Inadequacies in talent management are hurting the competitiveness and financial performance of firms. According to a survey conducted by the Economist Intelligence Unit (EIU) in July 2012, 43% of senior executives partially attribute the failure of their firms to achieve key financial targets to ineffective talent management, and two in five say it has also reduced their company's ability to innovate. Clearly, short-sighted HR policies are hitting companies where it hurts. The opportunity cost of not investing enough resources to talent development is also huge. A recent study by the Boston Consulting Group, a management consultancy, found that companies that are “highly skilled” in core HR practices achieve up to 3.5 times the revenue growth and as much as twice the profit margins of less capable companies.

The EIU survey also shows that C-level executives are often divided on key investment decisions related to talent management. Over three-quarters of CEOs (77 per cent) believe that cutting spending on workforce skills, training and qualifications is part of their company’s policy over the next 18 months, although only 49 per cent of CFOs and 18 per cent of HR directors agree- suggesting that C-level management are singing from different hymn sheets.

Perhaps more worrying is the fact that senior business leaders not just disagree with each other on critical aspects of talent management but they are also not sure who should bear responsibility for these issues in their firms. Over three-fifths of CEOs and CFOs say the head of finance is responsible for measuring the effectiveness of their firm's talent management strategy, but less than a fifth of HR directors seem to agree. Instead, an overwhelming proportion of HR directors (83 per cent) say oversight on talent is, in fact, their own responsibility.

Some of these shortcomings seem to be systemic or a fallout of organisation structures: for instance, the lack of a coherent strategy as a result of the divergence of views at the C-level. Other challenges can be quite easily addressed, such as measuring the effectiveness of a firm's talent management strategy. But the message is clear: to stay competitive in today's challenging and volatile business environment, C-level executives must pay more attention to talent management and strive for greater clarity and unity on strategy among themselves.

This analysis appears in Talent pipeline draining growth, a report written by CIMA, based on the findings of a survey conducted by the Economist Intelligence Unit in July 2012. To read the full report, click here

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.