Investors in People, Managerial Capabilities and Performance

Executive Summary: Investors in People (IiP) UK commissioned the Centre for Business Performance at Cranfield School of Management to investigate the impact of Investors in People on managerial capabilities, managerial performance and business results. In this study, we took three different approaches. Firstly, we conducted in depth case studies in seven different organisations. Through a series of interviews with HR professionals and line managers, we investigated the impact Investors in People had on management capabilities and managerial performance, probing their understanding of how good management delivered business performance. Secondly, we conducted a survey across some 400 small, medium sized and larger companies based in the UK. Senior, middle and junior managers provided data on their understanding of the role of Investors in People, the company’s managerial capabilities, the performance of managers, and the company’s financial and nonfinancial performance results. Thirdly, we accessed published data from returns to Company’s House (as provided through the FAME database) to test the linkage between perceptions of managerial performance and firm profitability. The companies we visited for our case studies highlighted the differences in managerial capabilities and performance between Investors in People recognised companies, and nonrecognised companies. They also illustrated the differences in organisational commitment to people and their development and provided practical examples of tools being successfully used to build management capabilities. In our study, we found empirical evidence showing that Investors in People: Enhances managerial capabilities - that is to say the knowledge, experience and skills of managers. Supports the development of an organisational learning culture. Improves the effectiveness of management development practices. Facilitates the creation of a high-performing environment. Increases the performance of managers. Furthermore, working with Investors in People triggers a chain of events (see figure 1). Investors in People recognised companies have better managerial capabilities that engender higher managerial performance, which leads to better perceived non-financial and financial performance, resulting in higher profitability - as shown in their published accounts – than nonrecognised companies. Managers play a key role in delivering business performance. This research shows how Investors in People underpins effective management through its impact on the development of management capabilities and management performance. Also, we conclude that the more companies embrace Investors in People, the better their performance will be.