I recently re-discovered a study conducted by the Boston Consulting Group (BCG) that reveals the relative value produced by each of the different HR functions.

The findings may surprise you.

The table below provides a summary of the BCG findings as they relate to the relative business impact of the different HR functions.

Note that the “x” (times) next to a number in the chart stands for the impact that the most capable companies achieved over the least capable companies. Obviously, the higher the number, the more important it is that your organisation has a highly capable function.

Ranking Function The impact that the most capable companies achieve over the least capable companies in…

…revenue growth

…profit margin

1

Delivering on recruiting

3.5x

2.0x

2

Onboarding and retention

2.5x

1.9x

3

Managing talent

2.2x

2.1x

4

Employer branding

2.4x

1.8x

5

Performance management and rewards

2.1x

2.0x

6

Developing leadership

2.1x

1.8x

7

HR processes

1.8x

1.8x

8

Global people management

1.8x

1.7x

9

Employee engagement

1.8x

1.6x

10

Outsourcing HR

1.6x

1.7x

11

Workplace diversity

1.6x

1.5x

12

Cultural change

1.5x

1.4x

13

HR technology

1.5x

1.4x

14

Strategic workforce planning

1.4x

1.5x

15

Learning programs

1.5x

1.4x

16

Corporate social responsibility

1.5x

1.3x

17

HR involvement in strategy

1.4x

1.4x

18

Workplace health

1.2x

1.5x

19

Managing flexibility and labour costs

1.2x

1.4x

20

Restructuring

1.2x

1.3x

21

Managing work/life balance

1.1x

1.2x

22

Managing an aging workforce

0.8x

1.1x

High-performing companies consistently did more in all major activities within these functions than their low-performing peers, but in certain activities their efforts truly stood out.

For example, companies adept at recruiting enjoyed 3.5 times the revenue growth and 2.0 times the profit margin of their less capable peers.

The lowest-ranked function of them all, managing an aging workforce, actually had a negative impact on profit growth (meaning that if you invest in it, you will actually hurt your organisation).

Does this mean that good HR practices drive good performance? Or that good performance enables good HR practices? To claim a direct cause-and-effect link here would be overreaching. But probing the relationship between HR practices and business performance is a worthwhile exercise if it sheds light on those activities that seem to be particularly beneficial.

See full article.