Five years ago talent was seen as being so vital to a company’s success that there was no call for a business case. But the dramatic shift in attitude in terms of accounting for the investment has worryingly had a negative impact on investment levels.
Although almost four out of five (79 per cent) HR leaders think that senior management at their organisation believe effective talent management is critical to the bottom line, more than half (54 per cent) of HR professionals feel their organisation has not invested enough in talent of late, simply because there is no agreement as to how to measure and show its return. Furthermore, more than four out of five (84 per cent) say HR should do more to measure and evaluate the financial and non-financial return on talent activities post-implementation of talent programs.
Leadership specialists, Cirrus, and global talent management technology specialists, Lumesse, questioned HR and talent professionals in UK-based companies from sectors including: banking and finance, FMCG, leisure, media, advertising, manufacturing, professional services, retail and utilities; and found two major challenges facing HR professionals in rectifying this problem.
Not only do under half (47 per cent) of all HR professionals believe they do not possess the requisite skills to develop a financial business case, just under half (48.5 per cent) also believe it isn’t actually possible to calculate the financial impact of talent investment with any accuracy, although 79 per cent do acknowledge a need for some element of financial measurement.
Despite the significant shift in attitude towards measuring talent, and the concessions of HR departments to look at the business case, the research found that in the absence of anything else, traditional HR metrics are still the most commonly used to validate investment.
Four out of five respondents still use retention figures and 77 per cent still use performance ratings compared with just one in four companies looking at company revenue and profit margins – suggesting the lack of a commonly accepted financial model to assess investment and lack of knowledge how to connect talent initiatives to financial outcomes, even in the face of pressure.
Rob Davies, partner at Cirrus, said: “We conducted similar research back in 2008, and while we’re not surprised by the shift in attitude, we did not anticipate the level of pressure HR professionals feel to justify talent investment. What’s really interesting about the research is that despite the pressure, there is still no consensus or guidance as to what a sound business case looks like, or how to present it.
“It’s not as simple as there being a skills shortage on the part of HR departments. Too many HR professionals have put forward a solid argument for the continued use of traditional HR metrics to warrant a purely financial solution that can be taught and adopted.”
Liliya Apostolova, senior product marketing manager, Lumesse, commented: “The growing interest in measuring return on investment of talent is likely to become a more definitive requirement, if it hasn’t already. Along with developing the business skills to demonstrate ROI, HR leaders increasingly lean on technology to help them glean the post implementation ROI of their talent programs. It’s essential all talent processes become centralised and integrated with each other to create meaningful reports on talent management ROI.
If there’s one thing HR can do a lot more of is understanding the business drivers and the desired business outcomes. Whether they use technology or other methods, their talent programs will only be recognised if they are aligned and in support of the business goals. Demonstrating this alignment is key for continued investment in talent. HR professionals should look to lead this conversation and show an interest in creating the solution to cement their position and contribution to their organisation’s success.”