When a layman is asked where a company invests. Most will ask about the organisational structure which is quite nominal but when the answer some do tend to forget that the employees are also an asset, in-short a very complex investment in terms of money, trust, time and whatnot. Though we say so, we never simply could apply the capital investment ideas directly in Human resources. We always want to divert resources of our mind thinking that a big company is big and having a mammoth growth rate simply because they estimated the most profitable products and profitable managers, consultants and that’s how their growth rate skyrocketed. Some yet to understand people think of some classic VCR or cellulose era kind of movies that showed about throwing money, doing corruption and ruling all. Of course, corruption simply destroys the whole machinery in running but throwing money may not simply be a winning Jackpot always. To the surprise of many, investing all resources in the most profiteering products never always yielded a successful result and this is the idea, which does apply co-incidentally in Human Resource.
Pic Credits: PandoLogic
Today most of the Companies try to analyse or approach a consultancy to get analysed many factors waiting to act as a sunny day or a thunderstorm when it comes to creating strategies about allocating the right resources to their different departments as they would have done while investing in different products. Here’s a widely used framework for your reference.
The best thing for Managers since the printing press
The Boston Consulting Group (a leading Management consulting firm) devised the Growth-share matrix in 1968 to aid organisations in evaluating and allocating resources to their different product lines. The matrix has been used since 1968 to help companies gain insights on what products best help them capitalize on market share growth opportunities. Meanwhile, some of the companies have adopted it while hiring in their own company.Reeves Martin, senior partner and managing director of the Boston Consulting Group said that nearly 50 years after its inception, the BCG matrix remains a valuable tool for helping companies understand their potential.Here the x-axis shows a product line’s market share and the y-axis shows the product line’s growth rate. We, therefore, have four quadrants as follows:
Stars: Product has a higher market share with its Industry growing rapidly
Cash cows: Product has a higher market share with its Industry slowly growing
Question mark or Problem child: Product has a lower market share with its Industry growing rapidly
Dogs: Product has low market share and Industry slowly growing
Typically, when any company launches a product, it starts as a Question mark or simply the problem child. The product will have a low market share with a fast-growing industry. If nurtured well (with the right investment, strategy, and people), the Problem child can turn into a Star i.e. a high market share company relatively fast-growing market.
Although Stars typically need an ongoing investment for the organisation to retain their market dominance, fend off existing & upcoming competition, meanwhile, sometimes to keep growing the market, it is loved by everyone in the market. As the industry reaches a certain size and starts slowing down, Stars turn into Cash cows – products that have a high market share in a slow industry/environment.
Cash cows are “boring” because both growth and innovation are slow, but they are highly valuable in terms of generating profits for the company. Despite that fact, the company keeps “milking” the Cash cow. As the industry slows down further or as more competition enters the industry seeing the Cash cow’s high profitability, the Cash cow slowly loses its market share and becomes finally a Dog – with a low market share in a slow-growing industry. Dogs may not be loss-making, but companies like to sell off or shut down Dogs as they reduce the Organisation’s Return on Investment. The hope is always that a Question mark turns into a Star and then a Cash cow. But sometimes, the Question mark turns into a Dog and the company loses money on it.
You can read more about the BCG matrix here: http://www.businessnewsdaily.com/5693-bcg-matrix.html
How it can be used in HR industry?
The companies evaluate the services & product lines they provide on the BCG matrix and see how the organisation is allocating resources (time, people or money) and if there is something which can be changed? Some may say, that it’s quite an indirect way of its effect on Hiring but the truth is it has a multi-directional impact in some mythical flowchart with good lot converging meetups or diverging junctions.
Stars: Candidates or Employees having higher output share as an individual, with career experience and growing rapidly. They do produce great results, clientele inflow, newer investments and increasing profits. The industry’s growth is nearly proportional with expectations from them.
Cash cows: Employees having significant output share with their skills and capabilities slowly growing. These are usually people who have served the company for long with dedication and loyalty. The industry’s growth is though affected by their work, the expectations are simply for profits.
A question mark or Problem child: Often the New Recruits having a low output share but the relation of the company’s projects with its Industry growing rapidly dependent on them too to a significant level.
Dogs: Employees having output share be it direct or indirect. Their output share and project results are slowly growing or improving but at times may turn liability to the company.
The nature of jobs sometimes loses their relationship with what we think as they are. A loyal fourth-grade government employee or their counterpart in the corporate sector has always made a significant contribution to the company but in indirect ways which very fewer people other than an HR person knows. Of course, Mr Pichai was once a newly recruited employee too, but it was the joint investment that we see Google as it is now.
Extra HR Idea: When in doubt, Create a 2*2 Matrix
BCG is one of the most popular examples of a 2*2 Matrix. But such matrices can also be used in a few question areas to define a reliable solution even in your personal life. One such example is the cost-benefit analysis where on a 2*2 matrix on the x-axis you can show the cost of products and on the y-axis, you can plot the benefits provided by-products. Out of the four combinations high cost- low benefit, high cost – high benefit, low cost – high benefit and low cost – low benefits – the products with lower cost and greater benefits are obviously worth spending your money on.Here’s an example of one such 2*2 matrix published by Harvard Press to help you prioritise the skills to learn right now. It can be accessed at https://hbr.org/2017/09/a-2×2-matrix-to-help-you-prioritize-the-skills-to-learn-right-now
An alternative for another perspective
Though a promising tool, the BCG matrix isn’t for every business. Some companies find they don’t have employees in each quadrant, nor do they have a steady movement of their projects and its members among the quadrants as they progress in their life cycles.
Some experts advocate the use of the GE/McKinsey matrix instead, which offers little more categorization options and measures products according to business unit strength and industry attractiveness rather than market share, the complexity of which may be outside an individual company’s control. Comparing the two models can reveal hidden insights that fuel increased growth for your company. It can be accessed at http://www.quickmba.com/strategy/matrix/ge-mckinsey/
Because finally, employees are not tools but humans who are the biggest natural resource made by nature. The resource that is too inhuman to think about just profiteering though it is never at the expense of downfall.
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2 responses to “Can BCG Matrix mean better HR?”
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