Talent management has broadly existed in various forms for many years, with organizations using such processes as succession planning and competency frameworks to identify and develop their high potential employees. The term itself was coined in the late 1990s, gaining particular momentum as firms tuned into the fact that having a consistent and focused approach to managing intellectual capital within the organization would have a positive impact for the business. Since then, white papers, surveys, reports and articles on the subject abound, each with perhaps a slightly different definition of talent management and each taking their own angle, but all with the same consistent message: organizations believe that it is important to have an effective talent management strategy with clear and tangible benefits for the bottom line.
For instance, Huselid and Becker (1995) researched the HR practices of 740 companies and found that those using high performance work systems (HPWS, or integrated talent management practices) had significantly higher levels of organizational performance, measured by an increase in market value per employee. Watson Wyatt‟s European Human Capital Index study in 2002 suggested that there were 36 HR practices and policies that were associated with an almost 90% increase in shareholder value.
According to a recent report from Ernst & Young, companies that effectively manage talent consistently de-liver higher shareholder value. The report, titled “Managing Today‟s Global Workforce: Elevating Talent Management to Improve Business,” analyzed results from a survey of 340 senior executives conducted in 2009 to assess global talent management practices and evaluate their impact on business. It was found that companies that align talent management with business strategy deliver on average 20 percent higher return on equity than those without alignment, and those that integrated their talent management programs delivered 38 percent greater returns.