Improve Your Talent Decisions Human Capital Management

2 Why & How The Economic Value The Processes

3 Economic Benefits of Strategic Human Capital Management Increase Revenue Improve Customer Satisfaction Improve Quality Increase Productivity Reduce Cost Reduce Cycle Time Increase Market Capitalization

4 Increase Revenue It was initially thought that companies that make more money were associated with better talent management practices only because they could afford them (.19 correlation), but the 2001 Watson Wyatt Human Capital Index Study showed that talent management practices actually increase financial performance (.41 correlation). -

5 Customer Satisfaction The 1998 Watson Wyatt study, Competencies and the Competitive Edge, showed that when an organization identifies and communicates the core competencies that it needs to be successful in the present and the future marketplace, it has developed a powerful tool to help meet its customer satisfaction goals. -

6 Improve Quality Motor vehicle manufacturing firms implementing flexible production processes and associated practices for managing people enjoyed 47 percent better quality and 43 percent better productivity than firms relying on traditional mass-production approaches, according to a world-wide study by Wharton School's John Paul MacDuffie.

7 Increase Productivity Initial research on 740 companies’ HR practices found that those using systems like ours had economically and statistically significantly higher levels of company performance. One standard deviation of improvement on their bell curve of integrated talent management systems was associated with changes in market value from $15,000 to $60,000 per employee. – Huselid, M. and Becker, B. (1995). High Performance Work Systems and Organizational Performance. Paper presented at the 1995 Academy of Management annual conference, Vancouver, B.C.

8 Reduce Cost ASTD and SHRM studied companies that are renowned for their ability to retain top talent (Linbeck, Kennedy& Rossi,Zachary,Dow Chemical, Edward Jones, Great Plains, Sears, and Southwest Airlines). One key finding was that all of these companies implemented competency-based position profiles so that employees understood the skills and abilities required to move into leadership positions. - American Society for Training and Development and Society for Human Resource Management (1999). Recruiting and Retaining Employees: Using training and education in the war for talent. Alexandria, VA: ASTD.

9 Reduce Cycle Time Steel minimills using a high- commitment approach to management required 34 percent fewer labor hours to make a ton of steel and had a 64 percent better scrap rate than minimills using a command and control approach. - Jeffrey Arthur of Purdue

10 Market Capitalization The five highest return to shareholders from (Southwest Airlines Co. 21,775%, Wal-Mart Stores, Inc. 19,897%, Tyson Foods, Inc. 18,118%, Circuit City Stores, Inc. 16,410%, and Plenum Publishing 15,689%) differentiated themselves from their competitors and the market only through the way they managed their people during the infancy of talent management. – Pfeffer (1994). Competitive Advantage Through People,

11 Benefit to YOUR Company: Retention What are your top 3, mission critical positions? What is the average pay and top pay for each position? What is the turnover rate at that position and how many are top performers? If the cost to replace is 2.5x salary what is the value of retaining 25% of those who were lost?

12 Benefit to YOUR Company: Productivity Pareto Principle: the top 20% of your employees account for 80% of your productivity. What actions would you take if you knew what differentiated those 20% from the rest? And how would that impact your business?

13 The Processes Align the strategic objectives Ensure that you know who can execute their goals and who cannot Rapidly build the capacity of those who have a gap Deploy the right people with the right skills in the right place at the right time

14 Drive Performance Vision Facilitated Sessions Strategic Plan Functional Goals Team Goals Individual Objectives

15 Appraise Talent Technical SkillLearning Agility Interpersonal Skill Interest Present Future Capability Commitment

16 Manage Learning Success Profile IDP Employee Appraisal Training Coaching Experience

17 Manage Succession high-performer model current capacity employee appraisal future promise “READINESS” “FIT” + gap analysis +

18 Process Overview Cascade objectives through meetings Assign multi-source feedback raters Drill-down into real-time data Identify attributes required to meet objectives Appraise all employees Identify gaps in required skills Create plans to bridge the gaps ASAP Provide learning, application and feedback Monitor developmental progress Identify talent required to succeed Assign appropriate talent in key roles Keep an eye on the future