The Value of People Management

August 21, 2012 by Wally Bock

On August 2, 2012, the Boston Consulting Group (BCG) published their study, “Realizing the Value of People Management.”

The study was the result of BCG research conducted with the World Federation of People Management Associations (WFPMA). They “surveyed 4,288 HR and non-HR managers about people management challenges in today’s world. The study overview opened this way.

“In the wake of the financial crisis, departmental budgets have increasingly been allocated on the basis of return on investment. For HR departments, quantifying the economic value of people management is a tricky proposition.”

After some descriptions of the challenges to companies today, the next paragraph begins this way.

“There’s yet another compelling reason to remain committed to investing in people: companies that do so enjoy better economic performance.”

I thought that “better economic performance” was the way your demonstrated return on investment. What I think is happening here is that the real split is in mindset.

The payoffs for an investment in people management don’t show up right away. If you have a short term perspective, it’s natural to think of people management and people themselves as costs. Prudent mangers control, contain, and prune costs. With that time horizon, temporary layoffs make sense.

Things look different if you take the long view. Then people look more like assets. Prudent managers invest in assets to develop them. People management practices are the investments you make and the time horizon for ROI is measured in years or decades, not quarters. With that time horizon, temporary layoffs destroy relationships and squander talent.

There’s a lot in this article about the best people management things you can do to increase economic performance. But they only make sense if you consider them over the long term. Then they’re like the tree you plant today, knowing that you or someone else will not sit in its shade for a decade or more.

Wally Bock is a coach, a writer and President of Three Star Leadership.

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