Several firms devote significant resources to researching this topic and annually surveying leading companies. While many of these studies have found positive relationships between a company's performance and specific people practices - for example, companies that increased training investment also increased shareholder return - few are able to establish a definite causal link. In other words, they are unable to prove that the financial return was the result of the specific human capital practice. How much of an increase in shareholder value is the result of increased training investment? All of it? Part of it? None of it? To date, the ability to quantify this connection has been hindered by an inability to systematically value the many intangibles associated with people practices.
As efforts will continue to ascertain a direct, cause-and-effect, connection between HR practices and company value, common sense says that certain people practices must be aligned with performance. Just look around at companies with a high rate of turnover among their sales people - or where the CEO's office is equipped with a revolving door - and, it is more than likely, that their stock price is suffering.
Rather than continue to debate cause and effect in an effort to find the proverbial silver bullet, our perspective is that companies looking for how people practices impact results will see the answers evident all around them. Our work, in looking at a dozen of the most recent studies of talent management best practices, shows that the alignment really hinges on the ability of the organisation to address the following questions:
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Do we know where to invest our human capital efforts to support our business strategy and market orientation?
For instance, an organisation that has a customer-centric business model may find it critical to strategically link selection, retention, succession planning, and competency efforts to this model in order to ensure the highest levels of customer satisfaction.
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Are our human capital practices integrated and aligned with one another?
This may entail, for example, integrating a number of activities (such as competency model development, workforce planning, talent gap analysis, talent reviews, succession planning, recruiting, staffing, education and development, retention programs, and evaluation of these processes) into one seamless system in order to increase the efficiency, customer service, and business strategy alignment of the HR organisation.
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Does our executive leadership see value in human capital efforts?
How actively involved is the executive committee, for example, in managing people? At several organisations, senior management takes a very hands-on role in managing talents from the top level down; becoming involved in activities such as succession planning, reviewing critical jobs, discussing high-potential people, reviewing development plans, and discussing critical areas of talent management gaps.
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Does our performance management system align with corporate objectives?
The most obvious ways to do this are by, for example, changing individual employee performance metrics based on the direction of the business. Simply put, an organisation that needs to shift to a research and development focus may decide to reward certain groups of employees for new technology proficiency. The shift in performance objectives serves to prepare employees for the work of the future.
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Can we say with confidence we know our talent situation - who are talent is, where our talent is and what we are doing to actively develop and position our talent to deliver the greatest impact for the organisation?
Many of the successful organisations we looked at have aligned their talent management practices to their business performance requirements. They assess their talent situation against their business strategy and market orientation, identify top talent and differentiate development paths for their top talent by grooming, nurturing or placing their top talent in critical positions.
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Do we provide the right tools and support to enable our employees to be most productive and effective?
It seems that the most successful organisations effectively communicate key strategic information to employees to engage them, clearly articulate expectations, assess and measure employees against criteria that align with the business strategy.