ROI on Strategic Talent Management: What a Business Should Expect from Their TM Strategy

Does This Catch Your Eye? (Wait ‘Til You See The Content…)

The Return on Investment: Talent Management Consolidated Data from Industry Research

Christa (Centola) Dhimo, December 2010

The purpose of this packet is to serve as a ‘grand hub’ of information that proves the value and return on Strategic Human Capital Management

All sources have been cited appropriately

This should enable Human Resource professionals from all industries to propose, design, implement, and sustain a well-founded and appropriately supported business case for aligning HR as a critical component to driving business success and results

Dec ‘10 Consolidation by Christa Dhimo, c/o via Best Practices, a volunteer organization to help professionals and small businesses achieve impressive results through new and improved capabilities…

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“Twenty-ten… [we] are already seeing – several transformational shifts in how organizations communicate, engage, and interact with their employees for a more sustainable competitive advantage.

“[We have concluded] a composite of the most critical trends facing business leaders as they work to reestablish organizational equilibrium, clarity, and momentum.

“The evolution of internal communications from tactical need to strategic necessity is truly fascinating as the purpose of work, the importance of reputation and the expectation of organizational values converge.

“The essence of which is communications as the means to perpetuate engagement throughout the enterprise fostering knowledge, learning, collaboration and innovation...”

Gary F. Grates, President/Global Managing Director, Edelman Change and Employee Engagement


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Trend #1: Employees Are Your Next New Product

Trend #2: Managers Are No Longer The Center of an Employee’s Universe

Trend #3: Leadership Rhetoric Challenges vs. Cheerleads

Trend #4: Conversations Inform Decision-Making Not Vice-Versa

Trend #5: Socializing Strategy Throughout the Enterprise Correlates to Success

Trend #6: Story-Sharing Defines Brands from Inside-Out

Trend #7: Engagement Equals Experience

Trend #8: Credibility Constantly Shifting

Trend #9: Adding Visual Dimension to One’s Work for Greater Comprehension

Trend #10: Situational Awareness Trumps All

Trend #11: Self-Identity is Found Through a Career-Path vs. A Company Destination


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http://change.edelman.com/documents/2010TrendsWhitepaper3-11520pm.pdf

In my experience, there are SEVEN components to driving business success and appropriate results through people:

1. Leadership & Communication (Trust and Respect Matter!!)

2. Goals

3. Alignment

4. Culture (Rewards, Morale, Motivations as Drivers)

5. Engagement

6. Tools

7. Growth (Individual, Team, Business)


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“From 1998 – 2006, the stock of the companies identified in Fortune’s 100 Best Places to Work for in America list outperformed that of the S&P 500 by more than 230%.” (Fortune, 2006)

“Organizations that apply talent management practices demonstrate higher financial performance compared to their industry peers.” (IBM/HCI Research, 2008)

“Companies with superior human capital practices can create more than double the shareholder value than companies with average human capital practices.” (Watson Wyatt Research, 2008)

“Employee Engagement positively impacts organizational performance predictability, customer satisfaction, and change sustainment. Of 50 companies surveyed over 12 months, those with High Employee Engagement saw 19.2% increase in operating income, a 13.7% increase in net-income growth rate, and a 27.8% increase in EPS growth rate. Those with Low Employee Engagement saw decreases respectively: -32.7%, -3.8%, and -11.2%.” (Towers Perrin, Sept 2009)


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The Greatest Risk: How Significant a threat do the following risks pose to your success? (The Economist, 2007– nearly FOUR years ago):

Market Risk: 10%

IT Risk: 20%

Reputational Risk: 35%

Human Capital Risk: 50%

This is especially true in harder times when employee engagement is at risk for being less productive due to poor morale, misalignment, poor leadership, lack of interesting/challenging work, and lack of development.


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A Top Performer’s value is 2-4x greater than the performance of the average employees. (Ulrich and Smallwood, 2004)

For software engineers in general, top performers are 12x more productive. (Pfeffer and Sutton, 2006)

Only approximately 25-55% of employees are engaged. (Watson Wyatt, 2007)

According to AON Hewitt, “The Percent of Organizations with Falling Engagement Scores Triples in Two Years, with Most Notable Drops Occurring This Year" (July, 2010)– [Yikes! Just when we NEED our Employees to perform & help with recovery !)

