Building a business case for talent management part 3: Addressing the strategic issues facing the C-suite

Building a business case for talent management part 3: Addressing the strategic issues facing the C-suite

When you're building a business case to justify an investment in talent management software, it's important to keep your C-level executives' top concerns in mind and the impact talent management best-practices can have on organizational performance. Your executives' top concerns will capture their attention, priority and investment. So you need to demonstrate how talent management best-practices and automated talent management software can help the organization achieve its strategic goals.

Here are some ways you can do that.

Know what your CXOs worry about

In recent years, numerous studies have placed talent issues among the top concerns for global C-level executives. Over the last five years, talent related issues have typically ranked second or third in the CXOs' top five priorities.

  • Pricewaterhouse Cooper's 2012 Delivering results, Growth and value in a volatile world, listed developing a leadership and talent pipeline and improving organizational efficiency as the #1 and #3 concerns.
  • In Deloitte's Talent Edge 2020 survey of 376 senior leaders at large global companies, only 17 percent report that their organizations’ talent programs are “world class across the board” and 83 percent believe significant improvements need to be made.
  • In 2010, Gartner identified legacy and succession among the top concerns of leaders
 

What are your C-level executives' top concerns? How do these concerns relate to your organization's talent strategy or talent management practices. Knowing these two things will allow you to express and even quantify both the value your talent management programs can deliver to the organization as well as the risks your organization faces if it doesn't make talent management a priority.

Understand that good talent management practices = better business results

A spate of recent research has started to make the link between good talent management practices and better business results. This is perhaps the best evidence that investing in talent can pay big dividends, if it's done properly.

  • McKinsey’s ground breaking War for Talent studies determined that companies with strong talent practices outperformed their peer group, earning 22% higher shareholder returns.
  • Watson Wyatt, using its human capital index, found that good people practices can increase a company’s value by as much as 30%.
  • Russell Investments reports that firms on the Fortune “100 Best Companies to Work for” list outperform the S&P 500 and the Russell 3000 by as much as 10%.
  • Stanford professors O'Reilly and Pfeffer found that a change of one standard deviation in an index of human resource management practices produced increases of $20 000 to $40 000 in stock market value per employee.
 

These results are just a few of hundreds that are publicly available and are indicative of the impact that talent investments can have on business performance.

Make sure your C-level executives are familiar with this research.

Know the major drivers for the focus on talent management

There are a number of other factors that are also driving companies to invest more in their talent. They include:

  • Improving productivity — the top performer differential is 2.5 to 10 times that of an average employee (Sullivan, 2008). Other studies of knowledge intensive organizations, like IT or healthcare, have shown the gain can be as much as a 100 – 200%. The more top performers you have, the greater the organization’s productivity. Hiring better people to fit into the organization and nurturing your existing top talent are key.
  • Mitigating risk — interest rates on lines of credit are now influenced by talent management effectiveness (Moody’s Bond Rating Service, 2010).
  • Improving organizational readiness — 70% of organizations have an insufficient pipeline of talent for critical jobs (Charan, 2008).
  • Cost savings — Implementation of employee and manager talent management self-service processes results in an average 20% reduction in HR transaction costs (CedarCrestone, 2008).
  • Strategy execution — Only 17% of companies report their workforce strategy is consistently aligned with their business strategy across the organization (Hewitt, 2009). When workforce and business strategy are not aligned, the organization is not in-tune for delivering optimal performance.
  • Internal/external accountability — New SEC disclosure rules that went into effect Feb 28, 2010, now require companies to describe, in their proxy statement, the role of the board of directors in overseeing risk management and how they are administering this oversight function. The rules further require companies to explain how their compensation policies and practices for employees affect the company’s risks and risk management, if the risks arising from these policies and practices are reasonably likely to have a material adverse effect on the company (SEC, 2010). In effect, the SEC is saying that strategically managing your business financials is not enough; you also need to manage your workforce. You need to backup your business financial strategy with a related talent strategy. This is a huge shift.
 

Which of these drivers are priorities for your organization? Referencing these factors and the potential impact talent management best-practices can have on your organization can be important to your business case.

Identify the workforce/talent data your executives need for effective decision-making

According to Pricewaterhouse Cooper's 2012 survey of CEOs:

"CEOs are seeking a better understanding of the scale and effectiveness of their investments in talent. Productivity and labour costs remain important measurements; these are the tools investors, lenders and businesses use to benchmark progress (or lack of it). They are largely standardized in many industries, and thus easy to implement.

Yet for many CEOs, those tools aren’t enough. They’re very good at telling a CEO how the business is performing today relative to its peers, but not at indicating whether the organisation is investing enough in employees to generate future growth. Such measurements cannot isolate skills gaps, and struggle to identify the pivotal jobs that drive exponential value; they do not measure employee engagement or team performance, both of which are so critical for investments to foster innovation to bear fruit. These measurements are much harder to make, which is one reason why they’ve been neglected and why today, so many CEOs are frustrated with the issue of talent." 15th Annual Global CEO Survey 2012 – Executive summary

With your current talent management processes, can you easily answer critical questions like:

  • Who are your top performers?
  • Are you effectively retaining your top performers?
  • What is your ratio of high-performers to all other performers? Is it growing?
  • Which are your high-performing teams?
  • Which roles/employees are most critical to the organization's success?
  • Are the right people in the right roles?
  • What is the cost of employee turnover?
  • Are you seeing increases in staff productivity?
  • Are your retention efforts working?
  • What skills are critical to the organization's success?
  • Are there gaps in critical skills? Where do these exist in the organization?
  • Are hiring, retention and development strategies working to address skills gaps or shortages?
  • Do you have sufficient bench strength in key skills and areas of the organization?
  • Are hiring, retention and development strategies working to build bench strength?
  • Are your internal promotion or mobility strategies effective?
  • Are you seeing a return on your investments in human capital?
  • What are you key employee engagement challenges?
  • Is employee engagement increasing?
 

If your talent management processes aren't integrated, or automated, you likely can't readily answer these critical questions and provide your organization with the data it needs for effective strategic decision-making.

In making the business case for investing in an integrated, automated talent management solution, it can be important to identify the critical data and analysis that the tool will enable, and the strategic decision-making it will support.

Conclusion

When building a business case for an investment in talent management software, you need to be able to demonstrate how this investment will help your C-level executives and the organization overall. This is particularly important in tough economic times, when organizations scrutinize their spending more carefully and are focused on cost-cutting.

The business climate is changing. Human capital, in all industries, is becoming an organization's most strategic asset. And all trends indicate that human capital will become even more valuable in the future. To strengthen your competitive position and drive business results, you need to invest in talent management processes, tools and technology that help you leverage your human capital. Your future depends on it.

By understanding the larger business value and impact of mature, integrated talent management practices, and showing how they can address your executives' top concerns and help the organization achieve its strategy, you can successfully justify this critical investment.

Read how others are addressing their CXOs' concerns

Read how SNC-Lavalin O&M put metrics in place to track the effectiveness of their talent management processes, increased engagement and retention, and built their organizational bench-strength.

Read Part 1: The rising importance of intangible assets

Read Part 2: Managing the changing workforce

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