Dear C-Suite: better HR practices lead to higher revenue

Dear C-Suite: better HR practices lead to higher revenue

It's a fact HR has known forever, but sometimes it's hard to convince the higher-ups: companies that invest in their people tend to reap financial rewards.

According to a survey by The Boston Consulting Group (BCG), companies that scored high in 22 key HR topics achieved up to 3.5 times more revenue growth and as much as 2.1 times greater average profit margins.

Titled Creating People Advantage 2012: Mastering HR Challenges in a Two-Speed World, the report revealed that the correlation between economic performance and capability in these 22 HR areas was especially striking in six contexts: strategic workforce planning, employer branding, recruiting strategy, recruiting process, on-boarding, and retaining employees.

The report found that many HR topics are not being treated with the urgency, leaving companies under-equipped and at risk.

“Companies are not making the headway they need to ensure that they have adequate talent—managerial, technical, and functional—in their people pipeline,” explained Jean-Michel Caye, a senior partner at BCG and co-author of the report.

Experts say that firms need to build their own talent pipeline in order for firms to grow.

"The clients that we work closely with their pipeline of leaders is always a big issue," Jeffrey Chua, partner and managing director of BCG Singapore, told Channel News Asia. "They don't have enough talents and leaders to keep up with their growth aspirations."

Chua added that as markets get more complex, the talent and the leaders that's required for them to be successful in the future is very different from what it has been in the past, so companies have to work both on the quality and the quantity.