There is evidence for HR practices driving financial results

Posted by Quinten van Es on Thu, Oct 27, 2016

research.jpgConsultancies have identified specific HR capabilities and initiatives that correlate to business performance. In 2015, Boston Consulting Group released study results that correlated overall excellence in talent management capabilities with increases in company revenue and profits.

The study was based on BCG’s Global Leadership Talent Index (GLTI), which has firms self-evaluate on 20 leadership and talent management capabilities. The study found that “talent magnets” (companies with a GLTI in the top 5% of scores) increased revenues 2.2 times faster, and profits 1.5 times faster, than “talent laggards” (companies with a GLTI in the bottom 5% of scores).

Companies can benchmark their results against BCG’s global database, but the GLTI falls short of being applicable as a rigorous or procedural best practice. The 20 factors that inform the GLTI are self-reported, which limits the accuracy of the measurement. Because the battery of only 20 capabilities evaluated is both cursory and broad, it can be hard for companies to tactically identify where and how to improve.


Additionally, the Institute for Corporate Productivity (i4cp) created the People-Profit Chain in 2013,
which details the organizational characteristics and people practices that are connected to a company’s market performance. They identified five business domains, Market, Strategy, Culture, Leadership and Talent.

When the chain is interconnected, the five domains yield a consistent set of outcomes, each of which is correlated to market performance. When a weak link within the chain is identified, high performers can be separated from low performers and companies can pinpoint specific criteria to change, the end result being revenue growth and increased market share, profitability and customer satisfaction.


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Best practices in general have the most impact on business performance when they are embraced companywide, starting at the top, and adopted smartly and sensitively by expert individuals. Top Employers Institute provides certification that ensures leadership in HR best practice implementation. HRCI provides certification that helps companies identify individuals who have both the knowledge and critical judgment skills to apply the best practices. On their own, certifications are correlated with better business performance – companies with Top Employers certification, and companies that have more than five HRCI certificants, show better results than companies that don’t.