According to one study, employers who excelled at HR functions saw up to 3.5 times the revenue growth and twice the profit margin of other employers. 

One of the most common questions asked by HR leaders is, “How can I prove the ROI (return on investment) of my talent strategy to the executive team?” The context for that question is often a C-suite that says talent is a top priority for their organisation, but who is consistently reluctant to make strategic investments in talent acquisition and retention.

Many studies have been conducted on this subject. One of the most influential was a large-scale research project conducted by The Boston Consulting Group (BCG) and The World Federation of People Management Associations (WFPMA) to investigate the link between people management capabilities and financial performance. The full report is available here.

Market Value

The market value of a company is a crucial aspect that reflects its financial performance and investor confidence. The report analysed the market performance of companies that were consistently recognised on Fortune magazine's prestigious "100 Best Companies to Work For" list. These companies demonstrated remarkable results in terms of stock price growth compared to the broader market.

Over a span of ten years, the report found that these ‘perennial people companies’ experienced significant growth in their average stock prices. In fact, their stock prices grew at a rate more than 10 times higher than that of the S&P 500 index. The average growth rate for these companies was an impressive 109%, while the S&P 500 index grew by only 10% during the same period.

This notable difference in stock price growth indicates that companies prioritising their employees and being recognised for their positive work environment and employee satisfaction had a profound impact on their market performance. These organisations demonstrated their commitment to creating a culture that attracts and retains talent, fostering employee engagement, and driving overall success.

Investors often view companies with strong employee-centric cultures and high levels of employee satisfaction as more stable, innovative, and capable of sustained growth. The exceptional stock price growth experienced by these companies showcases the correlation between employee satisfaction, company performance, and investor confidence.

Revenue Growth

Revenue growth is a key indicator of a company's success and ability to generate increasing sales over time. The report highlights the correlation between effective recruitment, talent retention, and revenue growth among companies.

Firstly, companies that demonstrated exceptional recruitment capabilities experienced remarkable revenue growth compared to their less capable peers. These employers, known for their adeptness in attracting and selecting candidates, achieved revenue growth that was 3.5 times higher than companies with less effective recruitment strategies.

Secondly, the report revealed the significance of talent retention in driving revenue growth. Companies that excelled at retaining their employees enjoyed revenue growth that was 2.5 times higher than organisations with lower retention rates. Retaining employees not only reduces turnover costs but also fosters a stable and experienced workforce. This, in turn, leads to increased productivity, customer satisfaction, and ultimately, higher revenue generation.

Additionally, the report highlighted the impact of strong talent branding initiatives on revenue growth. Companies that invested in developing a compelling employer brand and effectively communicated their value proposition to prospective employees experienced 2.4 times higher revenue growth compared to low-performing peers. 

These findings emphasise the critical role that attraction, retention, and branding play in driving revenue growth for employers. By focusing on these areas, companies can strategically build high-performing teams, create a positive work environment, and establish a strong employer brand.

Profitability

Unsurprisingly, these same three categories have a particularly strong correlation with high-profit margins. Companies that put a strong emphasis on recruiting saw their profit margin double, while those that placed a strong emphasis on retention saw their profit margin increase by 1.9 times. Similarly, companies with a strong talent branding initiative had a profit margin that was 1.8 times higher.

Another critical observation regarding effective employer branding emerged. The study discovered that top performers were 2.3 times more likely to adapt and personalise their employer brand messaging to different target groups when comparing the top 10% of companies in terms of profit margin and revenue growth to the bottom 10%.

This finding underscores the importance of tailoring messages to specific audiences based on factors such as gender, ethnicity, experience level and job function. It emphasises the importance of companies authentically aligning their voice with their Employer Value Proposition while catering to the diverse talent segments they seek to attract.

Critical Recruitment Decisions, Backed by Data

The data presented here can be used to persuade your executives to devote more resources to candidate attraction, onboarding, retention, and management. However, be aware that many executives will reject external data, even if it comes from a reputable source like BCG. So, the next best option is to collaborate closely with your CFO's office to develop your own internal credible process for calculating the pound value of HR's business impacts regularly.

This is where inploi comes in. Do you know your cost per hire? Or the average time taken to fill a job vacancy? With a single source of truth and real-time reporting, inploi gives you a 360° view of your hiring funnel. With easy-to-use dashboards and bespoke reports, you’ll get visibility of the metrics that matter most to you and your business, in real time. 

inploi’s Analyse provides insights into your candidate journey, from first contact through to hire by channel, location, and job. With full visibility into cost per hire, by channel and by job, you’ve got the data you need to back up and inform decisions. Keep track of your media spend, website conversions, and ATS placements all in one place. With all your data centralised and visible in a single source of truth, you can compare channels and deliver an ROI that you can boast about.

Ready to level up your hiring game? Get in touch with us to unlock the power of data.