Building Leadership

While most business leaders say people are their company’s most important asset, and most human resource departments keep data on things like:

• Turnover
• Performance Distributions
• Employee Engagement

Few are applying the kind of metrics that finance executives use, says John Boudreau of the University of Southern California’s Marshall School of Business. When a business wants to learn which consumer groups are most important, it might use customer segmentation or lifetime profitability models.

However, Boudreau says if they are asked what fuels employee motivation, “I get 15 answers in a room of 15 leaders.” And those answers are “D-minus” answers at best, he adds.

The approach to talent development should be similar to the approach a company takes to diversifying assets, Boudreau says. A company determining how to allocate talent in developing versus developed countries may decide there is a higher chance of fast growth in the developing country and choose to invest talent there, but this is tunnel vision that can lead to very costly mistakes.

A better approach is to build talent in both places with a ratio that optimizes risk and return—some resources may not get used, but it hedges risk. When managing turnover and optimizing talent, an approach similar to inventory management should be used—the top performers need not be in every job, and in some roles a “good enough” employee is better. An executive would never say the most sophisticated technology should be on every employee’s desk, and likewise in human resource management there should be attention paid to trade-offs and diminishing returns.

And in terms of employee benefits, a company should use an approach similar to consumer marketing—conjoint analysis that tells a company whether a customer would prefer some features over others. Customizing benefits offers to different employee groups can help a company achieve the most cost-effective combination of rewards to reach a certain retention level.

Contact Mary Hladio, (513) 984-9333 for a 30-minute complimentary consultation to discuss improving your organizational effectiveness.

Source: CFO (01/11) McCann, David

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