With economic uncertainties continuing in Europe and USA and the slowdown of the Indian economy, in 2012 there will be tremendous pressure on companies to deliver profitable growth – the tail winds that propelled growth will no longer be there and in fact there would be strong head winds that companies will have to negotiate.

More than ever before, HR managers will be called upon to justify expenditure on talent management initiatives. Stakeholders will ask HR to demonstrate return on investment or improvement in business results arising from HR programs. Whether it is training programs, sending managers to courses in management institutes in India or overseas, leadership development programs, development centres; HR will be required to show the business outcomes of each of these. Therefore, “business outcome” studies will become critical.

The business outcome studies will have to establish the link between business results such as improvement in sales, profits or customer satisfaction or other business critical parameters and the expenditure incurred on talent management activities. HR will have to identify these metrics, collect reliable data and provide valid evidence in very much the same manner in which expenditure on any asset needs to be justified through ROI calculations. Data driven HR or HR analytics will play a very important role.

Most HR managers are currently not equipped to carry out this exercise. HR has traditionally been justifying HR activities by saying “these are good to do...” or “other companies are doing and therefore we need to...” These explanations will no longer be accepted. They will have to develop the skills and expertise to carry out business outcome studies. Service providers such as the training organizations or talent assessment companies will be required to support HR to carry out these studies. In many cases the service providers will have to undertake these on behalf of their clients.

Another important trend next year will be that companies will seriously evaluate their talent pool. Given the uncertain global and domestic economic scenarios in 2012 and the next couple of years, companies will have to take stock of their talent pool and evaluate if they have the competencies, capabilities to drive growth in such uncertain times. Just as an individual crossing mid thirties has to get a complete health check up, companies will have to carry out a “talent health” check up. This will be in the form of “talent audit” where at an individual and at department or function level, an assessment of the capabilities of the existing management team is carried out.

This will involve looking at three critical parameters: Performance i.e. results delivered in the past, behaviors that are demonstrated and future potential.

While many organizations have data on performance available through their performance management systems, most companies do not have data on behaviors and future potential. Companies will have to use 360 feedback to assess behaviors and evaluate if these are consistent with what is expected and consistent with the values and culture of the organization. Companies will have to use objective assessment of future potential of their managers through Development/Assessment Centres.

Combining data on performance, behaviors and future potential at an individual manager level and at a department and functional level, it is possible to do a “talent health” evaluation. This provides a clear, data driven basis on which talent management initiatives can be planned.

Finally, HR leaders will have a greater role in shaping business strategy. Considering the critical role that talent plays in driving business growth in the tough economic conditions ahead, HR leaders will have to integrate talent strategy with business strategy.