Executive Summary
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The performance of an organization is determined by the performance of its employees.
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Organizations must therefore measure return on talent as well as return on investment.
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Knowledge is one of the most important factors for business success. If knowledge assets are increased, related factors such as sales will also increase.
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Talent—or intellectual capital—has fast become one of the most significant areas of business activity and competition.
Introduction
The performance of an organization is entirely determined by the performance of its employees. This bold statement deserves further study. If the determinant of corporate performance is not its employees, what is? Is it strategic intent? Core competencies? Manufacturing? Is it proprietary technologies? The best equipment and laboratories? A visionary CEO? Yes, it’s all of these things. And all of these things are created and constantly improved by employees. Talented employees are the agents of change. Good employees join in to help implement new initiatives. Others follow at various times, depending on when they can break the bounds of their comfort zone to enter the area of change, uncertainty, and opportunity. They fall by the wayside because they were in the wrong job.
It is broadly recognized that past performance is not a reliable indicator of potential or future success. Yet many organizations continue to use past performance to identify high-potential employees. How much true talent is overlooked by this practice? Overlooked and misplaced high-potential employees stagnate. The problem of identifying, positioning, and compensating high-potential employees spans all disciplines and levels, from the loading dock to the boardroom. Lost and underused employees represent enormous, largely unreckoned financial loss. A second problem is the difficulty of measuring the financial contribution of employees beyond global measures such as revenues per employee.
To focus a successful organization, managers must use a new tool called return on talent (ROT). Most organizations focus on return on investment (ROI), and fail to understand the key strategy of how to increase ROI by increasing ROT.
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