Great article by Peter Capelli in today's HR Executive that discusses the relationship between HR policies and stock performance. It summarizes the findings, entitled, "Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices ," published by his Wharton colleague, Alex Edmans. The study implies that investments in intangibles that lead to employee satisfaction drive long-term stock performance. He bases much of this stance on an analysis of the long-term stock performance of companies on "Fortune Magazine's 100 Best Places to Work For." For the 7 years between 1998 and 2005, the stock prices of companies on the list generated an average annual rate of return of 14%, which is more than double the 6% average return of the S&P 500 index during that time.
As I read both the article and summary of the study's findings, I couldn' help but think of some of the clients with whom we have worked to develop business cases for investing in talent management strategies that call for a shift in the way organizations manage their people.
For some, the business case to invest in new HR organizational structures, processes, policies and technologies that enable such a shift is made simply by selling value and the promise of talent management to their executive commitees with the support of studies such as this. Others go a step further by focusing on how the competition is investing in their talent management infrastructure [since they are presumably going after the same talent]. Still others use metrics related to business issues such as engagement, retirement, turnover, headcount forecasts, and bench strength to make their case. And for the very cost-conscious, we've helped some focus on cost savings through automation and Web enablement (e.g., digital delivery of performance forms, self-service, online courses, etc.).
My advice is to focus on VALUE citing specific areas of the business where talent management investments in job roles critical to executing on business plans intuitively will drive performance. For example, on-boarding programs for bank tellers to ramp up their productivity and and engagement, which will lead to greater engagement and customer satisfaction while driving down turnover costs. Most HR organizations we work with have sufficient insights into their various lines of business to make sensible value statements like this.
I'm curious to hear how others who have successfully made their case. I'd also love to hear from those who are currently leading the charge on a talent management business case at their organization. Are you focused on value? Would data from studies such as this one published by Wharton resonate with the people who hold the purse strings in your organization.
