Posts tagged ‘Shareholder value’

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.

22/02/2011 at 16:14 2 comments

Evidence-Based HR

Looking through books, research and blogs about evidence-based HR, it is clear that a few are very keen on the concept and lots of people are very skeptical about it. Let me say straight away that I think it is a great approach to HR.

Evidence-based HR is essentially an approach which rely on hard-core evidence for all HR initiatives. This approach suggest that statements such as “I believe”, “I think”, “It might” is scrapped in favor of what we know and what has been proven.

For example: a company might provide access to a gym, which its employees may use free of charge. HR may argue that this will result in healthier employees who in turn will have lower absenteeism and higher productivity. But how do we know that? It feels intuitively right that it will be the case, but how much lower will absenteeism be solely because of the gym and does it justify the cost of the memberships? Perhaps. The evidence-based HR approach will want to test this assumption.

The movement (if it can be called that) is often quite skeptical about the current practices of HR, which I think is a bit unnecessary.  Instead the drive should be a genuine interest in making HR as value added as possible though practices which are documented to create value. HR practices based upon evidence will eliminate fears from CFO’s about possible waste of money.

I truly believe that HR can add a lot of shareholder value. But not all HR practices can and will do. Some are simply a waste of time and money. Which ones add value and which ones does not? An evidence based approach may help us answer this question.

If you want to know more, check out Paul Kearns’ blog here…

04/02/2011 at 15:28 7 comments

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