When it comes to what CEOs want from HR to help drive business value, one of their main demands is that HR help communicate the value of talent to investors, whether that means Wall Street or a lone philanthropist. At a breakout session at last week’s ReimagineHR event in London, Brian Kropp, HR Practice Leader at CEB, now Gartner, explained that the reason CEOs want this help is not because investors believe in making employees happy for its own sake, but because they are increasingly acknowledging that talent is a leading indicator of business performance and growth. Below is an overview of some ideas HR leaders should think about when approaching this opportunity:
The Growing Value of Talent
According to PwC’s annual CEO survey, the percentage of CEOs concerned about the availability of key skills as a business threat to organizational growth has risen from 46 percent in 2009 to 77 percent in 2017. This year, CEOs identified “human capital” as the second most important investment to make to capitalize on new business opportunities, ahead of “digital and technology capabilities.” Various trends, from new technologies to demographic shifts, are uprooting the core assumptions of how companies and industries operate. In our analysis of earnings calls from 1,600 of the world’s largest publicly traded companies, we found that words like “change,” “transformation,” and “disruption” have become commonplace. (CEB Corporate Leadership Council members can see the full range of insights from our Investor Talent Monitor here.)
In a recent earnings call with Volkswagen, Chairman and CEO Matthias Mueller said that “Volkswagen needs to transform. Not because everything in the past was bad, but because our industry will see more fundamental changes in the coming 10 years than we have experienced over the past 100 years.” Highlighting the value of talent is becoming one way in which organizations can gain the trust of their investors that their business still has what it takes to outperform a rapidly changing, volatile market. Jean-Paul Agon, CEO of L’Oreal, mentioned in their earnings call that they were going through a “digital transformation” whose success “stems from our very decentralized agile approach in execution with a significant investment in talent.” Conversations like these are only growing, and investors are pushing for more. Private equity firms are even taking matters into their own hands, appointing executives to oversee the talent strategies of their portfolio companies.
As we’ve observed in our Investor Talent Monitor, 46 percent of the largest public companies talked about issues related to talent during their earnings calls in 2010, but by 2016, this number had topped 60 percent. This should not be surprising: Investment firms and activists have been making the news recently for taking an active interest in companies’ talent strategies, pushing firms for greater gender diversity on boards of directors as well as for firms to publish employee compensation and pay gaps.