What Is Talent Management and What Is HR’s Role in It?

Securing and continuously engaging talent in a business is an important aspect of broader human resource management initiatives. Human resources’ systematic approach to attracting and retaining top employees is commonly called talent management. This also involves developing employees' skills, providing them with ongoing learning opportunities, and continuously motivating them to improve their performance. It's through these initiatives that employers can attract and retain a highly productive workforce that's motivated to stay and contribute to the business over the long term. That's why a striking 48% of business leaders cited talent management as a top HR challenge this year, according to our 2025 Priorities for Business Leaders survey.

To dive deeper into why talent management is important, how it benefits a business, and what the process for managing talent might look like, read on.

Why Is Talent Management Important?

Your employees are arguably your company's most important asset. Hiring employees is an investment in the business that ideally reaps considerable rewards down the line, by way of high productivity and engagement levels, greater output of your goods or services, improved performance, and a strong reputation of your business as an employer of choice.

It's through talent management that you can maximize the value of your workforce. When you take the necessary steps to develop employees and keep them engaged, this can help the business gain a competitive edge by:

• Improving performance
• Keeping pace or staying ahead of industry competitors
• Being innovative
• Mitigating turnover
• Boosting customer satisfaction
• Developing and motivating future leaders of the business

Benefits of Talent Management

Prioritizing employee satisfaction and development improves the business's potential for its own growth and value. Specifically, some of the advantages of talent management for employers may include the ability to:

• Recruit top talent: Businesses that value and support their workforce can bolster their reputation and become known as an employer of choice — qualities that many of today's job candidates are looking for in an employer.
• Keep productivity up (even after employee departures): When employees leave, there may be gaps in coverage, but a strong talent management strategy helps ensure that open positions can be filled quickly, all while keeping operations running in the meantime.
• Improve productivity: A strong talent management strategy helps employees develop their skills and reach their full potential (whether it's training, mentorship, career pathing, or other approaches), which can make the business more efficient as well.
• Reduce costs: Finding and hiring new employees is more costly than retaining valued staff. It also takes time and resources that can stretch HR and hiring teams thin. The cost of a bad hire can have long-lasting and damaging effects on a business.
• Empower employees: By having a firm understanding of workers' skills and abilities, you can empower teams to develop new methods of problem-solving and take on new challenges.
• Keep lines of communication open: A company that values two-way communication and feedback (for example, through use of check-ins and reviews), demonstrates its commitment to engaging employees and keeping their needs top of mind.

What Are the Components of Talent Management in HR?

Talent management focuses on some specific, critical day-to-day activities, often overseen by HR teams. Here's a closer look at some of them.

Recruiting

The foundation of talent management is hiring the right people. The best recruiting processes support those efforts by carefully developing job descriptions, using an applicant tracking system to help manage the workflow of the hiring process, and carefully interviewing applicants to select the strongest candidates.

The use of AI-assisted recruiting tools can also help improve your business’s talent pool by shortlisting potential matches, creating up-to-date work profiles for review, and keeping prospects engaged. Combining the usage of an applicant tracking system and AI-assisted tools can empower you to hire the right talent faster than ever before.

Performance Management

Once employees have been hired, it's essential to have the right processes in place to successfully manage them. HR technology and service solutions in areas such as time and attendance can help track productivity and performance. Regular review processes help keep lines of communication open between management and staff, allowing workers to get feedback on what's going well and where they need to improve their performance.

Career Management

Managing your employees' career paths can help increase satisfaction while reducing costly turnover. Building on the information collected during reviews, companies can learn more about employees' strengths and interests. With that in mind, it's possible to work with employees on long-term career development plans. Whether you're working with someone on the management track or someone interested in being a highly skilled individual contributor, career management is a critical component of talent management and employee satisfaction.

Leadership Development

Have you identified the next generation of leaders within your organization? That's a vital part of the talent management process. Once these high performing, high-potential individuals have been located, businesses need to consider the best way to retain employees over the long term. Often, this process requires a focus on training, stretch assignments, and mentoring.

Organizational Strategy

Talent management activities rarely happen in isolation. Instead, strategic recruiting and support of workforce development begins with a company-level commitment. Your HR team may play a leading role in talent management, from identifying talent management as a strategic priority to determining how and where that focus will be applied.

The Talent Management Process

The talent management process consists of multiple steps required to effectively recruit the right people, as well as support them throughout their tenure at your business. The goal is to help them work, develop, and grow. The process involves the following steps:

Identifying Necessary Skills for the Business

The first step of the talent management process involves determining the skills and roles needed to help the business meet its strategic goals. You may want to perform a skills gap analysis to help ensure you're hiring individuals who will have the most impact on your bottom line. Doing this step before recruiting and hiring is important, since this analysis helps you identify gaps in the skill sets of your current team, and hone in on those you'll want your new hire to have.

