Companies spend three times as much per year on talent as they do on capital assets, and business leaders often think of talent as an operating cost to be minimized. But that’s a shortsighted belief, according to Senior Partner Fernando Perez and colleagues, noting that few companies attempt to calculate their ROI in labor with the same rigor they apply to ROI in capital assets.
Image description:
A horizontal stacked bar chart displays the average investment mix in 8 major industries from 2010–21, categorized by talent and capital investment, expressed as percentages. The chart lists the industries vertically: healthcare; industrial; pharma and medical products; business services; consumer; travel, logistics, and infrastructure; materials; and energy. A final row presents a global average. A third column provides the talent-to-capital investment multiple in text form.
In healthcare, 88% of investment went to talent, and 12% to capital, resulting in a 7.3x multiple. Industrial shows 83% in talent and 17% in capital, with a 4.9x multiple. Pharma and medical products invested 82% in talent and 18% in capital, giving a 4.6x multiple. Business services invested 81% in talent and 19% in capital, for a 4.3x multiple. Consumer shows 77% in talent and 23% in capital, with a 3.3x multiple. Travel, logistics, and infrastructure show 76% in talent and 24% in capital, for a 3.2x multiple. Materials shows 74% in talent and 26% in capital, resulting in a 2.8x multiple. Finally, energy appears to be an outlier, with 48% in talent and 52% in capital, for a 0.9x multiple. The global average across these industries shows 74% invested in talent and 26% in capital, with a 2.8x multiple. The chart notes that analysis of conglomerates, financial services and insurance, real estate, and technology, media, and telecommunications were not included.
Note: This image description was completed with the assistance of Writer, a gen AI tool.
Source: Value Intelligence by McKinsey.
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To read the article, see “The missing productivity ingredient: Investment in frontline talent,” February 27, 2025.