On the surface, talent management and performance management seem to mean the same thing – but they don’t. The two serve very different purposes in the HR world. The former is about recruiting, retaining, and rewarding employees; the latter involves examining employee expertise using metrics and feedback. Both are critical to building your company’s infrastructure.
Let’s break them down.
What Is Talent Management? One of many HR functions, talent management ensures your company will be future-ready by doing two things at once: constantly upskilling and reskilling your current employees while recruiting the talent you need to fill holes and grow. It’s an exercise in resource management in that HR stays on top of talent acquisition, employee engagement, development programs, and
performance.
That said, there are four pillars under the auspices of talent management:
1. Recruiting. To manage talent, you have to have some talent to manage. This pillar is the starting point for attracting new people to work with you. It’s also where HR aligns your company’s purpose with an employee’s desire for a purpose (think: long-term business goals meet career aspirations).
2. Learning and development. This includes everything from onboarding to succession planning to upskilling and reskilling as part of workforce planning. You’re developing the critical skills base of your company, minimizing wasted resources, and maximizing employee engagement.
3. Performance management. This is the process by which you measure, recognize, and improve your employees’ proficiency in the critical skills mentioned above.
4. Retention. After all you have invested in hiring, training, and developing your talent, you want to keep them as long as possible. Retention is essential for long-term productivity, efficiency, and employee engagement.
Why Is Talent Management So Important?
Talent management will always start with recruiting but retaining and developing talent unique to your company and your specific needs is critical for developing a competitive edge. That’s what makes talent management so crucial – its intent to improve business performance.
Use talent management to:
Open resources
When there’s a crisis, and you need specialized people now, a well-managed talent
pipeline will have available people with the experience, skills, and availability for
specific projects. That readiness saves you the time and money it would cost to recruit for that vacancy or to take another employee off a different project.
Aid succession planning
Because you’re managing your talent, you’ll have real-time data to use to understand time to value, readiness level, training needs, and development planning. This also means shorter vacancy periods when someone leaves or retires, and simultaneously demonstrates defined career trajectories for your employees.
Improve engagement, lowers attrition
When you lack resources or have an abundance in just one area, you can expect
disengagement, burnout, and disillusionment with our company’s decision-making.
Utilize your employees’ skills to make them more engaged and loyal.
Make hiring strategic
Strategic hiring is based on capacity planning, which leads to better retention rates. Hire based on future potential as much as current skill sets to avoid turnover by having the right people in the right roles. This helps you avoid the turnover costs of up to 33 percent of a role’s compensation and the 42 days (on average) associated with it.
What Is Performance Management?
Performance management dives deeper into individual or team management rather than your workforce as a whole. HR’s function here is to align employee performance goals with your company’s goals and needs and to measure progress toward business goals, not praise or rebuke people in annual reviews.
Performance management functions
Where performance management used to encompass remuneration, promotions, discipline, and development, it is now an iterative process. It needs to be flexible to update objectives in real time and guide day-to-day 360-degree feedback.
Use performance management to
1. Set expectations. This ensures that your employees channel their efforts efficiently
toward your company’s goals. These expectations ensure that work is planned around achievable metrics, and you have a universal language as everyone understands what’s equitable.
2. Continuously monitor individual performance. You stand a better chance of course correcting with regular reviews and feedback. Performance conversations held at frequent and regular intervals allow managers to flag areas of strengths and weaknesses, creating better communication channels.
3. Give weight to specific behaviors and thought processes when rating performance against organizational standards.
4. Recognize exceptional performance. High achievers must be recognized for their
efforts because they are clearly positively affecting your company and making valued contributions.
5. Develop employees’ ability to self-evaluate. Employees will improve their work
processes through the performance management evaluation process. As their processes improve, they will develop and apply new skills on the job and impart their understanding to peers.
Why Is Performance Management So Important?
Performance management is crucial because you want your employees to be with you for the long haul. Managing their day-to-day work helps you – and them – manage their career within your company. The talent you foster will be reinvested back into your company.
Employees benefit from the universal language created through communicating so closely and often with peers and leadership. The performance management process clarifies and outlines the responsibilities and success criteria for a job role. This motivates employees to perform better, increases their drive to innovate, and enhances their ability to self-reflect. A process like this will have both recognition and appropriate consequences for employees.
Managers benefit from performance management because it creates employees who are self-motivated, hungry for success, and invested in helping their team and the company prosper.
Employees understand the impact of their work and require less oversight, which gives managers time back for other tasks – and allows managers to better discern the low performers from the high.
Performance management done well creates informed employees, which leads to more efficient teams, which makes for a high-performing company. It outlines organizational goals at a value-driven level because it defines the capabilities and job roles that contribute to the goals, which gives meaning to all tasks, big and small.
This process also makes possible fairer administrative action, as the framework is pre-determined and universally recognized. In addition, there’s better management of resources and easier change management because the business goals and the pathways to realize them are articulated company-wide.
As you can see, talent management and performance management are unique HR strategies. No one is more important than the other, but each informs the other – and both are essential to your building (or re-building) your company’s infrastructure.