Hackett Research Alert: Companies Can Improve Earnings Nearly 15% by Improving Talent Management Function
July 24 2007 - 9:30AM
Business Wire
By excelling in talent management, the average Fortune 500 company
can generate a nearly 15% improvement in Earnings Before Interest,
Depreciation, and Amortization (EBITDA), netting almost $400
million annually, according to new Book of NumbersTM research from
The Hackett Group, a strategic advisory firm and an Answerthink
company (NASDAQ:ANSR). Hackett�s research demonstrates the bottom
line impact of more effectively managing human assets, and provides
strong evidence to executives, investors, and HR leadership of the
value of developing intangible assets such as a company�s
workforce. The research also provides HR organizations with a new
way to demonstrate the effect of their efforts on productivity,
customer satisfaction, and employee commitment, and, by extension,
on sales, profits, and shareholder value. �Certainly it makes
intuitive sense that attracting, developing, and retaining a
talented workforce can enhance a company�s performance. But like
many areas of HR, it�s been exceptionally difficult to measure the
real impact of improvements,� said Hackett Chief Research Officer
Michel Janssen. �Achieving excellence in talent management is not
something that happens overnight, since changing how a company
strategically addresses talent takes time and often requires a real
cultural shift. But Hackett�s research for the first time
quantifies the potential returns, and demonstrates why talent
management is a worthwhile investment.� According to Hackett HR
Practice Leader Stephen Joyce, �The best companies treat employees
the same way they treat their business lines, as something to be
carefully analyzed and strategically developed in support of their
business goals. They determine the skills, competencies, and
experiences needed to run their company over the next few years,
quantify the gap between their needs and their current resources,
then acquire the expertise they need through a combination of staff
development and hiring. As a result, they are more competitive in
the marketplace, and this is reflected in improved earnings.�
Hackett�s analysis, which is being issued as part of its new Book
of Numbers research volume �Talent Management: Buzzword or Holy
Grail?�, was based on the results from more than 125 comprehensive
Human Resources benchmarks performed by the firm over the past
three years. Using Hackett�s proprietary methodology for
determining top performers, metrics were chosen to reflect a
balance between talent management efficiency and effectiveness.
Hackett�s research found a strong correlation between improved
financial performance and top-quartile performance in four key
talent management areas: strategic workforce planning, which
involves identifying the skills critical to a company�s operation
and how those needs match up against those of the existing
workforce; staffing services, including recruitment, staffing, and
exit management; workforce development services, such as training
and career planning; and overall organizational effectiveness,
including labor and employee relations, performance management, and
organizational design and measurement. Companies with top-quartile
talent management outperformed typical companies across four
standard financial metrics. They generated EBITDA of 16.2%, versus
14.1% for typical companies. This gap netted a typical Fortune 500
company (based on $19 billion revenue) an additional $399 million
annually in improved EBITDA. On average, top talent management
performers also generated $247 million annually via a 22%
improvement in net profit margin, $992 million annually through a
49% improvement in return on assets, and $340 million annually via
27% improvement in return on equity. Hackett�s research also found
that top performers in talent management operate very differently
than their peers. They spend 6% less on HR overall than typical
companies, driven by dramatically lower costs in key areas such as
total rewards administration, payroll, and data management and also
lower employee lifecycle costs. These savings enable them to invest
more in talent management processes. Top performers in talent
management are also 57% more likely than their peers to have a
formal HR strategic plan in place, more than twice as likely to
facilitate strategic workforce planning discussions with senior
management, and 50% more likely to link their learning and
development strategy to their company�s strategic plan. About The
Hackett Group The Hackett Group, a strategic advisory firm, is a
global leader in best practice research, benchmarking, and business
transformation services that enable world-class performance across
selling, general & administrative (SG&A) and supply chain
activities. Hackett provides strategic insight, best practice
advice and implementation services grounded in performance metrics
obtained through 15 years and 3,500 benchmark studies at 2,100 of
the world�s leading companies. Through its�sister company REL, a
world leader in implementing cash flow improvement,
Hackett�also�offers tailored�solutions that�generate cash flow�from
operations�in addition to process�cost savings. Executives use
Hackett�s unique, empirically-based approach to prioritize
initiatives, execute faster, reduce risk and deliver sustainable
results. Our clients comprise 97 percent of the Dow Jones
Industrials, 77 percent of the Fortune 100 and 50 percent of the
FTSE 100. More information on The Hackett Group is available: by
phone at 770-225-7300, by e-mail at info@thehackettgroup.com, or on
the Web at www.thehackettgroup.com. Book of Numbers is a trademark
of The Hackett Group.
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