A new global study shows value of people management to bottom line.
The report From Capability to Profitability, was compliled by The Boston Consulting Group (BCG) and the World Federation of People Management Associations (WFPMA) and based on a survey of more than 4,200 HR and non-HR managers in more than 100 countries worldwide. It measured companies for proficiency in 22 HR areas and compared this to firms’ economic performance.
The report authors argues that companies that are highly skilled in core HR practices experience up to 3.5 times the revenue growth and as much as 2.1 times the profit margins of less capable companies.
The report found the correlation between economic performance and HR capability was especially strong in these areas:
- onboarding of new hires and employee retention,
- talent management,
- employer branding,
- performance management and reward, and
- leadership development.
Of these, the three most pivotal areas were leadership development, talent management and performance management/reward.
The study also noted a handful of key differentiators that marked out the companies displaying both HR excellence and high performance. These include:
- leadership models that clarify leaders’ expected contributions and behaviour,
- a talent pipeline that extends beyond successors to top management, and embraces international talent,
- proactive talent reviews,
- reward systems that reward behaviour, not just results, and
- the best companies combine these practices in an integrated and coherent way rather than carrying out processes in a linear and separate fashion, found the researchers.
Whilst this is not new to many HR professionals, business leaders can now see a clear link between integrated personnel management and productivity.