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October 2012

Link HR to the Bottom Line

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Many companies talk about their employees being their competitive advantage or their people being their greatest asset, yet surprisingly not as many make the correlation between employee engagement and the return on this investment. You can enhance your success as a business owner by understanding this connection and taking a strategic approach to staff training and development.

The terms “human capital” or “talent management” are often used to encompass a variety of topics that have traditionally been classified as human resource issues. These terms reflect a growing recognition by the business community that the people working in a business are an asset that can yield a greater or lesser return for the company based on how they are managed.

How much is that asset worth in your business? Think about what would happen if everyone left your organization tomorrow. What would it cost to replace them? This cost is only a minimum value of your human capital asset. It does not begin to answer the question of how much knowledge and productivity your organization would lose while replacing the lost talent and training new staff.

Many studies support the theory that superior human capital practices create substantially more shareholder value. A Towers Watson study found that when 50 global companies compared employee engagement to financial outcomes, there was an average of three times greater operating margins with higher employee engagement. While this survey found 33% of Canadian employees engaged, there were another 24% who are considered “the unsupported.” Unsupported employees are engaged from a motivational perspective, but they lack the tools, resources or capacity to deliver peak performance. As an organization, you can bring these employees from unsupported to fully engaged by providing them with the necessary tools, resources and capacity.1

In an age of economic turmoil, global completion and tight budgets, how do you maximize your investment in talent?

Do you initiate a bonus program that aligns performance with delivery of strategic objectives? Do you invest in a rewards and recognition program? Do you train 10 people for 20 hours or 20 people for 10 hours? Every initiative has a cost, so the first question to address is that of return on investment (ROI).

Strategy mapping is one way to capture the metrics that are part of a chain leading to a strategic outcome. You can use it to determine if the staff development investment you’re considering is worthwhile. This is less complicated than it sounds. For product training a simple chain would look something like this:

Will increased product knowledge result in more sales? By adding numbers and historic data or assumptions, you can determine if this investment in talent is worthwhile. The same process can be used to determine the success of a performance management program or new recruiting process. Once an investment is made, analysis needs to ongoing to determine if this is something that should be continued, or if the level of investment should increase or decrease over time. Using this form of strategy mapping helps to track the elements of human capital initiatives that are the most important in driving success.

HR has often been guilty of the “flavor of the month” approach to training and initiatives. Using strategy mapping can help keep you focused on outcomes, resulting in an increase to the bottom line.