Roi in Talent Management
Return on Investment in Talent Management: Measures You Can Put to Work Right Now
A Human Capital Institute Position Paper - September, 2004
Sponsored by
By David Creelman Return on Investment in Talent Management 1
Return on Investment in Talent Management: Measures You Can Put to Work Right Now
Key Points: 1. Attempts to put a dollar value on “human capital”, the way we would do for items like inventory, have not been successful. 2. There are good, proven, practical measures like “engagement” which offer valuable insights to investors, the CEO and the Board on whether human capital is in good shape. 3. Measuring a precise ROI of talent management initiatives is difficult in general, but specific quantitative studies can provide the information needed for decision making. 4. Semi-quantitative assessments (a mix of quantitative and qualitative information) is typically what managers want to give them confidence that an initiative is worthwhile. 5. Managers decide with the heart and the head. If the heart is unconvinced no ROI calculations will change their decision. 6. The issue of calculating a precise ROI can be avoided by determining which investments in talent will have the biggest impact on strategy execution. The value of these investments is self-evident. which talent investments to make. This paper outlines the issues, theories and practices concerning assessing the return on investment (ROI) in talent. The subject is in a curious state. There is great interest in the ROI of talent management, which extends to an interest even in unproven and complicated approaches. At the same time, there are simple things that do help, which are often overlooked. There are two separate topics: assessing the value of a firm’s human capital, and assessing the ROI of a given talent management investment. The first is of interest to investors since it is an indication of how much the firm is worth, and what is of interest to investors is of interest to the Board and
A Human Capital Institute Position Paper - September, 2004
Sponsored by
By David Creelman Return on Investment in Talent Management 1
Return on Investment in Talent Management: Measures You Can Put to Work Right Now
Key Points: 1. Attempts to put a dollar value on “human capital”, the way we would do for items like inventory, have not been successful. 2. There are good, proven, practical measures like “engagement” which offer valuable insights to investors, the CEO and the Board on whether human capital is in good shape. 3. Measuring a precise ROI of talent management initiatives is difficult in general, but specific quantitative studies can provide the information needed for decision making. 4. Semi-quantitative assessments (a mix of quantitative and qualitative information) is typically what managers want to give them confidence that an initiative is worthwhile. 5. Managers decide with the heart and the head. If the heart is unconvinced no ROI calculations will change their decision. 6. The issue of calculating a precise ROI can be avoided by determining which investments in talent will have the biggest impact on strategy execution. The value of these investments is self-evident. which talent investments to make. This paper outlines the issues, theories and practices concerning assessing the return on investment (ROI) in talent. The subject is in a curious state. There is great interest in the ROI of talent management, which extends to an interest even in unproven and complicated approaches. At the same time, there are simple things that do help, which are often overlooked. There are two separate topics: assessing the value of a firm’s human capital, and assessing the ROI of a given talent management investment. The first is of interest to investors since it is an indication of how much the firm is worth, and what is of interest to investors is of interest to the Board and