HR’s $64,000 Question: If We Invest More in Talent, Will It Really Pay Off?

It’s the old chicken-and-the-egg dilemma — do you first invest in talent and see the rewards, or, do you squeeze the most out of the talent and then spend more to increase what you’re getting out of it?

This comes to mind reading Mercer’s latest and just released Talent Barometer Survey, because it raises a great question that’s hard to escape: If you increase your investment in talent and human capital, will it is really pay off?

Here’s the really sobering finding from the Mercer survey: although 60 percent of organizations worldwide report an increase in their investment in talent in recent years, only 24 percent say that their plans are highly effective in meeting immediate and long-term human capital needs.

Only 12% have a long-term talent strategy

That’s a pretty big gap between spending and effectiveness. And, it may also be driving this finding from the survey: although 77 percent of those surveyed by Mercer say they have a strategic workforce plan in place, only only 12 percent said that it was part of their long-term strategy (that is, it was in their plans that extended out for five years or more).

130308-MERCER-74-PAYINGOFFMercer’s Talent Barometer Survey (and you can get more details and an executive summary here), which assesses the effectiveness of workforce practices in driving the short- and long-term success of organizations’ talent plans by region and industry, was presented at the recent World Economic Forum’s 2013 Annual Meeting in Davos, Switzerland.

“Effective workforce planning is an essential part of positioning talent as a strategic asset and maintaining a competitive business advantage,” said Julio A. Portalatin, President and CEO of Mercer, in a press release about the survey findings.

He added: “With the information and data analytics available today, employers can measure and manage their talent like never before. The question is whether the increased attention and efforts deliver the intended results. Outperformance requires a blend of innovative solutions and a fact-based approach to managing talent.“

Can more spending deliver better results?

Yes, that’s the real $64,000 question — can increased attention and spending on talent deliver better (or intended) results? And as the Mercer Talent Barometer Survey points out, the jury is still out on that.

But there’s one more piece to that puzzle and it is this: the survey also found that more than half (57 percent) of the organizations surveyed “are not confident that educational institutions will generate the talent needed by their businesses today … (and this) sentiment among respondents does not improve even when they are looking out as far as five years from today.”

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That’s a frightening prospect, but it is getting to be more and more of a drumbeat that you hear in a lot of different places. I just returned from SHRM’s annual Employment Law & Legislative Conference in Washington, D.C., and it was a subject of discussion there as well. Clearly, there is growing concern that the next generation of workers will not be ready to step in to the jobs that America — and the world — needs to fill.

“This lack of qualified talent is a real concern for employers and one that requires a multi-stakeholder approach to solving. We have found companies that are most optimistic about the future are actively involved in shaping it,” said Pat Milligan, Region President at Mercer and member of The World Economic Forum’s Global Agenda Council on Education and Skills. As a result of this educational gap, the survey shows organizations are employing internships, apprenticeships, and teaching high-demand skills in secondary institutions in an effort to bridge the gap.

Mercer’s Talent Barometer Survey includes responses from HR and talent management executives of 1,268 organizations representing 65 countries around the globe. The organizations surveyed vary in size from fewer than 1,000 employees to more than 10,000 employees (including government and not-for-profit organizations) and represent a wide variety of industries.

Investing in talent as “the key competitive asset”

Yes, it is a pretty sobering survey and it’s worthwhile to get the executive summary and dig in a little to mine the findings. What troubles me though, is the revelation that organizations ARE spending a lot more on talent but that their long-term plans are falling off, in part, one would think, because of the lack of effectiveness and return that organizations are seeing from their investment.

My guess is that there will be a lot of debate around this issue, so I don’t expect this survey to be the last word on the subject. As the conclusion of Mercer’s Talent Barometer Survey makes clear, talent IS the great game changer for companies everywhere that smart companies need to continue to invest in if they want to see better business success in the future.

Ultimately, the acceleration and enabling of talent in today’s global business landscape is an ambitious strategy that requires leaders who are willing to invest in talent as the key competitive asset; a culture that values talent and seeks to develop the best in every member of the team; and a collaborative mindset that can think broadly, be comfortable with complexity, and find common ground with the goals of other stakeholders.

This collaborative endeavor requires aligned incentives for participation and action, strong governance, and continuous measurement of progress and results.”

Perhaps most importantly, effective talent management requires successful communication — a non-stop effort to engage the hearts and minds of people inside and outside the workforce, affirming talent as the new currency of global business success and sustainable growth.”

John Hollon is Editor-at-Large at ERE Media and was the founding Editor of TLNT.com. A longtime newspaper, magazine, and business journal editor, John has deep roots in the talent management space. He's the former Editor of Workforce Management magazine and workforce.com, served as Editor of RecruitingDaily, and was Vice President for Content at HR technology firm Checkster. An award-winning journalist, John has written extensively about HR, talent management, leadership, and smart business practices, including for the popular Fistful of Talent blog. Contact him at johnhollon@ere.net, connect with him on LinkedIn, or follow him on Twitter @johnhollon.

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3 Comments on “HR’s $64,000 Question: If We Invest More in Talent, Will It Really Pay Off?

  1. So the I guess Mercer’s shocking headline is “HR SPENDS LOT OF MONEY; TALENT SITUATION DOESN’T IMPROVE.”

    Both their logic and their recommendations illustrate the fundamental issue. First, there’s no reason to assume that HR spending correlates at all with improved talent outcomes. If that was the case, every company with a expensive corporate university would be overflowing with talent.

    Execution of the fundamentals — goal setting, coaching, focusing on high potential development, honest conversations and timely talent decisions — delivers value and has little hard cost associated with it.

    Second, Mercer’s recommendations in the quote above are hilarious in their vague, HR-speak. ” . . . a culture that values talent and seeks to develop the best in every member of the team; and a collaborative mindset that can think broadly, be comfortable with complexity, and find common ground with the goals of other stakeholders.”

    Really? That’s the key to building talent? Actually, in organizations that build talent effectively they do this: 1. Clearly identify what type of talent they’re trying to build 2. Create the simplest possible mechanisms to build that talent. 3. Hold line managers accountable for building that talent with clear penalties for not doing it.

    We’d be far better served if we stopped complaining about/analyzing/surveying about these issues and simply executed on the fundamentals that we know (and the business knows) will deliver results.

  2. Couldn’t agree more Marc. I am puzzled why people continue to think that the one variable they are studying/focusing on can be the only variable that impacts company performance!!! There are many variables that impact a company’s bottom line —- talent management is only ONE of those variables. If you look at studies on a year-to-year basis you find that what we in HR cheer one year in “proving” ROI does not “prove” it the next year.
    And I would expect better of Mercer. So many people depend on them for solid information.

  3. All about how talent is defined in different markets in order to accurately track so called return on investment in talent. Think Germany provides good example close to 40% of labour /workforce follow vocational apprenticeships versus useless bachelor degrees which every Tracy driver in US seems to have but actually only around 15% whilst 25% of sales admin staff also has degree in states hence yes over qualified in USA as example although these examples play out in various markets be in UK, USA or India?

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