Talent on the map

by | Jan 9, 2014 | Articles

Pre-recession, investing in talent was viewed as being so vital to a company’s success that there was often no call for a business case – it was a no-brainer. Rob Davies, partner at Cirrus, provides some timely advice in the HR Director magazine.

Our latest research into measuring investment in talent brings together insights from HR leaders across a range of sectors including banking and finance, FMCG, leisure, media, advertising, manufacturing, professional services, retail and utilities. It highlights some of the unique attributes HR professionals can bring to the table when it comes to presenting a business case for talent initiatives and evaluating their success.

The research, conducted by Cirrus in association with talent technology specialists Lumesse, found that nearly two thirds of HR professionals feel overwhelmed by the complexity of showing a return on investment and creating a financial case for talent.

More than half (54 per cent) of those surveyed felt their company has not invested enough in talent, yet 87 per cent believed senior management still viewed it as being critical to the bottom line.

The research shows there is a very real need to justify the business case for talent, yet almost half of all respondents feel it isn’t possible to calculate the financial impact of talent investment. 47 per cent felt that HR professionals lack the relevant skills to drive this forward.

Are we looking at a HR skills gap, or is it actually feasible to calculate the financial return on talent investment?

For many HR leaders, traditional people metrics such as retention, performance ratings and succession ratios are still used to show talent’s worth. Irrespective of the demand for financial metrics, there was a feeling among those surveyed that it shouldn’t be a case of one set of metrics replacing the other. If anything, the financial and the people metrics need to dovetail to create a balanced approach where traditional metrics are a key part of any return on investment equation.

As Hasan Khair, Regional Talent Director, EMEA, Saatchi & Saatchi commented, “An ROI narrative built on pure financial metrics isn’t a rounded view. Intangibles, such as culture and what people feel are equally important.”

Dr Richard Waters, Group Head of Learning and Development at Hays, added: “The word I use is value – and value is about more than money. It is about how we deliver against the organisation’s wider strategy and this ultimately trickles down to the bottom line.”

Many other HR and talent leaders also argued that people metrics such as succession, employee engagement and motivation are predictive indicators of future business success.  Evaluating the return on investment should include these benchmarks as complementary metrics to the financial data.

Just one in four of the organisations surveyed linked revenue and profit margins to ROI in talent – suggesting the lack of a commonly accepted financial model of assessment.

We suggest there are four key steps to create a rounded and more connected approach to assess return on investment in talent.

1. Use a strategy map to convert intangible assets into tangible outcomes

The core of this approach is based on the strategy map developed by Professor Robert Kaplan of Harvard Business School. By using a strategy map, you can track both financial and non-financial measures to wider business goals. The map allows intangible metrics to be clearly connected to more concrete metrics , ensuring that the strategic impact of the investment is comprehensively valued.

2. Be inclusive

Work with finance teams to gain valuable insight into marrying people and financial metrics. It is also important to connect with any leaders whose activities are likely to impact on investment and treat them as stakeholders.

3. New skill sets

Irrespective of retaining traditional metrics as a measurement tool, skills shortages across the profession could limit the effectiveness of a dual approach. Developing skills to build capability even in the most basic of financial metrics could become a vital part of HR’s development.

4. Technology and a data-driven HR function

Research into HR technology buying trends highlighted that a fifth of organisations are using up to ten separate systems. Consolidating these into one core platform could help HR teams advance business analytics.

For many HR leaders, the challenge of measuring the ROI in talent is an opportunity to bring a unique perspective to the usual financial business case.  Traditional metrics such as motivation and engagement are powerful predictors of future business success. Combining these with hard financial measures can enable HR to prove its value and contribution to business success.

A talent strategy linked to strategic goals can give an organisation a real competitive advantage. HR professionals who can embrace the growing complexities of their role and shape a balanced case for talent investment can have a real impact on organisational success.

© theHRdirector 2014

Click here to download a copy of the research paper, The business case for investing in talent: how to build, shape and measure it.

Rob welcomes your views on this article. Please click here to send him an email.

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