How Great Companies Manage People

To sustain success, a company needs leaders who care about and develop their people.

How Great Companies Manage People_Sales Team Management

Good people practices confer a performance advantage. This is especially important as companies cope with a growing talent crisis and chronic economic uncertainty.

But just how strong is the correlation to economic performance? And what practices count the most? The Boston Consulting Group, in partnership with the World Federation of People Management Associations (WFPMA), recently explored this question as part of its ‘realising the value of people management’ research study.

Development and stimulation

They found that high-performing companies recognise that leadership is about more than just steering the business. It’s about nurturing, energising and challenging the people who help make it run — and who keep it competitive.

Companies that are highly capable in 22 key HR areas consistently enjoyed better economic performance than those less capable, some up to 3,5 times the revenue growth and as much as 2,1 times the average profit margin.

So what do high-performing companies do differently?

The high performers differentiated themselves dramatically in three of the most important topics: leadership development, talent management, and performance management and rewards. Within each area, they did more, and they did so more effectively.

  • Among other things, high-performing companies use incentives to engage leaders in people development. They make leaders’ compensation and career advancement dependent in part on leaders’ people-development efforts – 3,4 times as often as low-performing companies do.
  • They are also 1,5 times more likely than average to have in place a leadership model that describes expected contributions and behaviour and that is grounded in company values.
  • They define talent more broadly, strive hard to attract internationals, and nurture “emerging” potentials.
  • Unlike their less successful peers, they clearly define performance norms and standards and adopt them enterprise-wide.