Make no mistake we are all fighting the talent wars. A star performer in a ‘manual, lower-skilled’ job can be 2-5X more productive than an average workers, while a ‘star’ in a field like technology can be over 100X an average workers. Countless studies show that in many companies 10% or more of the productivity comes from the top 1% of the people.
That means that landing the best people is critical to your organization’s success. Now, if you want to know how much an organization values something look at a) the budget it gets and b) how senior a role it is given in the decision making process of the company.
In both these areas, HR is still woefully under-represented in average companies. This is a huge competitive advantage for companies that understand the importance of winning the talent wars.
According to Bloomberg’s annual HR report, “HR Department Benchmarks and Analysis”, the median HR budget has a ten year historical median of about 1%, but has risen fairly significantly in recent years. Reaching, for example, 1.4% of median operating budget in 2015.
And only about a quarter of HR managers are at the ‘executive table’ having full-participation in driving key strategic goals.
Because of these two things, HR remains one of the least technology forward divisions in companies, and talent management often lags as a result.
Giving a huge, sustainable advantage to companies where it doesn’t.
WHY TALENT ANALYTICS
According to HR leader Josh Bersin, in his article “Spending on HR is up this year and why it really matters”, large companies are now spending about 10% of their total HR budgets on technology — with an average across all organizations of 5–8% being invested in technology — and there is an over $10B HR technology market with many of the players growing at double digit rates.
Elite companies are starting to ‘get it.’ Technology has already transformed Sales and Marketing. It will do the same for HR and talent management.
This same article shows that companies where HR is integrated and a major player in the company have much better outcomes:
“Level four (the most productive HR departments) companies spend almost twice per employee on HR than level 1 companies ($4,434 vs. $2,112 per employee) and they are getting much better business outcomes. Their voluntary turnover rates, for example, are 30% lower than those at Level 1 (8% vs. 11%).”
THE FOUR LEVELS OF HR
(Chart: From Josh Bersin, see sources for link.)
So, what does this all mean for you and your company?
That depends — are you happy being average, or do you want to be elite?
According to Jeanne Meister, in her Forbes article (based on her book) “The Future of Work: The Intersection Of Artificial Intelligence And Human Resources” –
IBM and a number of startups are targeting intelligent assistants, also known as chatbots, or computer algorithms designed to simulate a human conversation, to recruit employees, answer HR questions, or personalize learning experiences. A survey of nearly 400 chief human resource officers conducted by the IBM Institute for Business Value found that half of the survey sample recognize the power of cognitive computing to transform key dimensions of HR, such as HR Operations, Talent Acquisition, and Talent Development.
Seriously. It’s hard to be elite — at anything. It requires disciplined, focused commitment. It requires time and money and organizational resources. And it requires an organizational commitment from the top to invest in technology and tools.
Make no mistake, your organization is in a global competition. The best talent in every industry — the talent that drives organizational growth and is transformational, has choices.
And only those organizations that have a competitive, sustainable talent advantage will likely survive.
For those companies, HR has to be viewed and funded as an ‘innovation and profit center’ — as the front line soldiers in the fight to build a repeatable process and structure — and find the technology tools to identify, recruit, on-board, promote and retain the very best. To get the best in HR, they have to be given the budget to find, try and use the best technology and tools.
According to “9 Employee Retention Statistics That Will Make You Sit Up and Pay Attention” by Maren Hogan:
- Nearly four out of five (78 percent) of business leaders rank employee retention as important or urgent.
- Yet, one third of new hires quit their job after about six (6) months.
- And one third (33 percent) of employees knew whether they would stay with their company long-term after their first week.
You can’t solve retention only after the fact — and you can’t solve it with slogans. You have to solve it holistically, looking at who is hired, the culture of the company, the traits that define high performers and people who stick around — the traits that matter most for teamwork — as well as compensation, culture, on-boarding and what is rewarded.
And yet, in the hourly worker space (a space employing over 75 million workers in the US alone) — many companies are seeing 100% to 200% turnover per year — and replacing workers is among the single largest cost drivers in the organization.
And that misses the biggest cost — the cost of missing out on the ‘transformational talent’ of tomorrow — that will allow your company to adapt, grow and thrive.
HR has historically been seen solely as a cost control, administrative legal compliance center. To quote one academic paper, “Role of Technology for HR Transformation Enabling Higher Organizational Performance”:
“The human resources function traditionally was an administrative function lead by individuals whose roles were largely focused on ‘cost control’ and ‘administrative’ activities (Ulrich, 1997). Missing key factors completely from the list of HR focuses were key organizational challenges such as productivity improvement, increasing quality, mergers and acquisitions facilitation, and building the ability of the organization to bring the new products to market and continuously remain competitive.”
We need to stop asking HR to fight the battle for talent with outdated technology.
Now how much is a single great idea worth? A single amazing hire — finding the next young worker with leadership and ‘star talent’ potential?
Can your company afford to miss that?
What about avoiding a single bad hire — and the risk of litigation or a PR nightmare torpedoing your business?
There are a host of technology solutions that can transform a company. But the biggest change needed a transformation in how we view HR. HR is the hub for talent management. What is more important than that.
But, I am biased. I built and ran a hi-growth company (AND 1). We great to over $200 Million in sales annually. AND 1 had great people, but the single biggest mistake I made was in building out the talent pipeline in my own department and staffing adequately. I know how hard it can be.
That’s why I am now the co-founder of Talytica.
We are building best-in-class tools for evaluating talent (modern assessments and machine learning) and we are predicting culture fit, future tenure and probable performance before you hire.
Whether you disagree or agree — or have seen other tools you love. I’d love to hear from you. What is the proper funding and role of HR, and HR tech in the modern organization? What is more important than investing in the team and tools that will help you win the talent wars?