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Human Capital Management: A Key Driver for Growth

Intensifying competition, continuing marketplace volatility and widespread globalization have done more than redefine the strategies, rules and measures of sustainable success for organizations today. They have also fueled the emergence of a critical driver of growth that until now has been too often overlooked — human capital management.

Employee skills, experience, development and job satisfaction can mean the difference between success and failure. Acknowledging this, the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CGMA) commissioned the Economist Intelligence Unit to perform a global survey titled Talent Pipeline Draining Growth: Connecting Human Capital to the Growth Agenda.

The survey of more than 300 CEOs, CFOs and human resource directors from a wide range of organization sizes and industry sectors was performed in July 2012. Its purpose is to understand talent management’s importance in business strategy and determine whether organizations have the resources in place to manage talent effectively.

Senior Executives Focus on Performance Targets and Strategy Leadership

Among the survey’s eye-opening findings is the damage inadequate human capital management is having on the bottom line. Forty-three percent of senior executives surveyed attribute their organization’s failure to hit key financial targets to ineffectively harnessing and managing their employees’ skills and experience. In addition, 40 percent believe that mismanaging talent has reduced their ability to innovate and 39 percent believe it is a barrier to achieving forecasted growth. Such measurable shortfalls take a tremendous toll on organizations, especially at a time when optimum performance, progress and competitive standing are needed most.

“Ideas are the currency of the knowledge economy, so human capital must be managed as rigorously as financial capital,” said Arleen Thomas CPA, CGMA, Senior Vice President for Management Accounting at the AICPA. “It is clear from our research that many companies are falling short of their potential because they lack thorough, relevant information about their people to support effective strategy, hiring and training decisions. Chartered Global Management Accountants can bridge this gap, combining broad perspective and analytical rigor to ensure the right focus and metrics that align talent management with business strategy.”

As the value of a successful talent management strategy begins to take greater hold among business leaders, there is less clarity on who holds responsibility for measuring the effectiveness of a firm’s talent management strategy. Eighty-three percent of human resource directors believe it is their responsibility; however, CEOs and CFOs disagree. Instead, 65 percent of CEOs responded that the CFO and finance team should be responsible for measuring the overall cost and value of recruiting, retaining and developing talent in their organizations.

“There is a worrying boardroom divide that threatens to destabilize sustainable growth by allowing the best talent to slip away,” said Charles Tilley, FCMA, CGMA and CEO of CIMA. “It is vital that organizations embed a robust human capital strategy within the wider business plan and develop appropriate metrics and KPIs that are subject to the same level of scrutiny as financial data.”

4 Steps Lead the Way to Successful Talent Management    

To help senior executives reap the full benefits of an effective human capital management strategy, and overcome any roadblocks that may arise, the AICPA and CIMA identified in their survey report the following four steps business leaders can take, which can be supported with guidance from CGMAs, to reconnect talent management with growth and progress:    

Step 1: Create human capital metrics and KPIs that are core features of the organization’s overall business strategy, and ensure that they also help implement the business strategy.

Step 2: Make certain that human capital information is credible and accurate, and made relevant and actionable so that it can support business decisions.

Step 3: Establish clear guidelines that not only explain responsibility, accountability and ownership of human capital management but also bring heightened visibility and credibility to the function.   

Step 4: Ensure that your organizational structure fosters close partnerships between executive and operational levels, especially collaboration between finance and human resources.

Please visit cgma.org/Resources/Reports/Pages/talent-pipeline-draining-growth.aspx to learn more about the Talent Pipeline Draining Growth: Connecting Human Capital to the Growth Agenda survey.    

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