Research and Insights

The Year 2007 served as a milestone in Human Resources in demonstrating the importance of effective talent management. Industry strategists have established that superior business performance requires a firm to continually hone its competitive edge. In the year end survey conducted by the Forbes Group, “intangible assets” such as management credibility and labor efficiency accounted for nearly two-thirds of the market value of high-performing manufacturing companies, swamping the contribution made by physical assets such as facilities, equipment, and product inventory. This discovery has led to the most prominent insight of the year: that competitive advantage today will depend primarily on the internal capabilities of organizations–in short, a competent and committed workforce.

In light of recent events, greater accountability for human and intellectual capital has now been a constant drumbeat. Management attitudes towards the workforce have shifted from employees being overheads, to them being value-adders who deliver sustained high organizational performance. Bill Gates once famously said, “Take twenty of our best people and Microsoft will be an unimportant company.” As a result, HR has been brought into the spotlight, with tough expectations from shareholders to become more strategic and contribute business value. The traditional administrative centers, which once operated as compartmentalized entities, must now align themselves towards one central goal: to develop and engage organizational talent who will directly serve to implement the firm’s strategy.

This presents an interesting dilemma. The asset that is now most important is the least understood, least prone to measurement, and hence, least prone to management. Compared to profitability and revenue market shares, the characteristics of a person are probably the most complex and least readily measurable.

What makes high performers tick? Is it cutting-edge technical expertise; proactive social skills; genuine loyalty to the organization; or the ability to articulate a compelling vision, motivate, and inspire? The need to quantify and objectively measure these intangible employee qualities attests to the pervading significance of the concept of competencies.

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