Study Finds Link Between Talent, Leadership and Financial Performance

The relationship between talent and financial performance has been an “intuitive” given to enlightened leaders for a long time.

Thanks to recent work by Boston Consulting Group (BCG) it’s no longer intuitive. The data are in and they are convincing. Boston Consulting Group released its Global Leadership and Talent Index survey of 1,263 CEOs and HR directors of global companies in 85 countries.

The results are compelling to say the least.

Will this change business priorities?

The high level findings include:

Leadership and talent management capabilities have a surprisingly strong correlation with financial performance. “Talent Magnets” – those companies that rated themselves strongest on 20 leadership and talent management capabilities – increased their revenues 2.2 times as fast and their profits 1.5 times as fast than “talent laggards,” or those companies that rated themselves the weakest.
The performance spread on leadership and talent management capabilities was wide. The talent magnets had an average capability score of 2.5 (on a scale of -3 to 3), while the talent laggards had an average score of -2.2.
Companies – even talent laggards – that move up just one level will experience a distinct, measurable, and meaningful business performance return.

With organizations spending an estimated $40 billion (yes, billion!) worldwide on leadership and talent development, these findings may enable leaders all over the world to re-orient their priorities, investments and behavior on talent/leadership development and gain the critical involvement and support with all the members of the C-suite.

Leadership accountability is critical

Through their research Boston Consulting Group divided leadership/talent management capabilities into six categories:

Strategy;
Leadership and talent model;
Talent sourcing;
People development;
Engagement;
Culture.

And it’s interesting to note their definitions require a great deal of accountability from leaders. This is a differentiated approach and one that should spur some thoughtful analysis by HR leaders.

The chart below lays out the performance differences between the lowest organization performers – Talent Laggards and the highest organization performers – Talent Magnets and the average performers in between.

A one-two punch of investment

Interesting, yes?

What’s even more interesting, then, are the data connecting these leadership/talent management performance levels with business outcomes.

Take a look:

In addition to proving the real correlation between leadership/talent management performance and financial performance, a valuable take away from this data is Boston Consulting Group’s conclusion that:

The companies that excel at leadership and talent management have figured out how to involve their leaders, not just the HR team, meaningfully and regularly in people development. “

The one-two punch of investment in leadership/talent development and significant accountability of senior leaders should help HR leaders around the world create successful business cases for moving leadership/talent development investments forward.

Let’s get ready to rumble…

This originally appeared on China Gorman’s blog at ChinaGorman.com.