Talent Value Cell

The Building Block of HR Analytics

Most companies view their total talent cost (TTC™) as one, undifferentiated lump of dollars (Normally called ‘Employee Cost.’). Some companies go further and review Employee Cost as a % of revenue. Attempts to reduce employee cost as a % of revenue is the most common action in talent economics.

Once you are on such a track of reduction, you cannot help but review spans and layers, front to back-office ratios, other such metrics, benchmark them and try to bring them in line with the lowest in the industry.

All these efforts that focus on cost reduction, ignore the value created by talent.

To pivot to value creation, you need to do something different.

That is where the method of Talent Value Cell™ (TVC™) comes in.

The idea behind TVC is to view your total talent cost as a portfolio of costs. To unpack the portfolio, you need to parse the total talent cost into value cells. Once that is done, you can review Revenue, Cost and Profit per employee for each value cell. This exercise will reveal relationships between costs and value that you had never seen before. It will reveal pointers to HR strategy that never came to light before.

How do you create a TVC?

In general, a TVC has three parameters. For example: Senior Vice Presidents in a business unit in US can be a talent value cell. Or Data Scientists in a business unit in India could be another talent value cell.

In the above examples, the three parameters of a TVC are:

·       Job band/capability

·       Business unit

·       Geographical location.

Once you identify the three parameters relevant for your business* you should parse out your total talent cost into value cells determined by these parameters. It is possible to have more than three parameters if they make sense for your business strategy. The key is that you are able to parse out your entire talent cost into individual value cells.

The next interesting step - one that will reveal powerful insights - is to compare the movement of revenue, cost and profit per employee of each value cell over a time period (generally 3 years). As you compare value cells with each other, you will already begin to see where value is being created and where it is being destroyed.

One more step will enhance the analytical power of these value cells: Calculate the total revenue, profit and cost of each value cell AS A PROPORTION of total revenue, profit and total talent cost of the company. Compare the value cells and see how the data moved over a time period.

Once you have this data, what do you do with it?

In my next newsletter, with the aid of a few diagrams, I will suggest action plans and strategic direction based on insights derived from value cells.

*Write to me if you need help identifying parameters relevant for your business.