Prior to the impetus created by the downturn, a growing body of research has sought to demonstrate the impact of strategic human resource management on the financial performance of organisations. 

Through the 1990’s and 2000’s, a large number of organisational-level studies across numerous sectors demonstrated measureable relationships between business performance and the adoption of progressive HR practices (e.g. objective assessment in recruitment, investing in development, appraisal and performance management, team-based working, etc). For instance, Mark Huselid’s (1995) seminal study related the adoption of HR practices across 968 US companies with their financial performance (controlling for performance in previous years). 

His findings revealed that on average, organisations possessing a more comprehensive HR system (based on scoring one standard deviation higher on his ‘HRM’ measure) demonstrated 7% lower labour turnover, $27k higher productivity/employee and $4.7k higher profitability /employee.

As this body of research has grown, it has also been subject to meta-analysis. Combs, et al. (2006) aggregated 92 large scale studies conducted at the organisational level to produce a robust analysis across a large sample. This research revealed that on average, having a progressive HR system (e.g. objective selection, training, appraisals, employee surveys, etc.) related to an average of 4% higher revenue per employee where five or six major HR practices were in place within an organisation.

While research of this nature is helpful to make the case, being able to develop HR strategy grounded in the key business metrics relevant to a particular organisation is particularly valuable. This is firstly to ensure that the strategy developed is firmly linked to what drives performance within the specific organisation and hence generate maximum value, rather than taking an ‘off the shelf’ strategy without adapting it to the context. 

Secondly, it is vital for the HR function to be able to act as a credible and convincing strategic partner that understands the drivers of performance for the wider business and that it can make its case on those terms. 

Talent Q’s annual talent management survey, which reports the views of senior HR practitioners from 189 UK organisations employing over 1.5million people, highlighted a mixed picture of talent management best practices in the UK in 2009.

The key conclusions to emerge from the research were that only a minority of respondents reported following best practice in terms of clear alignment of talent management strategy with business objectives (44%) and only 28% took an integrated approach across talent management processes. A significant minority of 18% were conducting assessment of the return on investment of talent management.

Indications for 2010 are that a lack of joined up talent management and assessment of ROI is a continuing issue. Talent Q has for some time advocated reusing talent management data gathered from recruitment throughout the talent lifecycle. However, only a little more than one quarter of respondents are now looking to re-use the data from recruitment in development and succession processes and within the beleaguered financial services sector this drops to 17%.
 
Last year the majority of organisations reported adopting a more reactive and process-focused approach to talent management rather than acting as a strategic partner and speaking the language of business more widely. This reinforced the concern that this widespread reactive approach in many organisations risked unpreparedness for the Challenges of the ongoing recession, thereby extending the recovery process.

HR professionals were urged to support faster delivery of change to ensure organisations’ survival and aid recovery.

When asked to look ahead, 38% said last year that they would not be looking to change their talent management strategy during the course of 2009. This has dropped to around a quarter this year, which is promising.

With seismic changes affecting the economic environment, companies must be more flexible and swift to adapt, update processes for recruitment, development and retaining staff and readdressing the skills and characteristics they are seeking. This will be key to meeting future Challenges.

Mass redundancies and the increased pressures brought about by the economic situation mean that it is more important than ever to get the best out of employees. The key imperative should be to identify potential and develop high performance, with succession planning and managing talent through periods of change being obvious priorities.

One Talent Q client has spent the past few months determining a new strategy which focuses its people on delivery. Called ‘Developing performance and potential’, the new programme explores how individuals achieve objectives and their potential for moving forward in the business. At its core is psychometric assessment and development programmes borne out of 360 degree appraisals.

Other good news is that last year 69% were focusing energy and resources on only their most senior people, but this has now dropped to 58%. We have clients who are now doing both a great deal of work at senior levels and the establishment of processes that will develop people into key roles, holding twice yearly ‘talent forums’ which happen at a group, divisional and local level, supported by the HR  team. This helps managers to both identify those employees in the high performance and potential categories and to address immediate local resourcing issues.

It's vitally important to put in place measures that demonstrate return on investment and to look at undertaking both qualitative and quantitative work that makes the case. In terms of recruitment, employers need to identify people who have all of the basics, but also have the ability to step up one or two grades quite quickly. 

Organisations still need to have a more integrated and robust approach to managing their people, especially when it comes to spotting and developing talented individuals or making sure that people are in the right jobs. We would urge them to make greater use of assessment techniques which will help inform all key decisions around human resources.