Build a Talent Investment Growth Approach
Randy Wolken, President & CEO

Finding workers with the right skills has become a global challenge. Changing demographics, widening skill gaps, burned-out middle managers, the desire for flexibility, generational disconnects, and eroding real wages are all obstacles to a company’s success. As a result, fewer businesses are reporting success in increasing productivity after a decades-long slowdown.

Business leaders have responded to these challenges by growing investments in technologies ranging from automation and robotics to digital processes and Artificial Intelligence (AI). They understand that capital and talent must work together to increase productivity. However, this insight hasn’t kept companies from treating talent—especially their frontline workforce—as an operating cost.

Data from a recent McKinsey study reveals just how shortsighted this belief is. In almost every sector, companies spend three times as much per year on talent as they do on capital assets, and this rate is even higher for manufacturers.

Despite this imbalance in spending, too few companies attempt to calculate their return on investment (ROI) in labor with the same rigor they apply to their ROI in capital assets. That fundamental gap in metrics can encourage companies to account for labor only as a cost, thereby losing out on the compelling case for talent investment. However, a growing number of labor productivity leaders have exemplified that when companies maximize employee value, an increased company value follows.

With talent representing so much of a firm’s investment in production, getting it right is essential. Talent shortfalls—whether due to stability challenges (such as high attrition, absenteeism, and chronic vacancies), low engagement, or mismatched skills—are even more expensive, especially when combined with limited labor productivity growth.

Labor productivity leaders maximize talent by viewing their frontline workforces as worthy of investment. Although each productivity leader analyzed in the study invested in talent differently, they had in common an investment in at least one of the following seven core aspects of workforce development. These elements positively shape the relationship between a company and its workforce:

• Reassessing compensation: A company must assess if its compensation is competitive enough to attract the necessary talent.
• Optimizing work and environment design: Reimagined workflows and spaces can improve safety, reduce waste, and enhance the working environment.
• Improving workforce planning and scheduling: Labor productivity leaders are enhancing their capabilities of forecasting labor supply and demand and creating dynamic and happier workforces by providing scheduling flexibility.
• Investing in talent attraction and onboarding: Productivity leaders are expanding the pipeline of future workers.
• Measuring talent effectiveness: The outperformers invest in tools and practices that create transparency while fostering individual and collective accountability.
• Building strong cultures and employee experiences: A community-oriented workplace culture creates a strong sense of belonging among employees, healthy relationships among coworkers, and an environment in which positive recognition reinforces desired behaviors.
• Investing in talent development: Develop employees’ capabilities beyond standard on-the-job training and tuition reimbursement. Those basic tactics aren’t enough to excite today’s workforce. Labor productivity leaders build holistic development opportunities, that include online instruction, classroom training, life-skill development, and individual professional development.

It’s important to remember that effective talent investment goes beyond the human resources department (HR), whose expertise in capability-building design, while essential, is only part of the puzzle. Labor productivity leaders should assemble a dedicated, cross-functional team that encompasses not only HR, but operations, engineering, finance, technology, and other departments, as well as representation from the front line to ensure the proposed investments meet real needs.

The process companies use for planning and prioritizing talent investments can follow the model already used for capital expenses. Company leaders must establish clear success metrics for all talent investments, assessing their effects on productivity, workforce stability, and other key performance indicators (KPIs). The company can build a library of interventions that leaders can adapt as needed as the results come in. Revised performance management and incentive systems that recognize effective talent investment can provide enhanced reinforcement.

To learn more about talent investment, contact Mike Frame, our Executive Vice President and leader of the talent approaches we offer at MACNY, at [email protected]. Our website is also an excellent resource about how so many companies are enhancing their global competitiveness by finding and growing their dynamic talent.