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Report suggests correlation between HR capabilities and financial performance

Organisations with the best HR capabilities are among the top financial performers worldwide, according to research by Boston Consulting Group.

The paper Creating People Advantage 2014/15 is its third annual report into HR practices and leadership. It is based on a poll of around 3,500 employees from 100 countries – alongside in-depth interviews with 64 HR leaders.

The report suggests that companies in the top 100 for financial performance score higher for HR capabilities than those in the bottom 100. The 27 subtopics within HR include diversity management, employer branding and recruitment strategy.

Boston Consulting Group's head of people and organisation practice Europe Rainer Strack told HR magazine that while "correlation doesn't always mean cause and effect", the results do suggest the financial impact of HR can be "pretty huge".

"This research will help HR to get a seat at the table," he said. "To have a financial impact HR needs to go beyond qualitative measurements, and towards analytics and a focus on numbers"

Another section of the report indicates that almost all parties agree work needs to be done to improve leadership within organisations. Strack believes HR has "a major part" to play in this process.

"The impact can range from how we evaluate leadership, through processes such as 360 degree feedback, to how we can develop leaders," he added. "There needs to be a particular focus on middle management, an area that can often be neglected, as this is at the heart of the business."