A new study by The Boston Consulting Group entitled "Realizing the Value of People Management From Capability to Profitability", reveals that recruiting is the most important human resources function when it comes to return on investment. More than 4,000 respondents from 102 countries were surveyed to compare high-performing companies with low-performing ones in terms of 22 different people-management capabilities. The study calculated the dollar impact of each of the different HR functions and ranked them. Companies that excelled in recruiting experienced 3.5 times more revenue growth than their less-capable peers. On boarding and retention and managing talent were the areas that had the next-biggest impacts.
Recruiting Impacts Everything
In the study, companies adept at hiring talent also had two times better profit margins than those that were less capable recruiters. The reason why recruiting is so powerful is that if you don't bring in the right talent, the other HR functions suffer. Your ability to retain workers and your overall employer brand deteriorate if your talent pool doesn't align with your business. In many ways, recruiting should take into account these functions because employer branding makes candidates want to apply in the first place. Recruiting is the function that attracts and selects future leaders, analyzes organizational requirements and gets the most performance at the lowest cost. It's the reason why headhunters are paid well by companies, why LinkedIn is thriving in the stock market and why there is a war for talent amidst a bad economy.
Mid-Level HR Functions
In the rankings, some HR functions were still important but not as critical. These include mastering HR processes, global people management and international expansion, enhancing employee engagement, providing shared services and HR outsourcing, managing diversity and inclusion, managing change and cultural transformation, using Web 2.0 tools for HR and strategic workforce planning. As we've seen, Web 2.0 tools such as LinkedIn are being used for sourcing candidates now more than ever before. A recent Jobvite study shows that over 90 percent of recruiters are currently using them in their recruiting process.
Low-Level HR Functions
The HR functions with the lowest overall impact on the bottom line included transforming HR into a strategic partner, managing work-life balance, health and security management and organizational restructuring. The lowest-ranked function was managing the aging workforce, which had just a 0.8 times impact on revenue growth. HR can play a strategic role in succession planning, supporting key influencers and decision-makers, maintain diversity and knowledge transfer from exiting employees. Work-life balance, as I discussed previously, is a critical element in the recruiting and retention of Generation Y. They expect it and aren't interested in working at a company without it. Health and security are also important especially for older workers who typically are less inclined to job-hop (relative to younger ones). They need a stable environment and health benefits. Finally, organization restructures are important because the business world is constantly changing and companies have to evolve their organization to align to new business opportunities.
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Dan Schawbel is a Gen Y career expert and the founder of Millennial Branding, a Gen Y research and consulting company. He is also the #1 international bestselling author of Me 2.0: 4 Steps to Building Your Future and was named to the Inc. Magazine 30 Under 30 list in 2010. Subscribe to his Personal Branding Blog for more advice.