Organizations that Invest in People, Perform Better

An interesting but not at all surprising report was released called “Creating People Advantage” from Boston Consulting Group. The report concluded that companies that invest in people tend to perform better in the market place. Whether the performance is a direct correlation, or just a sign that they are better managed overall, is anybody’s guess. Some figures regarding the success of people-oriented businesses in this study, are definitely worth discussing nonetheless.

One would expect companies with an emphasis HR to perform better in retention, engagement, and the like. This definitely held true, but what’s surprising, is how the bottom line of businesses flourished in environments where HR practices are a priority. Companies who excel at recruitment saw 3.5 times the growth in revenue, and 2 times the profit margin compared to their less competent contemporaries. Companies who do better with “onboarding of new hires and retention” enjoy 2.5 times revenue and 1.9 times profit margin. Those companies who make talent management a priority see 2.2 times revenue growth 2.1 times profit margin.While saying that the revenue growth and profit margin are improved as a direct result of HR best practices is a stretch, it’s certainly an intriguing pattern.

The success of people driven companies does not stop there. Three key areas of focus which are uniquely HR oriented, were much more likely to be shared by successful companies, they are: Leadership, attraction and retention, and performance tracking. High performing companies 3.4 times “as often make their leaders’ compensation and careers dependent on their people development efforts” Companies who perform better are 1.7-2.1 times “more likely to offer career advancement opportunities and have clearly defined tracks to improve development and retention.” Finally top performers 2.6 times “as often have clear norms that drive performance.” It appears that people are a sound investment.

These findings are certainly telling. Whether or not you can definitively prove that performance is improved by investing in employees, one can easily speculate these things are at least partially correlated. It seems the more data becomes available, the more I am convinced HR is the right industry to be in. Read the article for yourself, and see what conclusions you come to.

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Aaron

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