Quantifying the impact of high quality talent to an organization is an interesting challenge. In the tradition of McKinseys seminal War for Talent study, and Watson Wyatts ongoing Human Capital Index work, Hewitt Associates has released its version.
The Talent Quotient is a human capital metric that quantifies the financial impact of pivotal employees on an organizations business results.
Hewitt analyzed the HR data of more than 1,000 large companies and 20 million employees to determine the financial impact of human capital programs. Results showed that the flow of pivotal employees”defined as employees in the top quartile of their peers in pay progression”into and out of an organization is a strong predictor of changes in Cash Flow Return on Investment (CFROI) and shareholder value.
According to Hewitts research, for the average Fortune 500 company with about $10 billion in sales, a 10-point improvement in TQ Retain could improve a company’s CFROI by 0.7 to 1.6 percentage points on average over three years, or approximately $70 million to $160 million in cash flow.
The Talent Quotient presents another validated reason to emphasize the processes and technology to acquire and retain valued employees.