Recruiting the Right People

There are multiple components in attracting and recruiting great job candidates:

• Ensure that your compensation and benefits are competitive and align with industry standards.
• Create targeted job descriptions and post them in relevant spots (job boards, social media, company's career page, etc.).
• Communicate with current employees and ask for referrals.
• Consider internal candidates and hiring from within.
• Plan interviews and other means to narrow down candidates. In addition to your standard interview questions, consider using assessments where appropriate, ask for references, and conduct valid skills tests for candidates to demonstrate their skills.
• Provide timely communication to all candidates.

Provide a Positive, Streamlined Onboarding Process

Providing a great onboarding process can favorably affect workplace efficiency, accelerate training and development, and help drive results in a healthier, more collaborative company culture. You can also reinforce the ongoing nature of employee onboarding and its benefits by setting benchmarks for individual progress.

Provide Learning and Development Opportunities

Once employees have a solid understanding of what's required for their job and can make contributions to the business, don't forget the importance of training and development. A formal program can help develop the skills and expertise needed within your business and is critical in developing your organization's future leaders. And, overall, building effective training programs for your employees can significantly impact productivity and employee retention.

Conduct Performance Reviews

Employee performance reviews are a crucial part of relationship building, motivation, and performance enhancement. By investing time in these personalized discussions, you are demonstrating your commitment to helping your employees succeed and giving employees an opportunity to contribute to a plan that can help them succeed. Consider regular check-ins as well as formal reviews to ensure employees have chances to communicate ideas, bring up roadblocks, and express any work-related issues.

Implement Retention Strategies To Motivate and Engage Employees

By focusing on elements such as growth opportunities, benefits, training and development, improving company culture, and recognizing great performance, companies can see employee retention rates rise, even in today's tight labor market. Communicate these to job candidates and current employees alike, since this can demonstrate your commitment to helping the workforce grow.

Don't forget about other significant drivers of retention, such as attention to employee well-being. According to the 2023 Paychex Pulse of HR survey, four out of ten HR leaders plan to train employees or managers about the importance of well-being, including proactively addressing the challenges of burnout and quiet quitting.

Plan for Successors

There's always a degree of uncertainty in business, which is why you should have a process in place to determine which employees will eventually move up and take over key roles in the company when openings become available. Succession planning is also another part of the talent management process where cross-training and mentoring can help prepare the most-qualified employees when called upon.

Talent Management Strategies

There are many daily efforts that go into talent management, from recruiting for open jobs to managing performance reviews. From a cost perspective, each of these areas can look expensive — after all, considerable time and other resources are often devoted to the activities. But talent management doesn't have to be expensive; in fact, strategic investments can help keep talent management cost-effective while yielding a high return. Here's a closer look at some affordable talent management strategies.

Use an Applicant Tracking System

Effective recruiting is essential for companies to ensure they can keep growing and effectively replace workers who leave. But posting jobs, vetting candidates, and onboarding new staff can be a lot of work. An applicant tracking system is an investment that can help you reduce the costs of recruiting and save your staff many hours of work. Applicant tracking systems make it easier to move job postings through internal approval processes, post them to multiple job boards, and promote them via social media. These systems may offer functionality that enables customized applications with screening questions that make it easier to vet candidates, so you spend less time reading resumes and can dedicate more attention to top candidates.

Assess Your Talent With Performance Reviews

While recruiting helps bring new talent into the mix, it's also important to make the most of your existing staff. Performance reviews are a helpful way of managing compensation, identifying star performers to promote within the company, addressing problems, and keeping feedback loops open to encourage higher levels of productivity. However, conducting performance reviews can also be a daunting process. Using performance review software can make reviews easier to conduct offering guidance on schedules, questions, formats, and general communication.

Invest in Developing Your Leadership

Having a clear leadership development plan in place can help ensure your most talented leaders grow along with the company, rather than taking their expertise to your competition. It's expensive to recruit high-level employees, and there are high attrition rates. A leadership development program can help save you money overall by helping you offer specialized training, advancement opportunities, mentorship, and a clear growth path within the organization.

Include Talent Management in Your HR Strategy

Focusing on talent management is a critical component of your broader workforce management strategy, since recruiting, training, retaining, and promoting the right people are essential for optimum productivity and business output. While HR initiatives encompass talent management and much more, understanding and executing the day-to-day activities of recruiting, leadership development, business strategy creation, and career management are essential for successful employee management.