Shareholder value from a great talent management program

Every organization relies on a small cluster of talent in order to be able to execute its strategy and meet its goals. These employees – or talents – account for a disproportionate share of revenue and profits. They are the backbone of the organization and the company should do whatever they can to nurture and look after these talents.

This makes intuitive sense, but now this is increasingly also being proved through  more and more studies. Development Dimensions International, a consultancy company, write that “There is a demonstrated relationship between better talent and better business performance. Increasingly, organizations seek to quantify the return on their investment in talent. The result is a body of “proof” that paints a compelling picture of the impact talent has on business performance”

A few studies are being mentioned by DDI – to highlight just a few:

  • A 2007 study from the Hackett Group found companies that excel at managing talent post earnings that are 15 percent higher than peers. For an average Fortune 500 company, such an improvement in performance means hundreds of millions of dollars.
  • A study from IBM found public companies that are more effective at talent management had higher percentages of financial outperformers than groups of similar sized companies with less effective talent management.
  • Similarly, a 2006 research study from McBassi & Co.5 revealed that high scorers in five categories of human capital management (leadership practices, employee engagement, knowledge accountability, workforce organization, and learning capacity) posted higher stock market returns and better safety records—two common business goals that are top of mind for today’s senior leadership.

So, evidence support the long-held view that few talents (about 15%-20% of all employees) account for a disproportionate share of profits. A great strategic talent management program will identify, attract and retain those important people. Such a successful strategic talent management program must be a) driven by business strategy, b) integrated with other processes, c) managed as a core business practice and d) engrained as a talent mindset. Sounds easy but it isn’t but as evidence show – it is worth it.

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