Google says one top-notch software engineer is worth 300x the average. (HCI, 2008)

70% of organizations say that they have an insufficient pipeline of talent for critical jobs. (Charan, 2008)


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The cost of losing valuable talent is 1.5x the burdened salary of the lost employee. Cisco loses $250K for each talented engineer it loses. Bristol Myers Squib loses $500K for each senior leader lost. (HCI, 2010)

Eight out of ten CEOs anticipate significant changes for their organizations over the next three years. Their biggest concern– having a workforce in place that can adapt to an increasingly volatile future. (IBM, Enterprise of the Future, 2008)

Cost of a poor hire: $300K impact. Cost per day of operating without a key player in a strategic role: $7000 (Sullivan, 2005)


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“Gallup’s Q12”: workplace culture and talent practices, not about benefits and compensation Buckingham and Coffman, data supports that people leave their managers, not their jobs– recent data

indicates that Leaders have even more impact on employees these days (Melcrum, 2009) http://gmj.gallup.com/content/811/feedback-real.aspx

http://www.gallup.com/consulting/52/employee-engagement.aspx

Modified Gallup Questions that act as predictors and indicators of employee engagement (Dhimo Inserts re: “Lucky Seven”). Does the employee… Know the importance of the job (Alignment)

Have clarity of expectations (Goals)

Have an opportunity for development (Growth)

Get recognition for performance (Culture)

“Do what I do best” (Engagement)

Have the proper resources (Tools)

Have an effective relationship with manager (Leadership & Communication)


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Bersin & Associates, HR Executive, 2009:

Out of 773 companies: 40% of companies are in the novice stage in which they are just starting to

develop talent management strategies 41% are now in the intermediate stage where they are developing and

implementing strategies and have some mature processes in place 15% report that they have not started on TM strategies, down from 26% last

year

Mature, integrated talent management strategies have lower turnover, higher revenue per employee

The number of dedicated Talent Management executives has increased in the last year


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HCI, 2009/2010:

Engagement Levels: Only ~25% - 55% of employees are engaged. Employees who are most committed perform 25% better.

Breakeven Point: On average it takes 6.2 months for a manager to become productive in a new job.

Deployment (workforce planning/assigning resources): ~17% employees do what they do best at work.

Performance Expectations: Less than 50% of employees know what is expected of them at work.

Organizational Learning: Few organizations share knowledge and then learn from experience.


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From Melcrum Employee Engagement Survey of High Performing Companies (2009/2010)

Key Drivers of Employee Engagement

Actions of Senior Leadership (48%)

Actions of Supervisors (31%)

NOTE: used to be a key driver….

Opportunities for career advancement (29%)

Belief in vision, values, strategy (28%)

Fostering of people culture (24%)

What leaders need to do to engage staff

Communicates clear vision of future (70%)

Involves employees in decisions (46%)

Builds trust in the organization (40%)

Demonstrates commitment to values (39%)

Seen to respond to staff feedback (33%)

It’s time for Human Resources to play a critical role in the business success of an organization:

“Charter” Your Course: Define your own mission, objectives, and intended results; align to overall business goals and shared accountabilities across functional collaborations.

Define your Internal Brand: Become the Internal Presence required of you: be the department everyone goes to for counsel and RESULTS.

Partner and Provide Insights for Predictability: You know far more about trends, performance, and overall risk than you think you do. Use it.

Be the Business: Know how each function within your HR department aligns to business success.

Give Your Kids Shoes: Don’t become a “Cobbler’s Kids” story. Walk the Talk. Lead by Example. Be Your Mission to Your Function.


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December 2, 2010: Economic Intelligence Unit reports key employee engagement survey findings. Two of these findings reveal that:

1. C level Executives have a “rose tinted” view of employee engagement that is not shared by lower ranked employees. 47% of C level executives believe they have accurately determined levels of employee engagement, while only 16% of senior executives outside of the C suite share that belief.

2. There is a significant delta between engagement promises (verbal promises/commitments) and action. 84% of survey respondents identified “disengaged employees” as one of their largest threats to the business but little is done to identify or take action with the disengaged. Only 12% of respondents see action from their organization when it comes to dealing with and managing the disengaged.

http://businessresearch.eiu.com/re-engaging-engagement.html


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Documents

ROI on Strategic Talent Management: What a Business Should Expect from Their TM Strategy