What Is Your Return on Talent Employed™?
Measure how effectively your organization taps into the talent & skill of its people.
A surprising revelation awaits ambitious leaders. It concerns their ability to leverage the talents and skills of their people in driving performance, growth and innovation.
Data shows that most people within organizations are operating at between 50% and 70% of their full potential. These rates mean that one of the most important assets of the business (i.e talent) is being under-utilized, with a lot of skills, ideas and passion going to waste. Viewed positively it means that people have a lot more to give.
Learn about our pioneering work in the measurement of Return on Talent Employed™ using the menu above, or contact us (using the form below) to measure the ROTE for your Organization, business unit or team.
Inspired in the use of Return on Capital Employed as a primary business metric, we used the term Return on Talent Employed™ (ROTE) to measure how effectively talent is being utilized.
ROTE answers the BIG question: ‘What % of your org./team’s full potential is presently being exploited?
Given the importance of talent, managing ROTE can deliver a major boost to business performance, growth and innovation. Indeed, if only a small proportion of the latent talent in organizations was put to work it could transform businesses, industries and markets.
The New ‘Must-Have’ Performance Metric
for the C-Suite
ROTE Video Overview
(2 mins)
Obviously, Return on TALENT Employed™ is about Talent (ROTE), but that is not all. It is also about the requirements of competing in an increasingly VUCA age.
ROTE measures the organization’s ability to tap into the well of innovation, creativity and engagement that is its people. But also how well it meets is responsibility to foster the growth and development of its people.
Here we explore some of the reasons why ROTE matters and why it needs to be measured and managed.
Why ROTE? Your People Have A Lot More to Give
Most business units and teams have a lot more to give. Indeed, data shows that as much as 39% of the full potential of any unit or team goes unexploited. Think what would be possible if only a small proportion of that untapped potential was exploited.
Why ROTE? People are Your Most Important Asset
Are people one of your organization’s most important (and indeed expensive) assets? If ‘yes’, then you need to know how effectively people’s talents and skills are being utilized. You also need to know if there is any waste.
In an age when organizations are as talent-intensive as they are capital-intensive, isn’t the effective utilization of the organization’s people resources, every bit as important as that of any other asset or resource. When innovation and agility really matter, any waste of talent, skill or ideas is as serious as waste of plant, machinery or other assets.
Why ROTE? Delivering Ambitious Projects & Strategies
A low ROTE is a risk rating against any ambitious strategic initiative, project or priority that requires change, innovation or even transformation.
Why ROTE? Winning the War on Talent
ROTE gives organizations an advantage in the War on Talent, enabling them to win on three fronts. The first is in attracting new talent, the second retaining new and existing talent and the third; engaging talent fully in the pursuit of organizational goals while at the same time maximizing their own growth and development.
Why ROTE? The Innovation Dividend
Return on TALENT Employed™ is about maximizing levels of engagement, innovation and agility – factors that are essential to competing in a VUCA world.
Leaders say they want greater innovation, more creative problem solving and increased flexibility in response to accelerating change and VUCA markets. However, the extent to which they can have it, depends on their ROTE. That is, on the ability of their organization to tap into its well of human potential – the ultimate source of agility, creativity and innovation.
Why ROTE? Your Responsibility to Your People
Today’s organizations have a responsibility that goes beyond maximizing profits and shareholder returns (i.e. ROCE). That includes a responsibility to its people, their ongoing development and broader well-being.
Listen to your people – a good wage is no longer the primary motivator, rather it is the ability to do challenging and rewarding work, as well as to develop one’s talent and skills. When it comes to talent, a leader’s job is ‘to enable their people to pole-vault, rather than limbo dance’.
There is an aspect of your organization’s performance that is not being tracked. Yet it is vital, especially for sustaining long term performance.
Return on Capital Employed™ (ROCE) is a ‘primary’ measure of organizational performance, yet it entirely neglects one of the most important (and indeed expensive) assets of any organization. That is its human capital!
In an age where talent matters as much as capital, managers need to know how effectively the talents and skills of their people are being put to work. They need to know their Return on TALENT Employed™ (ROTE). Our sophisticated analytics provide the answer.
How is ROTE Calculated?
Return on Talent Employed™ (ROTE) is a calculation of the ratio of performance to potential for an organization, business unit or team. Here is how it works:
ROTE is calculated based on data provided by leaders and their teams through a secure online platform. It takes each leader 26 minutes online to participate.
A proprietary algorithm calculates ROTE based on thousands of data points based on all the individual responses and leveraging bench-marking data across 47 markets and 12 industries.
ROTE is more than a number. Big data visualization is used to model the strategies available for maximizing the Return on Talent Employed™.
