RESEARCH
  • Managing people

The ROI from Investing in Developing People

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A new UK industry Index reveals that large businesses with best-in-class processes for investing in people outperform their sector peers by more than double on key performance indicators for growth in market share, profitability and sustainability.

Notably the report on the research, Trends in Competency Management, points out that most value can be added when applied to senior managers, rather than lower-middle managers or junior staff. Senior managers are often viewed as the most difficult people to address because the so-called ‘soft skills’ they typically require are difficult to measure. Consequently, it was found that although developing the capability of senior managers offers the highest financial returns, investment at this level is sparse in most sectors.

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The findings come from research by a consortium of experts in Competency and Capability Management (CCM), which is currently working with the Cabinet Office and local government to improve delivery of large projects. The CCM Index measures individual organizations against their sector peers and sector versus sector. The index is based on interviews with senior executives and analysis of correlations between corporate KPIs, sophistication of competency management and investment in competency management.

Andy Todd, Managing Director of Commercial Catalyst Ltd, one of the report authors, commented: “The research shows it is possible to quantify the impact of investing in staff development on a firm’s competitive advantage. It’s definitive proof that managing the competency and capability of staff is a critical issue that deserves attention in the boardroom as well as the HR department. Those who do it best massively outperform those who don’t. Looking at the impact on growth in market share, profitability and financial sustainability, the gap between those with the best CCM and the sector average is much bigger than we expected… CCM is about mapping skills against corporate goals – something many executives admit their organizations are not good at.”

Competency and Capability Management is defined as the ability to capture and quantify the competency and capability of people in an organization, map it to roles and optimise acquisition, development, retention and motivation of staff to maximise organizational performance.

Commenting on the finding that CCM can add most value to business performance when it is applied to senior operational and programme managers, rather than lower-middle management, rank and file labour, or skilled trades, Todd says: “Workers lower down the food chain are low hanging fruit and shouldn’t be ignored, but the real rewards are found higher up the management structure – particularly those with operational or programme responsibility. Businesses typically find these the hardest levels to address, but top companies use cutting edge techniques, data and systems to make a genuine difference.”

“A blend of economic, political and business factors means it has never been so important for firms to get the most out of the people they employ and to ensure their competencies and capabilities are aligned with corporate goals. The message for businesses is clear. It’s time to review your CCM processes and learn how the best in your sector and in other sectors drive performance from their people.” says Todd.

The CCM Index finds that sectors with substantial competition between firms and high risk mitigation measures, such as Aerospace and Defence, or Engineering and Heavy Construction, tend to have the best CCM performance and less variation between firms than other sectors. Conversely, Healthcare, Oil and Gas and Information Technology have high variation between firms which is starkly reflected in the relative performance of companies.

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