· 2 min read · Features

HR needs to find the secret levers that demonstrate ROI

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A report published last week found, surprise, surprise that CEOs were at odds with HR about talent management. It seems the top brass know their workforce is important, yet they plan to cut budget. The report from a global group of accountancy organisations must have made more than a few HR teams squirm.

It shows a CEOs plus CFOs versus HRDs divide – not least in that most HRDs believe there's a disconnect at high level; while fewer than 30% CEOs and CFOs agreed. And that 77% of CEOs advocated cutting investment in workforce skills and training, while only 18% of HRDs agreed.

CEOs and CFOs clearly aren't blind to the need for a good workforce; in fact, 43% of the respondents partially attributed the failure of their firms to achieve key financial targets to ineffective people management and just about the same number said inefficiencies had reduced their firm's ability to innovate.

I simply can't see anything changing until HR does one clear-cut thing.

Fundamentally, people at the top want their human capital to be in the right place: they know they need good people and they need development. Yet it seems that because HR is seen (and acts) frequently as a support function and less a strategic driver – accountability doesn't make headway. And if there's one thing this report shows it is that there should be no more time wasting.

And many now will be saying that ROI isn't traditionally measured in HR because it can't be done. Poppy cock. You can measure everything – what you spend and what you return. The secret is finding the levers that matter, so a difference can be shown.

CEOs and CFOs are used to getting ROI on all new systems, products, platforms, whatever. Most aren't used to seeing ROI on their people processes.

For CFOs this is a particular problem. They tend to be logical people; things are fairly black and white. To them, if you invest in something, you want to see a return on that investment, otherwise it's a bad investment. What a CFO wants to know is, "if I make this investment, what pounds, shillings and pence will I get to show for my money?"

So show it to them. Do it yourself, or ensure your service providers can help you show it.

Take recruitment, for instance. You can create recruitment processes that take cost out of the hiring process by reducing the time invested by the recruiter or the source but increase the quality of the candidate getting through. By increasing the quality of the candidate that hits the hiring manager, you reduce the burden on their time ie, they will need to meet fewer people to find the right one, thus allowing them to focus on their day jobs, which should be about adding value to the business. And if HR creates a more robust hiring process, and therefore the business is hiring the right candidates more often who are able get up to speed quickly and deliver value, ROI can be shown there too. These are all things that HR can impact on with good processes and each is utterly measurable.

And just as a final thought on data and HR's need to tap into it, there is no data to support the view that past experience is the best predictor of future performance. All the data points to the fact that anyone recruiting must understand all of the information available on a candidate (ie, intellect, values, motivations, behaviours and experience) to best predict whether they will be successful in a role. Interestingly in the report, neither the CFO/CEO nor HRD mention anything outside of skills and experience, and that's a disconnect that will only create more obstacles.

The report by the Chartered Global Management Accountants (CGMA) was from a global online survey of 313 senior executives carried out in July 2012.

Colin McKinnon (pictured) is a consultant at predictive assessment recruiter, Chemistry Group