Roi in Talent Management

7421 Words Apr 3rd, 2010 30 Pages
Return on Investment in Talent Management: Measures You Can Put to Work Right Now

A Human Capital Institute Position Paper - September, 2004

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By David Creelman Return on Investment in Talent Management 1

Return on Investment in Talent Management: Measures You Can Put to Work Right Now
Key Points: 1. Attempts to put a dollar value on “human capital”, the way we would do for items like inventory, have not been successful. 2. There are good, proven, practical measures like “engagement” which offer valuable insights to investors, the CEO and the Board on whether human capital is in good shape. 3. Measuring a precise ROI of talent management initiatives is difficult in general, but specific quantitative studies can
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Another question is, What indicators do we have that this asset is in good shape? In finance, the quick ratio ([cash + A/R]/ current liabilities) is a simple indicator of the health of a firm’s balance sheet. People wonder if there are not similar ratios or measures for human capital. In finance the value of a plant in Taipei is quantifiable. People may also wonder if there is some quantitative measure of the talent in the Taipei operation.

There is a field of study called humanresource accounting that is concerned with the question, How much is this asset worth? There are academic papers on this topic such as in Eric Flamholtz’s book Human Resource Accounting : advances in concepts, methods, and applications (1985). One method that was developed to answer this question looked at replacement cost, where they simply ask, “If we fired everyone and had to re-hire them, what would it cost us?” That gives a minimum value of the human capital asset.

Most managers are concerned with the day-to-day talent management decisions, such as, “Is it worthwhile interviewing more candidates or should we just pick from the ones we’ve seen?” However, the CEO, the board, and the financial markets are interested in the big picture and are looking for some overall measures of the “talent asset.”

Return on Investment in Talent Management 3

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