We often hear CEO’s and Managing Directors say that “People are their most important asset”, then why is human capital not factored into the measurement of business performance?
Typically, organisations use Return on Capital Employed as a measurement of the effective use of an organisations assets and resources. This does not always include the most valuable resource – people and talent.
Growth Pitstop coined the phrase Return on Talent Employed (ROTE) as the measurement of how effectively your organisation taps into the talent and skill of its people. When we treat talent like any other business asset, we get a clearer picture of how effectively we are using that asset and if there is any of it going to waste. In other words, we get an understanding of how much talent is exploited and how much talent is going to waste.
People have the potential to deliver a certain level of performance; we call this ‘performance potential’. This includes their total capacity for commitment, effort, creativity and innovation. We want to know how efficiently performance potential is being used.
At Below the Line and Growth Pit Stop we see on a daily basis examples of organisations, business units and teams that are not fully maximising the talents, skills and abilities of their people. This is so common that many of our clients are at a point where they are willing to accept that this is the way things are.
Yet we see that using the Growth Pit Stop methodology allows people in teams to engage in a process known as ‘cognitive reframing’ that allows them to begin challenging that idea at both a personal and team level.
Data shows that most people within organisations are operating at between 50% and 70% of their full potential and data is a powerful tool for giving businesses, teams and people an insight into where they are right now and how they are doing. The next challenge comes when we ask a team both collectively and individually whether they are happy with what the data is telling them and if they are not, then how important is it for them that this be changed for the better?
When it comes to performance we know that the problem is never down to the lack of potential, rather it is a question of how do we capitalise on all the potential that is currently either going to waste or not being tapped into at all?
The challenge is to translate potential into performance and ultimately results. By knowing your Return on Talent Employed, you can work with your team to help them achieve their full potential. ROTE doesn’t just benefit the organisation, but also the people. It can provide greater motivation from doing more meaningful work, using their talents and skills and creating opportunities to learn, develop and grow.
Organisations depend on the ability to maximise the level of commitment, innovation and skill of its people. It depends on maximising on its Return on Talent Employed. Return on Capital Employed and Return on Talent Employed are two sides of the same coin. Measuring both will help drive and sustain profitability in the long term.