systematicHR

So how much does it cost to drive up revenues by 1%?  There are many possibilities including:

• Cost of acquiring new talent versis:
• Cost of developing new talent
• Cost of rewards versus:
• Cost of 1% increase in engagement

So which of these has the largest actual impact to the bottom line?  It’s not as if I or HBR can provide any answers for your specific situation, but it certainly is an interesting idea to ponder.  It’s not that any of these is the “right” answer, but understanding that there may be an optimal mix for your spending.  Note that the above is not a comprehensive list.

Of course you need a constant influx of new talent from outside your organization.  Without new talent, your existing talent actually stagnates.  New talent from outside not only brings fresh faces, but also ideas and spurts of energy into an organization.  New talent from outside is also a quick way to fix many problems such as departments that may be creeping along at too slow a pace.  However, new talent is quite expensive does not bear the historical perspective of incumbents.  They are often prone to repeating mistakes that have been made before, because they were not there to witness it the first time.

Developing talent is probably less expensive, but the lead time on this is considerable.  Senior talent may take years and even decades to develop.  What you get in return though is a deep understanding of not only the product at hand, but also the entire history of the R&D that went into a product.  As you make these choices and forecast your talent needs, you’ll also be projecting the ratio of senior talent you’ll be needing in the future.  How you decide to staff your learning organization or your staffing organization will be critical to your ability to execute on your desired mix of talent sources.

In terns of rewards, I could also have phrased this as short term and long term rewards, but I find the opposition of rewards and engagement more interesting.  Basically you’re asking of you should invest in creating motivating jobs and a motivating workplace, or if you should introduce motivating factors such as monetary compensation.  The reality is again that the answer is some sort of a mix.  But this is exactly the type of philosophical challenge we all have.  If we’re dealing with salespeople, the mix is weighted towards cash.  If we’re dealing with service reps, we probably are more interested in engagement.  The mix may also change depending on the type of industry you are in, or your company’s position as a market leader or laggard.

All too often we cruise along adding to HR budgets so we can keep up with reactionary demands.  Not often enough to we sit back and evaluate how and where we spend our money.  Remembering that our jobs are to shape the organization’s future workforce, this shaping is fully dependent on the choices we make today.