We were pitching a development program that we knew the company desperately needed. We left the meeting sensing that the executive team was looking for some type of “proof” that this was the right investment.
We felt utterly defeated. We were not clear what was missing — we had competitor benchmarks, insights from well-respected talent management groups, and validation from executive MBA professors. The engagement survey data was clear — the significant opportunity area was to invest more in development programs. Shouldn’t all of this be enough?
But it was not enough. It took working through some very tough questions to learn what was missing. And by doing this a few (ok, maybe several) times, a framework started to emerge to think through how to build a business case for talent management initiatives.
Our Guiding Principle
Let’s start with the guiding principle of the framework:
Talent management is inextricably linked to the business strategy.
As we reflected on the feedback from the executive team meetings, we started to understand that there needed to be a clear connection between the development program and the company’s goals. This was the “proof” that the executive team was seeking. They needed more specific justification than external benchmarks and insights; we had to demonstrate how the development program advanced the company’s business strategy.
Based on the guiding principle, a four-step framework emerged for how to build a business case for talent initiatives.
Step 1. Define the talent necessary to execute the business strategy.
Start with the detailed business strategy to understand key talent needs. Where is the company going and what is it trying to achieve? What are the key goals? What talent will be required for the company to achieve its goals?
Most companies go through a strategic planning exercise each year and define goals, high-level investments, and project financials for at least two to five years. To build a compelling business case, understand this level of the business strategy. The more specific information you have on the company strategy, the stronger you can make the business case.
For example, let’s assume the strategy is to double the revenue and change the revenue mix to be more concentrated outside of the United States. One way to define the talent needed to execute the business strategy is to determine how many new executive leaders will be required globally to support the new business and what skill sets leaders will need to be successful in the new environment.
Step 2. Identify challenges associated with finding the talent.
Once you identify the talent needed to enable the strategy, understand the challenges of finding that talent. You can start by comparing your current talent pools against future needs. What are the gaps? Are there adjacent skillsets that can be developed into the skillsets required for the future? Can current skillsets be transferred into new locations to serve new markets?
In our example above, if the goal is to double the revenue and change the revenue mix to be more concentrated outside of the United States, the next step would be to compare the executive leadership talent in each region against what will be needed once the company doubles in revenue.
Step 3. Quantify (in business terms) the need to meet the challenge
Once you identify the challenges associated with finding the talent, identify and quantify how to overcome them. What skills will be developed in-house and what skills will be recruited from the outside? Which roles can the internal recruitment team handle and what investments will be required for external recruitment? What development programs will be needed? Quantify the investments required in each of the proposed programs.
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Going back to our example, let’s assume the following proposal to create the new leadership team: a) 60 percent through internal development; b) 10 percent external agency hiring; and c) 30 percent external recruitment done by the internal recruiting team. The costs of these programs are: a) $25,000 to send each employee through the development program; b) $165,000 for each agency hire; and c) $50,000 for each hire through the internal recruitment team. There is no question that these are significant investments. However, by connecting them to the business goal of doubling the company’s revenue, clearly these are necessary investments to enable the company strategy.
Step 4. Define metrics to monitor progress.
Once you have defined the needed investments, identify real, quantifiable metrics to measure progress. Simply getting the investment is not enough; continually measure and report back the status of the investments to executives to keep them informed. This will also enable course correction if something is not working as predicted. Metrics demonstrate the business value of the programs.
Use a few key business metrics to measure progress. Continuing with our example, given that the goal of our proposal is to create the leadership team to support revenue growth, one of the metrics should be revenue growth.
Talent management and HR teams are often reluctant to connect their programs to key business metrics that can be impacted by so many things outside of their control. Remember that no business unit or functional group has 100 percent control over this metric; growing revenue is a cross-functional effort and the talent management programs have a part in this.
Other metrics in our example include a high-potential promotion rate, time to hire, and the leadership turnover rate. These metrics provide insight into how well the talent programs are working. For example, if the target is a 75 percent promotion rate of leaders that graduate from the development program and the actual promotion rate is 50 percent, it may signal that the curriculum needs to be adjusted.
Talent management programs are only as successful as the business strategy they are trying to enable. If a strong connection to the business does not exist, there is no way of demonstrating that talent management programs are driving business outcomes.
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The next meeting was much more successful. We were able to connect the business case to the overall strategy and present it in a way where the executive team knew it was the right thing. We built metrics to measure progress and reported back regularly to the executive team.
I hope that the framework makes sense and provides a way to start thinking through your business case. If you would like more information, listen to the TLNT webinar entitled “Building the Case for Talent Management” where we go through the steps in more detail, walk through an example, and cover another important topic of how to communicate the case.
I also encourage you to provide feedback on the framework. Building a business case is not easy and each business case needs to be specifically developed to address your particular situation. We are always looking for ways to make this even better. Good luck!