China’s labor market is one of the most challenging in the world, and many companies list human resources as their top operating issue in China, largely because of rising labor costs and high turnover rates.

Two trends drive the consistently large salary increases and high turnover rates. First, foreign companies continue to invest heavily in China, and demand for talent remains high. Second, as first-tier Chinese companies transform their businesses to compete on the global stage, their expectations for talent are beginning to match those of foreign companies. The result is a persistently tight labor market for first-tier multinational and domestic companies operating in China.

Why do employees leave? #1 is compensation. Next is better career opportunity and tied for third is better benefits and better training and personal development opportunities.

More on China

http://www.talentmgt.com/performance_management/133/index.php

http://www.corpu.com/reports/chinaworkplace.asp

According to the Hackett Group, by excelling in talent management, the average Fortune 500 company can generate a nearly 15% improvement in Earnings Before Interest, Depreciation, and Amortization (EBITDA), netting almost $400 million annually.

Hackett’s research found a strong correlation between improved financial performance and top-quartile performance in four key talent management areas: strategic workforce planning, which involves identifying the skills critical to a company’s operation and how those needs match up against those of the existing workforce; staffing services, including recruitment, staffing, and exit management; workforce development services, such as training and career planning; and overall organizational effectiveness, including labor and employee relations, performance management, and organizational design and measurement.

Companies with top-quartile talent management outperformed typical companies across four standard financial metrics. They generated EBITDA of 16.2%, versus 14.1% for typical companies. This gap netted a typical Fortune 500 company (based on $19 billion revenue) an additional $399 million annually in improved EBITDA. On average, top talent management performers also generated $247 million annually via a 22% improvement in net profit margin, $992 million annually through a 49% improvement in return on assets, and $340 million annually via 27% improvement in return on equity.

Hackett’s research also found that top performers in talent management operate very differently than their peers. They spend 6% less on HR overall than typical companies, driven by dramatically lower costs in key areas such as total rewards administration, payroll, and data management and also lower employee lifecycle costs. These savings enable them to invest more in talent management processes. Top performers in talent management are also 57% more likely than their peers to have a formal HR strategic plan in place, more than twice as likely to facilitate strategic workforce planning discussions with senior management, and 50% more likely to link their learning and development strategy to their company’s strategic plan.

Now, that sounds like a business plan!

From KnowledgeInfusion: According to the most recent CFO Business Outlook Survey, for the first time in years, labor costs topped the list of biggest concerns. Three out of the four top worries are HR issues.

What Worries You as a CFO?

Cost of Labor – 46%
Cost of Healthcare – 39%
Consumer Demand – 34%
Skilled-labor Shortage – 33%

How can HR help? Focus on optimization of talent, get more value out of what you already own, understand the skills/competencies of your workforce, focus on compensation strategies…

I have been working my way through Josh Bersin’s “High Impact Talent Management” research and pulled out a few things. First, this is not his report on vendors. It’s a survey of what companies are currently thinking. Here’s a few interesting pieces of information:

Average business impact of doing this process with excellence. Priority of impact to the business:

1. Performance management
2. Competency management
3. Sourcing and recruiting
4. Leadership development
5. Learning and development

One interesting point is that that performance management is “management itself” – the daily management of people.

Josh was stressing that organizations must have the processes first. The technology must support the processes. Organizations will see a 5-10 times higher ROI by focusing on the processes themselves; not the systems. Systems are enablers.

Performance management has the highest impact on business results. If it’s enterprise wide, it can drive 40% higher business impact than just having a few standards in place. Also, if enterprise wide, it also positively impacts Leadership development, career planning and pay for performance (and others). Why? It creates a common currency for the alignment and evaluation of people, it creates a culture of performance and it creates a dialogue and process for development.

No ROI for vendor Performance Management Systems

Bersin found that performance management systems are not yet showing return. Organizations haven’t had them long enough and the impact of PM is driven by process, behavior and culture. Performance management as a system must work before you automate it.