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Investing in People

Six successful ways high-performing organizations approach human capital management.

By Karie Willyerd

HR and talent professionals have known it for years and now it’s been proven: a better-prepared workforce delivers better results. In fact, a global survey of more than 2,700 executives conducted by Oxford Economics and SAP backs up intuition with data. The study examined thousands of high- and low-performing companies worldwide, examining correlations between workforce priority and financial success.

The results named several key characteristics of high- performing companies that leverage talent to drive bottom-line growth. Many HR departments make the case that talent drives results to the C-suite, and some findings show that employees are worth investing in. High- performing organizations approach their human capital management in specific ways, including:

  1. Drive workforce strategy at the C-level. Top-performing organizations prioritize workforce issues at a far higher level, extending them through the top management of the company. Executives at high-growth companies are significantly more likely to say that workforce issues drive strategy at the board level (64 percent versus 49 percent). Nearly a quarter of underperformers say that workforce issues are an afterthought in current business planning and will continue for three years.

Preparation for the future workforce means more than just reacting to changing trends -it requires that workforce issues, including developing talent, implementing learning programs, succession planning, and onboarding, be on the C-suite agenda. In HR, urgent tasks often take priority over big picture ones, making it difficult to pay attention to what’s truly strategic. Yet the survey shows that companies that perform well place an emphasis on board-level discussions of workforce strategy. Making time to implement strategic workforce issues will help organizations achieve high-performer status.

  1. Prioritize training and mentoring. More than half of high-performing companies say they offer supplemental training programs as an employee benefit. In fact, high- performing companies were nearly 10 percent more likely to have a mentoring program as compared to underperformers. Additionally, high-growth companies are 16 percent more likely to have a formal mentoring program than underperforming companies.

Training programs are important because the new generation of workers expects these initiatives to be in place in order for them to grow and succeed. The survey found that Millennials rated development as a bigger priority than compensation in the United States. This is a big factor in attracting the next generation of talent. Plus, as baby boomers exit the workforce, there will be a strong need for new leaders to replace them. Organizations should start developing leaders through training programs and developmental job assignments in order to be ready for the future.

  1. Plan for the changing demographics of the workforce. Executives at higher-growth companies tend to be better prepared to adapt to changing workforce trends by paying greater attention to the demographic shifts shaping the workplace. According to the SAP/Oxford study, 60 percent of high-revenue growth companies believe that Millennials entering the workforce is the top labor market shift affecting workforce strategy, as compared to 51 percent of underperformers.

According to Pew Research, in 2015, Millennials became the largest generation in the workplace in most countries, including the U.S. What do Millennials look for? SAP research shows that this younger demographic wants feedback 50 percent more often than other generations. Relying on an annual performance appraisal won’t give them what they need so organizations must prepare management to provide feedback at least monthly, and to incorporate developmental planning during those discussions.

  1. Attract quality talent. Higher-growth companies are better at recruiting the best talent: 55 percent of high- performing companies say that they are satisfied with the quality of job candidates recruited for most positions, compared to only 46 percent of firms with below-average profit margin. The talent void for lower performers persists beyond recruiting, as more than half of underperforming companies say that recruiting problems are having an impact on overall workplace strategy.

Talented people want to work for companies with high potential. To attract the best talent, organizations must have a compelling narrative for how a candidate can make a real difference and receive development opportunities. HR can help line managers understand the need to provide an outstanding offer that will make a difference.

  1. Reward based on merit, not tenure. Sixty percent of high-growth companies say they are more merit driven than tenure driven, compared with less than half of underperformers. In other words, underperformers may be more likely to focus on developing internal talent and engendering loyalty as they look toward downsizing (and may be outmaneuvering high performers in this area). However, they may be bypassing more qualified candidates to reward more tenured candidates when filling leadership roles.

Some of the most admired companies in the world, such as Apple and Google, have average employee tenures of only a little over a year. According to a study commissioned by the Freelancers Union, over one third of the workforce in the U.S. reports having at least some contingent work aspect. We are increasingly moving toward employee relationships that look more like stints than long-term engagements. Recognize and promote people for their performance and contribution, and they are likely to remain loyal. Recognizing loyalty above results doesn’t always yield high performance.

  1. Recognize the value of data. While both groups say they are currently impeded by a lack of data, lower performers expect to be significantly more likely to suffer from a lack of data required to do their jobs effectively in the future. This includes data related to the job market, industry, customers and financials, as well as visual representations of complex data.

Fifty-five percent of underperformers believe a lack of industry data will impede their employees’ ability to do their jobs in three years, as compared to 31 percent of high performers. In addition, 50 percent of underperformers believe a lack of job market data will restrict their employees’ ability to do their jobs in three years, as compared to 32 percent of high performers.

According to research from CSC, big data is only going to get bigger, with an estimated 4,300 percent growth in data yearly. Data can help organizations understand their people as well as predict performance success. HR must be able to provide meaningful information to the business. Start now, before the universe of data gets so big that the task will be unapproachable.

As the saying goes, people are our greatest assets, and this new research proves that people are worth investing in. In today’s tight labor market, talent matters need to be a main concern and prioritizing them will deliver better results. Research finds that high-performing companies are strategic about their workforce and in return, their employees deliver better products, services, and financial results.

Karie Willyerd is workplace futurist at SuccessFactors, an SAP Company.

Tags: july-august-2015

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