Cost Effectiveness of Retaining Top Internal Talent in Contrast to Recruiting Top Talent

TALENT MANAGEMENT DEFINEDTalent management (TM) is a concept that has been adopted by organizations in the United States (US) since the early 1990s (Fakhr El Din, 2013; Khatri, Gupta, Gulati, & Chauhan, 2010; Nilsson & Ellstrom, 2012; Yarnall, 2011). For TM to be effective, an organization needs to define and evaluate employee talents and determine which talents are most important to the organizational structure. Khatri et al. (2010) defined employee talent as "attracting and recruiting qualified candidates with competitive backgrounds, managing and defining competitive salaries, training and development opportunities, performance management process, retention programs and promotion and transitioning" (p. 39).Kehinde (2012) believed that talent "is the primary driver of any successful company. It has become increasingly obvious to most business owners and executive teams that, rather than being constrained by capital, companies are typically most constrained by talent" (p. 178). Sixty-three percent of surveyed organizations agreed that organizational wealth is derived from an investment financially in TM (Kehinde, 2012). In order for an organization to be successful, it will need to have the right people with the right skill sets and talent in the right job (Choudhury, 2012; Fakhr El Din, 2013; Khatri et al., 2010; Odom, 2012; Pandey et al., 2012). Talent management is not the "order entry" side of HR (benefits, pensions, payroll, etc.) but rather focuses on individual employees, their skill sets, their potential and their ability or desire to move vertically within the organization (Khatri et al., 2010).Recruiting and RetentionBoth recruiting and retention can be used to increase an organization's overall competitive status. "Today," Pandey et al. (2012) stated, "in this constantly changing environment, global competition, the natures of work companies have realized the importance of talent in the success of the organization" (p. 367). Therefore, TM should be used to address these strategic issues in order to improve organizational performance. Pandey et al. (2012) identifies two basic problems and recent trends in TM. These two problems are shortage of talent and motivation of employees (Pandey et al., 2012).When an organization spends excessive time, money, and energy recruiting an employee who does not fit the required skill set or need of that organization, it can result in a high level of turnover and less effective performance - in essence, it is a waste of resources. The economies of India and the US are currently suffering from a gap in skill and qualified talent. Deloitte's 2011 study of US and Indian manufacturing industries identified the skills gap at an estimated 600,000 workers (Moutray & Swift, 2013). One year later an internal study by the National Association of Manufacturers (NAM) (2012) revealed that 62% of small and medium-sized US manufacturers had positions that were not filled due to a shortage of qualified candidates (Moutray & Swift, 2013). Employees now are taking advantage of a tight labor market by showing limited employee loyalty to an organization that does not meet the needs and wants of its workforce (Pandey et al., 2012). If no attention is given to retaining and developing the existing employee, most will leave an organization within five years (Phillips & Roper, 2009).Problems Affecting Talent ManagementParticular trends in the workforce that will impact an organization's effective use of TM resources include higher salary requirements, cost of employee turnover, increased global competition and the increased cost of identifying the intangible assets (skills and knowledge) of an employee. The Society for Human Resource Management (SHRM) stated that nearly four out of five manufacturing organizations were unable to fill open positions (SHRM, 2013). These shortages for skilled workers, particularly in the disciplines of Science, Technology, Engineering and Mathematics (STEM) have suggested that a new normal is at hand for the workforce. …