Talent Management and the Economics of (In)tangible Value

There’s an old saying about economists that crops up every now and then, and goes a long way toward explaining why economic analysis sometimes get a bad rap.  The saying is that an economist will look at a person with one foot in a bucket of ice and the other in a bucket of fire and proclaim that, in terms of an average temperature, that person should be just fine.  This saying was recently repeated (by me) at a workforce conference at the Kansas City Federal Reserve to illustrate that American business can no longer take an “on average” view of workforce investments.   As in other business processes, talent management must drill down to cause, effect and customized solutions similar to those used in customer service, market identification and process control.

A recent report from the Harvard Business Review describes why this is so important.[1]  The report stated that companies implementing talent management programs that automate tasks and gather data on workforce actions were gaining an edge over their competitors.[2]  “Early adopters have created tangible value for themselves…gaining a hard-to-replicate competitive edge,” said Jenny Shapiro, a senior vice president of human resources at Morgan Stanley.

The centralization of data, analyzed to demonstrate how workforce investments and outcomes can be aligned with business goals, will be a game-changer in this decade.  And it will not be a technique only used by large companies.  Small and medium-sized companies will also take advantage of workforce analytics if they want to stay on top of the return to their investments.

Up to now, it’s been hard to parse the tangible value of the workforce from the intangible value it creates because we haven’t had accounting measures to validate the risks and returns.  Investments such as recruitment, hiring, and wages and benefits have been written off as expenses without having analyzed how those expenses furthered business success.

Many global businesses – the usual early adopters of data analysis technology – are already investing in automated talent management.  The difference between an automated talent management system and an HRIS (human resource information system) is the inclusion of workforce actions and analysis in the talent management technology.  These systems, like Oracle’s Taleo, perform analyses on workforce investments and their results, and tie them to businesses’ strategic goals.  In doing so, they provide a comprehensive method for understanding how hiring and training can directly support the development of new product ideas, improved customer service, and reduce turnover costs.

Small businesses, such as locally-based manufacturers, could really benefit from the use of talent technology like this.  A study by Mercer of 3,000 senior managers said that the managers felt that the gap between the data they needed to make good decisions and the quality of the information they were receiving was a difference of more than 50 percentage points.[3]

NIST MEP is developing a talent technology system that will help SMEs with workforce decisions and allow small manufacturers to more accurately predict what skills are needed for jobs, when those skills will be needed, and when the needs may change.  The tool will also help analyze how direct investments in workforce programs can result in intangibles such as new ideas, better customer relationships and more effective teamwork.   This tool won’t be available until late 2013.  In the meantime, there are many resources that provide information on the development of internal workforce systems.  Two very good websites are http://home.bersin.com/ and www.astd.org.  Both of these sites have research on talent management and talent management tools.