You’ve cried for years about getting a seat at the table, but those tears were mostly ignored. Well now there are 400 million reasons why the C-level guys better pay attention.
Does HR at your organization get invited to the table but is forced to sit in the high chair while the “grown-ups” talk real business. Are there clumps of hair at your chair side from days of pulling it out as you struggle to show how HR helps the business? Is HR’s contribution really so transparent?
Well there’s hope yet. In fact, here’s the opportunity not only to get a seat at the table but also to flip it on its side, thanks to findings recently released by the Hackett Group —you know, the guys who measure everything twice. In a study examining the impact of talent management on financial performance—that’s right, straight to the bottom line—Hackett found that top-performing companies in talent management report 15 percent higher EBITDA than their peers in the Fortune 500. That’s a whopping $400 million more in earnings! Think you have the board’s attention now?
I know, I know—bringing this kind of incredible finding to the C-suite may lead to you having to sit in the lunchroom by yourself, but from what Steve Joyce, a senior business advisor at Hackett, tells me, it’s on the level.
Here’s how they came to their conclusions: They first defined talent management effectiveness and efficiency and ranked their database of companies by quartile. Only those in the upper quartile in both categories were considered top performers in talent management (for detailed information on methodology, see our in-depth article on p. 14). Their financial results were then compared with peers, and here’s what they found:
• EBITDA was $400 million higher than other Fortune 500 companies;
• Net profit margin was $247 million higher;
• Return on assets (ROA) was 48 percent higher;
• Return on equity (ROE) was 27 percent higher.
You’re thinking, “This is about as dubious as thefive-minute exerciser advertised on TV.” I can understand the skepticism. I was, too. But there is compelling AND logical evidence behind the numbers. Let me explain.
According to Hackett, the top performers spend 31 percent less on transactional processes such as total rewards administration and payroll and data management. Where those savings go are to strategic areas such as workforce development and workforce planning. HR has always known that recruiting and retaining the top talent make a competitive difference, and now they don’t need to connect the dots for those number-driven CFOs.
For years, we at HRO Today have espoused the need to get strategic through transformational HRO, and now Hackett is backing us up with data. Remember, data wins over the hearts and minds of CFOs, COOs, and even CEOs every time. This is important stuff because not only does it help direct HR to make the wisest spend, but also it elevates its stature from whiny stepchild to cost-savings champion. Here’s your chance to bask in the spotlight—take it while you’re still under it.
There’s only one thing to do with data like this: share it with as many business leaders you can gather in the boardroom, stop in the hallway, or corral in the parking lot. This is the supporting evidence you’ve been wanting for a long time. When the C-suite see the numbers here, not only will you be invited back to the table, you’ll finally be given a grown-up chair as well.