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World – Better HR practices increase revenue and profits

06 August 2012

Companies which are highly skilled in core HR practices experience up to 3.5 times the revenue growth and as much as 2.1 times the profit margins of less capable companies, new research by The Boston Consulting Group and the World Federation of People Management Associations found.

The survey, which questioned over 4,200 HR and non-HR managers in more than 100 countries found that the correlation between economic performance and capability in the 22 monitored HR areas was striking in six contexts: recruiting, onboarding of new hires and employee retention, talent management, employer branding, performance management and rewards, and leadership development.

“Overall, what these findings reveal is that ‘people’ companies are far more proactive and more strategic about ensuring they have the talent they need – today and in the future. They fully understand the connection between talent and sustainable performance,” said Rainer Strack, senior partner at BCG and a co-author of the report. “These findings should be a wake-up call for executives and HR people everywhere. As the talent crisis worsens, those who don't make a commitment to attracting, developing, and retaining talent put their future performance at risk.”

The report found key differences between highly capable and less capable companies. In talent management, for instance, high-performing companies offer more development programmes for a broader range of talent, including attracting people from abroad. In performance management, those companies also tend to recognise “fair and transparent” measurement and rewards systems, rewarding behaviour, not just results, to a greater degree than low-performing companies.

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