In the wake of the financial crisis, departmental budgets have increasingly been allocated on the basis of return on investment. For HR departments, quantifying the economic value of people management is a tricky proposition. Yet now is not the time for companies to skimp on their people expenditures. With the pressures of globalization, the growing scarcity of talent, and an employer-employee relationship frayed by persistent economic pressures, companies today—more than ever—must regard their human capital as an asset worthy of continual investment.
There’s yet another compelling reason to remain committed to investing in people: companies that do so enjoy better economic performance. Those that excel in leadership development, talent management, and performance management, for example, experience substantially higher revenue growth and profit margins. For the companies that keep dedicating capital to their human capital, what is the nature of this connection? What are they doing right?
The Boston Consulting Group and the World Federation of People Management Associations (WFPMA) recently conducted major research to probe the relationship between people management capabilities and financial performance. We surveyed 4,288 HR and non-HR managers on their current HR capabilities and challenges, the strategies and approaches they use to address these challenges, and the difficulties they foresee in attracting, managing, and developing people.