When it comes to business performance, the primary metric for CEOs and CFOs is the Return on Capital Employed™ (ROCE). But, while ROCE is a measure of the effective utilization of an organization’s assets and resources, it does not include what is often called the ‘most important asset’ – that is people or talent.
Our research suggests that leaders should think about the organization’s human capital the same way as any other asset or resource. That means measuring how efficiently talent is being utilized and how much of it is going to waste.
When it comes to sustained and profitable growth Return on Talent Employed™ (ROTE) is ‘the other side of the ROCE coin’. It is a powerful new metric for the C-Suite – one that every leader should know.
The New ‘Must-Have’ Performance Metric for the C-Suite
ROTE Video Overview
(2 mins)
Here is a C-Level summary of our ROTE Research:
The Primary METRIC for Performance
When it comes to business performance, the primary metric for CEOs and CFOs is ROCE (Return on Capital Employed). But, in an age when talent matters as much as capital, isn’t there something missing?
While ROTE is a measure of the effective utilization of the assets and resources of the business, it does not include what is often called the ‘most important asset’ – that is the people or talent of the organization.
Measuring Performance in Talent-Intensive Organizations
Given the importance of talent, leaders should think about and value the organization’s human capital the same way as any other asset or resource. That requires measuring the return on talent – asking how effectively talent is been utilized and if there is any of it going to waste.
How efficiently talent is being utilized (and how much of it is going to waste) can and should be measured. The means of measurement is the Return on Talent Employed™ (ROTE).
ROTE – A Two-way Dividend
ROTE pays a two-way dividend – it rewards both the organization and its people. The dividend for the organization includes the potential for enhanced / sustained performance, an advantage in attracting and retaining staff, greater employee engagement and improved capacity for innovation.
For the organization’s people the dividend includes the greater intrinsic reward/motivation that comes from doing more meaningful work, utilizing one’s talents and skills and the opportunity to learn, develop and grow. After all, who wants to work in an organization where their talents, passions and skills are being stymied.
Measuring Return on Talent Employed™
An organization’s people may have lots of potential (as indeed most organizations do), but how much of it is being exploited? Is it 50%, 70%, 90% or more? We believe that leaders should know the answer, so too should their investors and shareholders.
Performance Potential – Measuring ROTE
Some organizations are better at utilizing their talent than others – they have a higher ROTE. However, the average across 12 industries and 47 markets is 61%. That is measured as the ratio of performance to potential.
Any ROTE figure could be interpreted as either ‘negative’ or ‘positive’ or seen through what we prefer to call the lens of ‘performance’ or ‘potential’. Which works best for you depends on mindset and other things.
However, the attention-grabbing headings are hard to resist:
Measuring Return on Talent Employed™
Just as some organizations are more profitable than others (i.e. have a higher ROCE), the ability to capitalize on the potential of people also varies greatly. Organizations with a higher ROTE (Return on Talent Employed™) are better at utilizing their talent.
ROTE – Winning the War on Talent
ROTE really matters in the context of the ‘War on Talent’ where competitiveness depends on the ability to attract and retain the best people and certain key skills are in short supply.
ROTE gives organizations an advantage in the War on Talent, enabling them to win on three fronts. The first is in attracting new talent, the second retaining new and existing talent and the third; engaging talent fully in the pursuit of organizational goals while at the same time maximizing their own growth and development.
ROCE & ROTE – ‘Two Sides of the Same Coin’
In an increasingly VUCA world your people’s talents, ideas and skills are more important than ever. So, ensuring that they are being utilized effectively (i.e. a high ROTE) is a key role for the leader. Sustained and profitable growth depends on it.
The ROTE proposition is both straight-forward and compelling: To maximize ROCE, focus on ROTE also. In so doing, the gains in engagement, creativity and innovation from the organization’s people, will help to drive and sustain profitability in the long term. ROTE and ROCE are ‘two sides of the same coin’.
Click here for more detail behind the research.
Learn about our pioneering work in the measurement of Return on Talent Employed™ using the menu above, or contact us (using the form below) to measure the ROTE for your Organization, business unit or team.
Background & Methodology
This whitepaper is based on our ongoing program of applied research and joint discovery with leaders from business units and teams within over 975 organizations (such as Pfizer, ARUP, SES and Almac.
Research is based on data gathered via our performance analytics platform – Pitstop Analytics™ and the research frameworks published in our books Pitstop to Perform™™ and Growth Pitstop™.
Originally, planned as an ebook due for Qtr 2, the core concepts have been published in a whitepaper so as to engage the wider community in our research as it progresses.
A very special thank you to all those who have contributed to and guided our research.
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