Companies with high expertise in key HR practices achieve up to 3.5 times the revenue growth and 2.1 times the profit margins than those with less advanced HR practices. That is according to a recent study by Boston Consulting Group and the World Federation of People Management Associations (WFPMA). The study entitled From Capability to Profitability: Realizing the Value of People Management involved more than 4,200 managers of HR and other corporate departments from more than one hundred countries.
The study compared the economic performance of companies with respect to 22 key areas of personnel management. The correlation between the economic performance and the HR areas monitored was the strongest in six of them:
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recruitment,
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onboarding of new and retention of existing employees,
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talent management,
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employer branding,
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performance management and rewards,
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leadership development.
In the area of leadership development, the best performing companies rely on models that clearly define the expected benefits and behaviour of leaders. People development is one of the main parts of the requirements of a leader's work and it is associated with incentives in the form of compensation and career development.
In the talent management area, the most performing companies rely on the fact that the supply of talent should not be limited only to successors of top managers. They offer development programs to a broader base of talenta and strive for an international talent, too. They create both horizontal and vertical career development opportunities. They encourage individual development.
In the area of performance management, the best performing businesses excel by pursuing performance transparently. They have fair and transparent systems of performance measurement and rewards based on individual abilities. They reward not only results but also effort.
The study is available for download on the Boston Consulting Group website here (for free after registration).
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