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JWI 522 (1192) Page 1 of 5
JWI 522
Strategic Partnering with the C-Suite
Week 4 Lecture Notes
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JWI 522 (1192) Page 2 of 5
THE SCORECARD OF TALENT MANAGEMENT
What It Means
Are your talent management practices making the company more profitable? How do you
know? If you were asked to defend the return on investment for your HR departments, would
you be able to do so in quantifiable terms that your CEO and CFO would find convincing? Far
too many HR professionals can’t. Not being able to “speak with data” is a sure way to keep HR
out of the inner circle.
Why It Matters
• It clarifies how effective people management practices increase competitive advantage.
• Having agreed-upon metrics helps everyone get on the same page in evaluating the
focus and efficacy of talent management efforts.
• It transforms the image of HR to a financial contributor rather than a cost center.
“Make talent management as rigorous as financial management
Bill Conaty
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JWI 522 (1192) Page 3 of 5
DEMONSTRATING THE ROI OF TALENT DEVELOPMENT
It’s not enough that your HR department generates great results; the value of what you do must be
understood.
This may sound a little self-serving, but we assure you, it’s not. If the CEO and senior-level business
leaders do not recognize the source of the contribution to the organization, they won’t know where to
invest appropriately to get the results they need. As an HR professional, you must be able to explain
accurately and concisely what you and your team are doing to impact the bottom line.
Many business managers have no real idea what the return on their investment in their people is. Why
not? The simplest answer is they don’t ask the right questions. They don’t ask questions about the real
costs of a bad hire, or what the impact of an inefficient performance review process is, or how paying big
bucks for a rock star performer could generate returns greater than those generated by workers earning
average salaries and delivering average work.
McCord cautions against such commoditization of people and roles.
“We have plentiful resources to tap for salary information from a range of industry surveys, which
cover every domain and offer an elaborate breakdown of levels. They’re amazingly
sophisticated. But the issue is that jobs are not widgets, and neither are people. Any role you
need filled is likely specialized in ways that the survey job descriptions cannot possibly truly
account for. Meanwhile, any potential recruit may have skills that can’t possibly be measured by
surveys, like good judgment and collaborative prowess.”
Powerful, P. 111
HR can help business leaders reassess the way they approach hiring, and how they evaluate the return
on the investment in their people, by helping them track the real costs and benefits that are often hidden
in operating budgets. They can also encourage hiring managers and finance people to think about the big
picture impact or great hires.
“Consider not only what you can afford given your current business but also what you will be able
to afford given the additional revenue a new hire might enable you to bring in.”
Powerful, P. 122
TALENT MANAGEMENT AND PROFITABILITY
While the return generated by a top performer is worth several times the return on a mediocre employee,
on the other end of the spectrum, the cost of a bad hire can be triple that person’s salary when you factor
in expenses like the additional performance coaching needed, the impact on other members of the team
and on the output of work, and, of course, the costs associated with terminating and replacing that
employee.
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JWI 522 (1192) Page 4 of 5
Organizations can dramatically improve their performance by understanding the impact of sound talent
management practices, and by leveraging the data that people analytics provides to build a competitive
advantage through better hiring and talent management practices. As McCord puts it, “Building the
muscle to hire great people is a huge competitive advantage.” (Powerful, P. 74) The best HR leaders will
be those who approach human resources not as a bureaucratic undertaking, but as a strategic driver of
competitive advantage.
“The most competitive companies are able to stay limber, always innovating and growing, largely
because they are always proactively bringing in the new talent they need. The best employees
are always looking for challenging new opportunities, and though they are usually intensely loyal,
many of them will eventually seek those opportunities elsewhere. You can never know when they
might decide to make a move, and often there is nothing you’ll be able to do to stop them.”
Powerful, P. 91
THE SCORECARD OF TALENT MANAGEMENT
So, how should we keep score of our talent management practices? How should the CEO, CFO, and
CHRO evaluate the effectiveness of the HR department in adding value to the organization? Imagine if
you could track and explain how your team generated many multiples of what it costs the company in
salaries and overhead. How would that change the picture of HR?
In developing a scorecard for your organization, consider the practices presented in our course readings,
but don’t limit yourself to these. As Jack advises, look everywhere for great ideas, including organizations
that are outside of your industry. But, perhaps most importantly, don’t attempt to develop a scorecard in
isolation. Armed with a few basic questions, you can begin the dialog with hiring managers and operators
(a topic of our discussions over the next two weeks) to identify the Key Performance Indicators (KPIs) that
matter most, such as…
• What would happen to your bottom line if your team outperformed by 20%?
• How would productivity be improved if we could reduce the hiring time from 6 weeks to 2 weeks?
• What HR practices consume most of your time? What would happen if we could get these off
your plate, or reduced by half?
• If we could get 75% of your department performing as well as the top 10%, what would that do for
profitability?
One final thought is that, while retention is a common metric, McCord is not a big fan:
“… retention is not a good metric by which to evaluate your team building success or whether
you’ve created a great culture. The measure should be not simply how many people you are
keeping but how many great people you have with the skills and experience you need. How
many of them are you keeping? How many new people with skills and experience you need are
you hiring? You also want to closely monitor how rigorously you are evaluating whom you need
to replace and how efficiently you’re acting on that determination.”
Powerful, P. 93
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JWI 522 (1192) Page 5 of 5
GETTING THE MOST OUT OF THIS WEEK’S CLASS
As you read the materials and participate in class activities, stay focused on the key learning outcomes
for the week:
• Explore the relationship between talent management and profitability
There are plenty of resources that address the financial impact of hiring, onboarding, and
attrition. It is helpful to look at these and share them with the executive team, but don’t stop at
generalized numbers. The most impactful action you can take is to gather and analyze that data
from your own organization. Sit with your managers and go over the numbers to answer
questions like:
o What is the ROI for each worker?
o What does the hiring process really cost?
o How much more are your top performers worth than your average performers?
o What are your competitors paying?
o Would you be better off paying more money for a few top performers, or less money for
more average performers?
o If we got a top performer, how do we make sure we create a team that they want to stay
on for as long as we want to have them? Remember, we are building a team, not a family.
o What is the right relationship between bonuses and performance?
• Identify ways to assess the ROI of the HR function
Want to get the attention of the CEO? Turn your department into a money maker. HR has the
potential to do exactly that if – and only if – it can document and demonstrate what it does. Dig
into your own organization’s data. What is HR’s real impact on your company and on the
bottom line? Talk to some finance people in your company. Ask them how they calculate IRR.
Go back and read your notes and materials from your JWMI finance course. Work with
managers and have them evaluate the return with you. You’re not in this alone.
• Strengthen the role of HR as a driver of the financial success of the organization
You have to speak with data in a way that those “business types” understand. The evidence is
clear that the best performing employees are able to deliver many times what they cost the
company, and this is certainly also true of the best HR departments. But you can’t change the
perception of HR from that of a cost center to a profit driver unless you make the connection
between what you do and what the financial results. Be a part of strategy meetings and make
sure that the ROI of talent management is included in the analysis of the business’s financials.
