People management pays, says independent study

21 February 2008

Press release issued by Investors in People UK

New practical framework will help any employer make improvements and measure impact

A new report published today delivers the most compelling evidence to date of the link between effective people management and business success. The two-year study suggests that organisations with a comprehensive approach to people management perform better than those without, indicated by higher profits per employee, higher profit margins and higher productivity. It also identifies 12 core measures that any organisation can track to assess the impact of their people management practices on business performance.

People and the Bottom Line has been produced by the Work Foundation and the Institute for Employment Studies (IES) and supported by the Department for Innovation, Universities and Skills (DIUS), the Department for Business Enterprise & Regulatory Reform (BERR), Investors in People UK, the Sector Skills Development Agency (SSDA) and the University for Industry (UFI).

The research involved developing and testing a framework of people management practices with nearly 3,000 employers to assess their impact on organisational performance. The researchers collected data from each organisation and assessed performance across the framework of measures. Their analysis suggests that organisations which adopt a range of people management practices – from resourcing to employee engagement, skills development to job design – can achieve substantially stronger performance than employers that invest in just one area.

Indeed, the results suggest that if a business increases its investment across a number of people management practices by around ten per cent, it could secure an increase in gross profits per employee of over £1,500 per annum.

David Lammy, Parliamentary Under-Secretary of State for Skills, said:

‘This report represents an important development in understanding the extent to which good people management lies at the heart of successful organisations. This is vital information for all companies operating in today’s competitive economy. I would encourage employers to take note and consider how they can use the findings to up their game.’

Simon Jones, Acting Chief Executive at Investors in People (UK), added:

‘This is a ground-breaking study. It delivers compelling evidence of the role that a proactive approach to people management and skills development can play in business success. It shows that people management must be woven into the DNA of any organisation that wants to maximise its performance – it cannot be piecemeal or tokenistic. This is a very important report for employers of all types and sizes and it’s vital they sit up and take notice.

‘The good news for employers that want to check the effectiveness of their HR practices and identify opportunities for improvement is that the report also offers a practical framework for doing so. I urge employers to take a serious look at how it could help them seize the business opportunity on offer.’

In terms of practical application, the report also identifies the 12 core measures that are most effective in helping employers track the impact of their people management practices on business performance. These cover areas as diverse as recruitment, development plans and employee appraisals. This framework provides clear guidance for employers, who can adopt its measures to assess their own people management practices and identify opportunities for improving their performance. This means the report not only provides a compelling business case for good people management but also a route map for maximising and measuring its effectiveness on an ongoing basis.

Other key findings from the report are as follows:

  • Younger firms tend to score better against the key indicators than longer established organisations.
  • There is no ‘levelling off’ in terms of the business benefits that good people management can deliver – even where companies are investing in their workforce, there is evidence of the benefits of doing more.
  • Companies that score highly tend to be strongly geared towards creating a good working environment for their employees and being innovation led.

Notes

A summary of key themes from the research is available from the Investors in People press office on 020 7544 3118. The Press Office can also arrange briefings on the research.

The core measures identified by the researchers were as follows:

  • Proportion of new appointees tested on recruitment
  • Proportion of new appointments for which there was a person specification
  • Proportion of employees covered by a succession plan
  • Proportion of workforce that have a current personal development plan
  • Proportion of the workforce that have a career development plan
  • Proportion of employees qualified to degree level
  • Proportion of managers that left voluntarily over the last twelve months
  • Proportion of staff that receive profit related pay
  • Proportion of staff that have a regular appraisal
  • The frequency with which staff have one-to-ones.
  • Who decides on the pace of work (1 = exclusively managers to 5 = exclusively workers)
  • Who decides on task allocation (1 = exclusively managers to 5 = exclusively workers).

Investors in People

  • The Investors in People Standard provides a practical framework for improving business performance and competitiveness through good practice in human resource development.
  • An organisation that has achieved the Standard has been successful in adopting and maintaining its three fundamental principles: Plan: developing strategies to improve the performance of the organisation, from business goals to leadership strategies; Do: implementing those strategies, taking action to improve the performance of the organisation; Review: evaluating and adjusting those strategies, measuring their impact on the performance of the organisation.
  • The Investors in People Standard and Profile are promoted and developed by Investors in People UK – an organisation whose main stakeholder is the Department for Innovation, Universities and Skills.
  • The Investors in People Standard is delivered by a partner network:
    1. In England, the network of Investors in People Centres.
    2. In Scotland, Scottish Enterprise (SE) or Highlands and Islands Enterprise (HIE).
    3. In Wales, the Business Skills Delivery Team at the Department for Education, Lifelong Learning and Skills, Welsh Assembly Government.
    4. In Northern Ireland, the Department for Employment of Learning.

For more information on Investors in People please visit www.investorsinpeople.co.uk.


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