Every company understands how crucial return on investment is. But how many view return on talent the same way?

Employees represent both an organization’s largest investment and its deepest source of value. In a world where businesses are navigating economic uncertainty, rapid technological change, and upheaval in the working model, it’s important that their talent systems emphasize both productivity and value creation. Having the right talent in the right roles—and giving employees the support and opportunities they need to succeed—is critical to achieving returns.

McKinsey research indicates that companies that put talent at the center of their business strategy realize higher total shareholder returns than their competitors.

In this article, we focus on five actions that organizations can take to maximize their return on talent: build a skills-based strategic workforce planning capability, create a hiring engine that brings in the right talent to fill critical roles, invest in learning and development, establish a stellar performance-oriented culture, and elevate HR’s operating model to become a true talent steward.

It’s not enough to take one or two of these actions in isolation. But together, these five components intersect with and reinforce one another—skills-based hiring, for example, should be supported by tailored learning journeys and performance evaluations that provide clear and timely feedback on skills development.

When combined, these five actions can help leaders establish a truly strategic and less siloed talent system that generates higher returns over the long term.

Talent + productivity = value

Measuring the return on talent has been a long-standing challenge for companies because it’s so difficult to calculate individual productivity in many roles, and it’s equally hard to track progress and improvement over time. How does an organization that is beginning to overhaul its talent approach quantify such an intangible asset?

McKinsey research indicates that when the revenue per full-time employee of high-performing companies is compared with that of similar companies within their industry that are average performers, there is a wide disparity in the revenue productivity of employees. In other words, the revenue generated per employee differs greatly.¹

Yes, revenue per employee is a blunt instrument, and it is influenced by factors beyond productivity, including brand name and go-to-market approach, market share, type of products and services offered, and operating model. Still, even when comparing like-for-like companies on the productivity of corporate function employees—where work should be comparable—our research gleaned from years of benchmarking suggests that there are significant gaps in employee productivity across companies.

‍

Read full article here