How can better talent management improve corporate competitiveness?

The story of human development is, in essence, the story of productivity growth. It is widely acknowledged that, as technology has advanced over time, the workforce has become increasingly more productive. However, despite continued technological developments, average annual productivity growth has sharply declined from 2.1% in the 1900s, to 0.2% over the past 20 years, contradicting previous trends and raising concerns for policy makers and businesses. Solving this puzzle is vital for governments across the globe, to promote growth and progress after the pandemic, and for businesses, to maintain competitiveness and profitability amid rising operating and financing costs. The importance of productivity has been corroborated by Deloitte CFOs in the most recent CFO Survey, which found that ‘Poor productivity / weak competitiveness in the economy’ is one of the largest risks to business. Currently, however, much focus has been on the role of governments across the globe in creating policy and making investments that can unlock productivity and reverse this unlikely trend. Such a focus fails to examine how a firm’s own behaviour has the potential to affect performance and efficiency.

The Power of Effective Talent Management

Research from the World Management Survey shows a strong correlation between good talent management practices and high productivity and profitability; approximately one third of the productivity variance across firms can be attributed to talent management practices, and the top 20% of firms with high talent management quality are over three times as profitable as the bottom fifth. By identifying and emulating the traits of firms paving the way for excellent talent management practices, businesses can bridge the productivity gap and enhance their overall performance.

So, what are the key talent management practices that HR leaders should adopt to boost business productivity? The World Management Survey, alongside Deloitte research, has identified four talent management characteristics that are common amongst the world’s most productive firms:

1. Decentralized decision making

Empowering the workforce to take ownership, drive decisions, and be accountable, results in agile and effective work processes. Studies reveal a strong correlation between productivity, market competition, and decentralization of decision making, as firms in competitive markets tend to be more productive and responsive. It is important to note that younger and more technologically advanced firms tend to embrace this approach more readily.

2. Flexible performance management

Organisations that set clear, demanding goals, which link the actions of individuals in the workforce to the performance of the firm, are amongst the most productive. Additionally, incentivising and rewarding top performers (e.g., through profit-based compensation schemes) and identifying underperformers in a timely way, tends to have a positive effect on workforce productivity.

3. A culture of constant learning

The most productive organisations realise that the current pace of technological change requires not just constant updating of the people’s technical skills, but also the development of softer managerial skills to support an agile, nimble workforce. Working towards becoming ‘learners for life’, requires investment in the right infrastructure and developing a corporate culture that promotes and rewards constant learning.

4. Embracing new technology

Productivity leaders tend to be quicker to experiment with, invest in and widely adopt new technology. When thinking about how technology can support talent management, we might look to software that enables collaborative working and decision-making across and within dispersed teams or cutting-edge performance management and cloud-based services offering a wide variety of targeted online learning options. Without the right technological framework, corporations will struggle to develop the three traits of the most productive firms identified above. Looking forward, with the advent of Generative AI, we expect technology to become an even more noteworthy differentiator between productivity leaders and laggards.

Indeed, there is much that can be actioned by HR leaders in order to tackle the issue of declining business productivity. The key lies in promoting an agile, forward-thinking and collaborative approach to how the workforce function within a business, and embracing the inevitable technological developments that continue to come our way. By using the best talent management practices organisations start to unpick the productivity puzzle.