Performance through People: Transforming Human Capital into Competitive Advantage | McKinsey Global Institute

Talent Development

This 40-page paper addresses the question: how does developing talent affect firms’ financial returns and other organizational outcomes? Based on an analysis of +1800 large companies with more than $100 million in annual revenue spanning various sectors in 15 countries, organizations were sorted based on two factors: 1) how much they focus on developing human capital—measured by internal moves as a share of all moves, average training hours per full-time employee, and an overall organizational health index survey and 2) whether they financially outperform (e.g., profitability) their sector peers. While four subsets of organizations emerged, one segment stands out: People + Performance Winners (P+P Winners). This segment excels at creating opportunities for employees to build skills while consistently clearing the highest bar for financial performance. P+P Winners are not only consistent through the normal ups and downs of business cycles, but are a) more resilient in times of crisis, b) are talent magnets, and c) have attrition rates almost five percentage points lower than the second-highest performing segment. As firms communicate the business impact of their talent initiatives, I am resharing this 20-page report by The Conference Board, Telling Your Human Capital Story. It provides ideas on how organizations can tailor the messages of their human capital story to different stakeholder groups—from investors to prospective employees.