‘Firms are failing to manage and harness the skills of their workforce’
Ideas can be replicated. Markets can be undercut. To thrive in the long term, it is becoming increasingly evident that two of the most critical factors determining a company’s fate in our current business environment are the quality of its human capital and the way it manages its talent pipeline.
Unsurprisingly, talent management is one of the key focuses for leading organisations. A recent study by the Boston Consulting Group produced some telling data.
The research found that companies that are highly skilled in core HR practices achieve up to 3.5 times the revenue growth, and as much as twice the profit margin of less capable companies.
CIMA’s own research supports these findings. A CIMA/AICPA survey of more than 300 senior executives found that 43 per cent partially attributed missed financial targets to ineffective human capital management.
The survey, carried out on our behalf by the Economist Intelligence Unit, also found that in 40 per cent of cases the same problem had also reduced their company’s ability to innovate.
This suggests that many firms are failing to effectively manage and harness the skills and experience of their workforce. Interestingly, North American firms generally reported more difficulties as a result of poor talent management than their European and Asia-Pacific counterparts.
Our research found that only 16 per cent of the North American executives we surveyed said their organisations have personal development programmes in place. This compared with 45 per cent in Europe and 35 per cent in the Asia-Pacific region.
Our report concludes that while most companies understand the importance of human capital, they do not appear to have the right systems, processes and information in place to manage their talent effectively.
Of those surveyed, just 41 per cent said they were confident that their human capital strategy is truly embedded in their organisation’s strategy.
This is a concern. Digging into the data, some of the shortcomings seem to be systemic, or a fallout of organisational structures.
Problems range from an incoherent strategy as a result of different views at C-level on critical aspects of talent management to a lack of trusted and useful information and insight.
Worryingly, only 12 per cent of CEOs said they were confident about the quality of metrics that senior management receives on human capital.
The message to business leaders is clear. To stay competitive and grow in today’s fast-moving, volatile business environment, they must reconnect human capital to the growth agenda.
Our report recommends four steps organisations can take to maximise growth from talent. The first is to embed a human capital strategy within the wider business strategy. The second is to collect and collate the right information and translate it into actionable insight. The third is to ensure there is clarity on responsibility, accountability and ownership for human capital performance management.
The final step is to structure the organisation in a way that encourages collaboration and partnering.
Above all, our research highlights that in today’s business environment, the CFO generally has the mandate to work with the HR director to manage human capital performance and, in particular, performance analysis.
This is good news for chartered global management accountants. Firms should use our members’ skills in uniting financial facts with human capital metrics and KPIs to provide relevant, accurate insight from a base of independence and objectivity.
Given the lack of confidence in the current data, many HR directors would clearly welcome and benefit from closer partnering and support.
If harnessed fully, the talents of CGMA business experts can be utilised to unblock the talent pipeline of the whole organisation and channel ideas and insights into areas where they will be the most effective.
Charles Tilley writes a regular column for CGMA Magazine, entitled “One-to-one: Top tips from the boardroom”. For his latest column, visit http://tinyurl.com/d4xtq4n
Illustration: Masao Yamazaki/Dutch Uncle
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