Why the Board Cares about How You Manage Your Talent

Most progressive companies are coming to recognize the importance of strong talent management practices and the impact they can have on company performance.

But how far reaching in an organization’s structure should talent management go, and who should be paying more attention?

According to recent research from human capital analysts David Creelman and Andrew Lambert, talent management is a strategic issue that’s squarely on the agenda of the boards of directors – and with good reason.

The Link Between Risk Management and Performance Management

Issues surrounding corporate governance have been front and center in news headlines over the past couple of years, and efforts to manage the risks associated with a company’s people and more specifically, their behavior and their performance have become increasingly important.

For board members, it’s their business to know and manage the behavior of senior management and to effectively mitigate risk – but they must extend that awareness to the talent that resides at every level of their organization.

In fact, new disclosure rules set by the U.S. Securities and Exchange Commission (SEC) make it a requirement. In February, 2010, rules went into effect that make it a necessity for companies to document the role of the board in how it oversees and administers risk management, of which talent is included among the potential risks.

As a prime example, a look at the SEC disclosure rules show that companies must explain how their compensation policies may cause issue under certain conditions, and if the risk from these policies are likely to have an adverse effect on the company.

So what’s the bottom line? Well, because it just so happens to involve the financial bottom line, it brings talent management to the very center of board radar screens.

Identifying Important People Indicators

Boards must now pay heed to any potential risk that may impact business or strategic company objectives, and must ensure that any risk, including those involving talent, is communicated as a normal course of business.

Risk management has moved from simple mitigation to performance optimization, and as such, boards must strive to minimize the impact of any risk regardless of origin.

Identifying important people indicators requires a big picture view of the company’s talent – from competency strengths, to talent pools, to goal management, to compensation plans – which is where an effective talent management solution comes in.

Strong boards take HR factors and talent management seriously because they see people issues as critical. They understand the perspective that having the right skills being developed, a highly engaged and high performing workforce, and strong bench strength will help the organization continue to grow, innovate and compete.

Is your board doing the same?

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