How Do You Quantify The Value Of Your Company’s Talent?

Author

Paolo Gaudiano and Ellen Hunt

October 26, 2016

It would be difficult to disagree that a company’s talent is its most important asset: take away the people, and the company simply does not exist. From a financial perspective, most companies today have a good, tangible sense of how much their talent costs them. But how many companies have an equally tangible idea of how much their talent is worth? Put another way, how do you place value on your company’s talent?

This is not simply a theoretical question: in most organizations, performance is at the heart of decisions about hiring, retention, advancement and compensation. But, with the possible exception of sales staff, the relationship between performance and value is unclear. How do you measure the value of your talent systematically? How do you measure the impact that each individual has on team performance, let alone overall company performance?

Unfortunately, for most corporations, decisions about personnel are based on qualitative, often subjective measures. And even when some quantitative metrics are used, they typically focus on individual measures, rather than on a broad picture of how individuals fit in, and contribute to, the organization as a whole.

The issues of talent valuation and attribution have close analogs in marketing, where a multitude of initiatives – ranging from product design and packaging to ad campaigns – all contribute to the overall success of a company in the marketplace. In the last decade we have witnessed a dramatic shift in marketing toward quantitative, analytical methods to measure, quantify and optimize marketing resources. This shift was motivated by the advent of the Internet, which gave consumers unprecedented access to many more sources of content, including detailed information about products. Hence, in order to stay ahead of the war for consumer attention, marketers have had to become more efficient in finding consumers and delivering increasingly relevant messages to them.

We believe that a similar trend is now starting in the HR domain, where a war for talent is taking shape. Today’s prospective employees are no longer looking for the one job that will last a lifetime. Rather, they consider a broad spectrum of characteristics that range from the company’s vision and mission, to its flex time, family leave policies and overall employee satisfaction. And the Internet is making it easy to find all of this information.

We see many other parallels between the evolution of marketing in the last decade and the evolution of HR in the next decade. Here, we want to focus on two aspects of talent management that we think will be absolutely critical to the success of HR leaders.

First, just as marketers learned to shift from measuring ad impressions to measuring the impact on sales, HR leaders must shift from a cost mindset to a value mindset. This requires defining value at all levels of the organization: the individual, the team, the department or division, and the entire organization. The greatest challenge, in our opinion, lies in the complexity inherent to every organization. Specifically, the overall – or emergent – behaviors of an organization depend in complex ways on the behaviors of individual employees, their interactions with each other, the environment and policies of the workplace, and even the interactions with a company’s customers and competitors. This makes it very difficult to estimate the impact that each individual has on a department or division, let alone on an entire organization.

Second, just as marketers had to refine their understanding of their customers well beyond simple demographic segments, HR leaders must learn to recognize the value of a diverse workforce. This has nothing to do with corporate social responsibility: assuming that it’s OK to have mostly white men in senior management and executive positions is like assuming that it’s OK to advertise your product only on magazines that are read predominantly by white men (Playboy, anyone?).

In reality, these two facets of HR leadership are closely related: we believe that the collective inability of corporate America to embrace Diversity & Inclusion stems from the lack of quantitative rigor with which performance and value are defined and managed.

Just as marketers have made huge investments into analytics and technology platforms, we expect that HR will undergo a tectonic shift toward quantitative tools in the next decade. But we want to emphasize that “quantitative” should not simply mean “let’s collect a bunch of data and look for patterns.” Before jumping on the Big Data bandwagon, HR leaders would be well advised to think about the question that motivated this blog: how do you quantify and maximize the value of your talent?

The knowledge of the principles of complexity will be extremely beneficial to HR leaders who want to understand how value is formed and ripples through the entire organization. Interestingly, the principles of complexity have been used successfully to help marketers understand how to attribute value to any one of their myriad marketing initiatives.

Regardless of the specific path that progress follows, HR will evolve rapidly to become a more quantitative discipline. And once that happens, discussions about Diversity & Inclusion will disappear, just as today no savvy marketer would argue as to whether or not a company should bother to advertise on the Internet.

 

This article was written by Paolo Gaudiano and Ellen Hunt from Forbes and was legally licensed through the NewsCred publisher network.

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