ROI of People Focused Organizations

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The holy grail in HR is providing hard, compelling data-based evidence for the ROI of investing in people.  With this data, HR is in the strategic driver’s seat of the budgeting process.  Without this data, HR is resigned to the furniture conversation.

Want some new people investment ROI data from a source that even your CEO would pay attention to?  How about The Boston Consulting Group (BCG)?  They’re a big time global business strategy consulting firm that your CEO respects.

For the third time since 2008, BCG has partnered with the World Federation of People Management Associations (WFPMA) to publish its Creating People Advantage report.  The most current, published in October, is Creating People Advantage 2012: Mastering HR Challenges in a Two-Speed World.

The findings are the result of BCG’s analysis of responses to an online survey that polled 4,288 executives from companies throughout  a number of industries, 102 countries, and six major global regions.  Additionally, 63 HR and other executives from high profile companies all around the world were interviewed.  The survey and interviews covered 22 HR topics and the report includes interesting case studies from companies like L’Oreal, Samsung, and Daimler Trucks.

It’s a fascinating – and very readable – report and the findings won’t surprise you.  In fact, the top three critical topics for HR leaders around the world remained the same as in BCG’s 2010 global survey:

  • Managing talent
  • Improving leadership development
  • Strategic workforce planning

The data are compelling and the comparisons between countries and regions of the world really are interesting.

The big bonus, though, is the report that is appended at the conclusion, From Capability to Profitability: Realizing the Value of People Management. It’s loaded with economic data that compares the HR practices of high-performing companies against those of lower-performing ones in critical areas, including talent management, leadership development, and performance management and rewards.

The bottom line is that companies that demonstrated proficiency in the 22 key HR areas experienced revenue growth that was up to 3.5 times higher and profit margins that were 2.1 times higher than those of less capable companies.  And guess what those increases did to their share prices?

BCG 2012 People Companies Outperform the Market Average

Think your CEO and CFO are interested in higher revenue and profit growth rates?  Think the board might be interested in higher share price growth rates?  Think they might be willing to invest in practices that would accomplish those outcomes?  Yep, me too.

The budget season has long passed, and you’re locked in to the 2013 operating plan.  But take a look at the 22 key HR practices in your organization that this report covers and start a file that will hold the data to build the people investment plan for 2014. It takes some time to gather the foundational data to build your investment business cases.

Start now.  Start tracking the data.  Start setting the benchmarks. Start thinking in business cases.

And quit talking about furniture.

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1 Comment

Filed under Boston Consulting Group, Business Case, CEOs, China Gorman, Connecting Dots, HR, HR Data, Human Capital ROI, ROI, WFPMA

One response to “ROI of People Focused Organizations

  1. Another gem, China. As I read through the report, I found it odd that the return on training was so low on the list at a time when there is so much noise about the Skills Gap. It looks like this report is saying “the best HR practice is to recruit people who already know how to do the job and don’t invest in development.” Is that how you read it?

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