The business case for Talent Management
How to calculate the benefits you are likely to achieve from automating your HR function ?
The simplest benchmark for measuring the value of the workforce is to divide the organisation market capitalization by the number of employees. Toyota is a good international reference as its capitalisation is bigger than it´s competitors combined. Toyota has invested in human capital management systems and HR portals to deliver information to employees in real time to help optimise their activities.
Being able to gain more value from it´s people is its key differentiator.
In essence, there are two sides to the investment equation:
Reduced staff turnover - Implementing a talent management system that reduces a single executive loss can produce an instant payback. Even a process as simple as conducting orientation sessions with new starters can generate returns by reducing turnover and improve performance in the first 90 days of employment.
Time & attendance improvements - Companies that have installed time and attendance systems typically see an immediate 1 to 2 per cent increase in attendance levels.
Automation of employee requests - Any business with more than 100 employees pays a heavy cost for managing holidays, absence and appraisals. The use of an electronic system allows access information instantly and lets employees to view their details quickly, saving time and money for all concerned.
Employee motivation and engagement - Better career management and training opportunities that link personal development to the organisation's goals, backed with flexible remuneration and benefits, can lead to more satisfied and productive employees. Service industries, in particular, have identified a clear correlation between the contributions of highly engaged employees to a business's overall profitability
Reduced grievances - Effective grievance and labour relations reporting can help organisations reduce the number of grievances handled, and lead to improved employee satisfaction.
Managing absence - Objective measurement and analysis can highlight unacceptable costs to the organisation that may need remedial action. Just as importantly, it may help to establish that a limited problem may exist where a few longer-term cases create the impression of major overall problem.
Headcount reductions - Streamlining HR processes and self-service applications require less administrative drudge work. The HR function can achieve better results with fewer people, or you can move people from low value positions to roles where they can have a more positive impact. Outsourcing payroll or HR removes direct employment costs and replaces it with a more flexible, negotiable cost model. Instead of worrying about HR and compliance issues, your senior executives are freed to focus on their primary responsibilities. The first stage is to identify the specific business drivers that the solution should address and discuss how it will contribute to those drivers. During the second detailed planning phase, the baseline data that will underpin your ROI calculations process must be clearly defined and collected. The information will need to be assessed and validated through further business impact assessments, during which the objectives may need to be revised to ensure that stakeholders agree on the desired change and the business impact measures that will be influenced.
Ultimately these business impacts are converted to monetary values to calculate the ROI. Intangible benefits need to be identified and reported along with business metric improvements. Taking these into account, the ROI is produced by comparing the monetary benefit calculation with the costs of change, including any incurred to overcome barriers encountered during the transformation.
The simplest benchmark for measuring the value of the workforce is to divide the organisation market capitalization by the number of employees. Toyota is a good international reference as its capitalisation is bigger than it´s competitors combined. Toyota has invested in human capital management systems and HR portals to deliver information to employees in real time to help optimise their activities.
Being able to gain more value from it´s people is its key differentiator.
In essence, there are two sides to the investment equation:
- the direct costs of running your HR admin system and the indirect costs of running inefficient systems (for example the costs of bad decisions, inadequate training or high staff turnover)
- the potential benefits you would gain from processes that would improve performance, morale and organisation flexibility.
Reduced staff turnover - Implementing a talent management system that reduces a single executive loss can produce an instant payback. Even a process as simple as conducting orientation sessions with new starters can generate returns by reducing turnover and improve performance in the first 90 days of employment.
Time & attendance improvements - Companies that have installed time and attendance systems typically see an immediate 1 to 2 per cent increase in attendance levels.
Automation of employee requests - Any business with more than 100 employees pays a heavy cost for managing holidays, absence and appraisals. The use of an electronic system allows access information instantly and lets employees to view their details quickly, saving time and money for all concerned.
Employee motivation and engagement - Better career management and training opportunities that link personal development to the organisation's goals, backed with flexible remuneration and benefits, can lead to more satisfied and productive employees. Service industries, in particular, have identified a clear correlation between the contributions of highly engaged employees to a business's overall profitability
Reduced grievances - Effective grievance and labour relations reporting can help organisations reduce the number of grievances handled, and lead to improved employee satisfaction.
Managing absence - Objective measurement and analysis can highlight unacceptable costs to the organisation that may need remedial action. Just as importantly, it may help to establish that a limited problem may exist where a few longer-term cases create the impression of major overall problem.
Headcount reductions - Streamlining HR processes and self-service applications require less administrative drudge work. The HR function can achieve better results with fewer people, or you can move people from low value positions to roles where they can have a more positive impact. Outsourcing payroll or HR removes direct employment costs and replaces it with a more flexible, negotiable cost model. Instead of worrying about HR and compliance issues, your senior executives are freed to focus on their primary responsibilities. The first stage is to identify the specific business drivers that the solution should address and discuss how it will contribute to those drivers. During the second detailed planning phase, the baseline data that will underpin your ROI calculations process must be clearly defined and collected. The information will need to be assessed and validated through further business impact assessments, during which the objectives may need to be revised to ensure that stakeholders agree on the desired change and the business impact measures that will be influenced.
Ultimately these business impacts are converted to monetary values to calculate the ROI. Intangible benefits need to be identified and reported along with business metric improvements. Taking these into account, the ROI is produced by comparing the monetary benefit calculation with the costs of change, including any incurred to overcome barriers encountered during the transformation.
