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

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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

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

“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  Trend #6: Story-Sharing Defines
New Product Brands from Inside-Out

 Trend #2: Managers Are No Longer  Trend #7: Engagement Equals
The Center of an Employee’s Experience
Universe
 Trend #8: Credibility Constantly
 Trend #3: Leadership Rhetoric Shifting
Challenges vs. Cheerleads
 Trend #9: Adding Visual Dimension to
 Trend #4: Conversations Inform One’s Work for Greater Comprehension
Decision-Making Not Vice-Versa
 Trend #10: Situational Awareness
 Trend #5: Socializing Strategy Trumps All
Throughout the Enterprise
Correlates to Success  Trend #11: Self-Identity is Found
http://change.edelman.com/documents/ Through a Career-Path vs. A Company
2010TrendsWhitepaper3-11520pm.pdf
4 Destination

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.
14 Lead by Example. Be Your Mission to Your Function.

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

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