When Henry Ford set out to build an affordable automobile, he needed to put into place all the mechanics of the assembly line, a clear symbol of the industrial age. But in the information age, the Henry Fords of today need to put into place all of the intellectual talents necessary to construct a successful business. That is the challenge driving the development of Talent Management.

What Is Talent Management?

Talent management goes beyond traditional human resources, which won’t be displaced anytime soon. Talent management involves identifying key talents that will drive the success of the company and ensuring the people who contribute those talents are located, nurtured and retained. In the early days, talent management focused mostly on the corporate suite, but the best businesses now realize key talents and the people who contribute them exist throughout the operation.

Because these talents and people are so vital to success, talent management cannot be left to a human resources department assigned to recruit, review and resource payroll for the entire organization. Talent management starts with the CEO and spreads like tentacles through upper management to middle management and beyond. Many now argue talent management has become the CEO’s primary role.

Jack Welch, a longtime CEO of General Electric, put it nicely, “My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.”

Why Is Talent Management Important for Your Business?

McKinsey & Company conducted the first extensive research into talent management in 1997 and pegged its importance for successful businesses. The company conducted a second round of interviews in 2000, totaling 13,000 manager interviews at 112 large U.S. companies. The findings on the impact of nurturing talent in the corporate structure were astounding:

• In manufacturing, companies with the best plant managers grew profits by 130 percent, while the lowest performers showed no gain in profits.

• In industrial services, companies with the best center managers increased profits by 80 percent, while profits with the lowest-performing center managers remained flat.

• In financial services, the top performing portfolio managers added to their portfolios by 50 percent, while the bottom performers showed no increase.

• And finally, companies most committed to talent management showed a return to shareholders 22 percentage points higher than their industry average – that’s 22 percentage points, not 22 percent.

Unless making money is not the point of your business, it’s easy to recognize the importance of talent management.

McKinsey’s Five Elements of a Talent Formula

Based what it learned about the structure of the successful companies it studied, McKinsey & Company developed a strategy for companies to follow named the Five Elements of a Talent Formula.

Though business coaches and talent gurus have added their own twists to the formula over the past 20 years, adopting a strategy is contingent upon each business and its needs, so these five elements still provide a solid baseline:

1. Install a Talent Mindset at all levels of the organization, beginning with senior management: A talent mindset means everyone in leadership buys into the concept that developing and retaining talent is the No. 1 key to your company’s success. Leaders at all levels will be charged with recruiting, nurturing and retaining talent and, most importantly, will be held accountable for their contribution to developing a strong talent pool, top to bottom.

2. Create a winning Employee Value Proposition (EVP) that brings scarce talent through the doors, and keeps them there: Winning EVPs will answer the question: Why would talented people want to work here? While EVPs could vary by positions or departments, all should include these four elements:

• Exciting work: Talented people, first and foremost, need to find value and challenge in the work they perform, allowing them to tap the creativity and talents you hired them for.

• Great company: Talented people will remain dedicated only if they feel the company is well-managed and respects their ideas and commitment.

• Wealth and reward: Talented people need to be recognized for the value they add to the company with good pay and benefits. A company that adheres to a rigid pay scale will not attract and retain the talent to succeed.

• Growth and development: Talented people strive to learn and move forward constantly, so nurturing that desire is essential in retaining the best talent.

3. Recruit great talent continually: Companies and managers committed to talent management are constantly on the lookout for the best talent. While growing talent from the bottom up may have worked in the old business model, the best companies must be willing to bring in new talent to plug holes at all levels, even in senior management.

4. Grow great leaders: The notion of a born leader flies against the grain of truth. Most leaders are nurtured into their roles by being challenged to improve, supported when they fail and pushed anew to reach outside their comfort realm. Mentoring programs provide a great opportunity to develop fresh leadership throughout an organization.

5. Differentiate and affirm: Companies often are faced with the temptation to treat all employees the same, but this only leads to creating cookie-cutter employees, not talented leaders. Top performers need to be rewarded with new job opportunities and challenges; pay increases; special benefits and rewards. While middle and low-performers, while still needing nurture, can be placed into the cookie-cutter mold of a pay scale and standard benefits. Of course, as Jack Welch mentioned, you need to be willing to pull out the weeds as they will suck away nourishment from your talent.

Talent Management Best Practices

A Fortune 500 company will develop a very different talent management system than a Silicon Valley startup, but many of the best practices still will apply across the business spectrum:

• Create a Talent Mindset: This idea must start at the top and flow throughout the company. Managers at all levels must be charged with recruiting, developing and retaining superior talent. And new people coming into the company must be aware their talents will be recognized, encouraged and rewarded.

• Adopt a New View of Employees: You must recognize that few people expect to make a career-long commitment to a company when hired. The company must develop a culture and environment that encourages employees to stay. Some companies even refer to their employees as volunteers, as their commitment to stay with a company is considered voluntary.

• Hire Like You Sell: Recruiting top talent no longer is a matter of accepting hundreds of resumes and expecting the best to come to work for you. You must consider the interview process your opportunity to sell your company’s vision to new talent.

• Reward, reward, reward: Don’t be afraid to be accused of giving special treatment to your top talent. They are special. They make your company special. They deserve special treatment. And that special treatment could be just the thing to tip the scale that keeps your top talent at your company and performing at their best. That special treatment will make your company appealing to outside talent as well.

One simple reward that will appeal to your top talent is a Gympass membership that will follow them as they travel the globe, both on business and for pleasure. The membership also creates a win-win for your company as your top talent will be healthier, happier and mentally refreshed when they challenge their bodies and follow a regular workout routine.