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The Cost of Talent Mismanagement

From time to time in this blog, I discuss the tremendous value of proper talent management discipline. In my most recent blog post, I discussed the value of a unified competency model. A unified competency model defines a consistent set of skills used in every key talent management process throughout the lifecycle of an employee – recruiting, promotion, career development, performance management, learning management and succession management. Another way to emphasize the value of talent management is to think about the high cost of talent mismanagement. When an organization lacks an understanding of what skills are required to accomplish its work and what skills employees actually have, we see the following very costly symptoms:

  • Candidates are hired without the required skills, and then additional training dollars are invested to equip the new hire to adequately fill the position.
  • Without understanding the current skill sets of employees, or what skills are needed, an organization cannot develop clearly defined career paths. As a result, employees do not see a path for career growth, and many times leave for opportunities that are more attractive.
  • A lack of clarity on skills often leads to hiring redundant skills.  With a glut of certain skills, career progression becomes difficult, resulting in stagnation. Employees become bored with a lack of opportunity and challenge, and often productivity suffers.
  • Succession Planning is nearly impossible without a unified competency model and, as a result, it is often ignored.  When valuable skills leave the organization, typically there is no identified replacement or even a plan on how to fill the resulting gap.
  • Without clearly defined skill requirements, job openings are typically not filled by existing employees. Employees then perceive a lack of internal opportunity and eventually look elsewhere.

All of these symptoms cost money – and the dollars can be very costly indeed. Suppose a fictitious organization has a head-count of 2,000 and an average fully-loaded salary of $60,000 a year. This represents an annualized fully-loaded human capital cost of $120 million. How much do these inefficiencies cost the organization? 10%?  5%?  Even if the inefficiencies represent just 1% of the annualized fully-loaded human capital cost, this represents $1.2 million in annual cost, taking a huge toll on profitability.  When thinking about the value of talent management, we must also consider the high cost of talent mismanagement.

Tags: Human Capital Management