain level of security and comfort.

However, in order to really bring about a rethink, it is first necessary to observe. If the competition or a particularly successful company reshuffles the cards, the discussion is stimulated. We are in a decisive phase in which the spirit of innovation is tangible everywhere, but many ideas are not yet fully developed. It is the ideal time to initiate change.

The next step is to take up already existing “rules of the game”. This blog post shows several overlaps between talent management and competition theory that can serve as a starting point. For example, rethink your compensation policy to strategically align individual and company efforts. With measurable goals, it is possible to create a successful example.

Last but not least, patience is required. The first success in the back is to drive change forward with the support of management and to communicate efficiently with all stakeholders. The adaptation of methods from quality management and sustainable development can be very helpful.

Published by Dave John

Decade of work experience in leadership consulting with strong focus on talent acquisition & assessment across different industries and geographies.

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