HR – Leadership and talent management capabilities have a strong correlation with financial performance

Unlike other disciplines, such as corporate finance, leadership and talent management is a relatively undeveloped field in the application of data- and evidence-based approaches to value creation. Most companies do not address the most fundamental questions around leadership and talent development, despite huge expenditures—$40 billion annually by some estimates. Still, some companies get it right. Not surprisingly, these companies tend to be market leaders in their industries.

The BCG Global Leadership and Talent Index (GLTI) is the first tool to precisely quantify a company’s leadership and talent management capabilities. It is the product of a multiyear effort that culminated in a recently completed study of more than 1,260 CEOs and HR directors at global companies.
WHOM WE SURVEYED AND WHAT WE ASKED

The power of the GLTI lies in its simplicity. It is a 20-question survey that places a company at one of six leadership and talent management capability levels and suggests ways to systematically move from one level to the next. It quantifies the revenue and profit gains that companies can expect from moving up the index. Here are the high-level findings:

• Leadership and talent management capabilities have a surprisingly strong correlation with financial performance. “Talent magnets”—those companies that rated themselves strongest on 20 leadership and talent management capabilities—increased their revenues 2.2 times faster and their profits 1.5 times faster than “talent laggards,” or those companies that rated themselves the weakest.
• The performance spread on leadership and talent management capabilities was wide. The talent magnets had an average capability score of 2.5 (on a scale of –3 to 3), while the talent laggards had an average score of –2.2.
• Companies—even talent laggards—that move up just one level will experience a distinct, measurable, and meaningful business performance return.

For companies struggling to improve their leadership and talent management capabilities, or for those that want to reach the next level of excellence, the GLTI will lay out an improvement plan based on their starting position and existing capabilities, and it will anticipate gains in business performance as improvements are made.

Chosen excerpts by Job Market Monitor. Read the whole story at bcg.perspectives – The Global Leadership and Talent Index