Running the Numbers – Talent Management Really Does Pay Off

Companies with more mature talent management capabilities reap strong bottom-line benefits, including earnings that are 18 percent higher than typical Global 1000 companies, according to a new study from The Hackett Group Inc.

The study, which examined the performance at more than 60 companies over a three-year period, found that, in addition to higher earnings, leaders saw significantly improved net profit margin and greater return on equity and assets.

Obviously, I’m not surprised! But I am pleased to see quantifiable research being released that can back up what we’ve known all along… One of the biggest challenges we find with talent management users is the search for ROI. It’s not that there isn’t a return on talent management investments – it’s that the return is actually so intrinsic and so assumed, that many organizations don’t invest time to set metrics or measure outcomes for their systems. In many cases, they know how desperately their organization needs talent management tools, so they just set up their new systems and watch as anecdotal evidence to their success rolls in.

Works every time! But consider how much more strategic the HR team could be – quantifying operational impact at the boardroom level.

Just look at these Hackett Group findings:

From an operational standpoint, talent management maturity leaders outperformed typical companies across an array of efficiency and effectiveness metrics. Leaders showed superior ability to increase overall employee engagement, faster recruiting cycle time and greater linkage of talent management to business strategy. Their talent management professionals were also significantly more productive than those at typical companies.

These are measurable, attainable bottom-line goals. And if you knew that your key competitors were tracking these metrics, wouldn’t you want to make sure you were measuring – and raising – the bar too?

Here’s the core of the problem:

“It’s easy to find companies that feature talent management in their strategic plans and reports to shareholders. But truly, most do little more than pay it lip service. They stick to the basics because they don’t truly understand the impact of improving their talent management capabilities,” said Hackett HR advisory practice leader Stephen Joyce. “With this research, we’re clearly quantifying the price most companies pay for their lack of commitment. By ignoring the strategic value of talent management and failing to develop a comprehensive program that drives top performance in this area, companies are missing the opportunity for a triple payoff — an enhanced bottom line, better performance across the enterprise and improvements in specific talent management processes.”

So here’s a challenge for 2010 – if you know you need talent management, start setting up the processes. And don’t neglect measurement in your steps! If you are already employing talent management systems, take the time now to have a serious look at how you can apply business-level metrics to it, so you can track your progress and your investment.

But don’t just take my word for it, I’ll leave you with a final thought from Hackett Group:

“We’ve worked with companies to drive improvements in key talent management areas such as succession planning, recruitment, and learning and development, and seen them generate significant cost savings while also improving effectiveness. These companies were better able to attract high-quality staff, retain key talent and develop the skills they need to support strategic business goals, and the focus on people also has a measurable impact on business performance.”