If the fantastic results of IIP seem too good to be true, take a look at the Hambleden Group's evidence of 2300 firms who have improved productivity, increased profits and reduced customer complaints

THE best way a company can improve its financial performance is by investing in its own people - and that's official, according to a landmark report by the Hambleden Group. Hambleden, awarded part of the contract for the Investors in People national pilot project in 1990, provides extensive evidence that the most compelling way in which a company can boost profits is by offering appropriate development to its own people.

This is a crucial message, because interest in the IIP standard is now so wide (more than 30% of the UK workforce are employed by firms enjoying IIP status) that companies cannot afford to lose sight of the fundamental IIP principles in their everyday operation. It was designed as a tool to improve competitiveness and business performance through a framework for best practice in human resource development. And the Hambleden Group report offers proof that companies which observe both the spirit and the letter of IIP are leaving their less imaginative competitors behind in the market-place.

''The first strand of our research was to find those really successful businesses,'' Hambleden Group founder Duncan Collins said. ''Not the big bureaucratic monoliths but smaller, dynamic, rapid growth businesses. And not just those in exciting new sectors.''

A major exercise using financial accounts ranked companies according to performance over the last three trading periods. Eventually 500 businesses were identified which were ''experiencing hyper-growth (doubling annual sales/staff and growing every year in return on capital/total assets)''.

Hambleden focused on one feature they all shared - their strong commitment to people development. This led to the compilation of a wider list of 2300 companies

The percentages by which the hyper-growth companies were outperforming others operating in their sector were amazing: return on sales 192%; return on capital employed 97%; return on assets managed 41%; average remuneration 79%; turnover per employee 106%; profit per employee 734%.

''Companies which are committed to people development obtain higher prices for their goods and services. They control their costs better. They make their capital work harder. They can afford to buy the best people on the market to work for them. They get more out of their employees in sales, productivity and profitability.''

And, should any further incentive is required, he says: ''If the average company worked for, and gained, the same standard, it could target similar performance improvements. For instance, in a company with annual sales of #1m, these performance improvements could translate into a pre-tax profit increase of #49,600, rising on a similar basis for every extra #1m of sales.''

All 2300 companies researched by the Hambleden Group are recognised Investors in People. ''In other words,'' Collins said, ''their boards of directors are publicly committed to developing people as a core business strategy, have undergone assessment and have been successfully accredited.''

Firms which have adopted the IIP standard have shown striking bottom line benefits in the last five years. Boots the Chemist has improved its operating margins from 7% to 11%. Cadbury Schweppes Bournville has achieved improved productivity by cutting non-productive downtime at its chocolate plants by a quarter. Hotpoint has made savings of #2m a year at its Peterborough factory through better team-work arrangements. Nationwide has reduced customer complaints by 59% and 26% in the last two years. Improved motivation at Powergen has seen absenteeism fall to 2% from 7% in the mid-1980s.

What distinguishes these hyper-growth or ''world-class'' businesses from the average business? Any company, Collins explains, has three normal streams of activity:

n Marketing - obtaining orders from customers

n Operations - getting the goods or services to customers

n Finance - controlling working capital.

However, with a world-class business there are four streams of activity:

n Marketing - finding out what customers want and obtaining orders from them

n Operations - getting the goods or services to customers as promised

n Finance - controlling working capital for a high return investment

n People - investing in human capital so as to have the above capabilities.

Therefore, the emphasis on people development is a crucial extra dimension which leads to enhanced success in the marketplace. In a company which actively operates on these four principles, top management invariably are publicly committed to developing people; continuously plan the development needs of groups and individuals; take vigorous action to train and develop people from induction to exit; evaluate the financial return on their training and development expenditure.

It is a powerful message. Those companies which have devised a strategic and consistent policy for human resource development will go on to reap tangible rewards in their business dealings. Nor is such a policy difficult to put in place and sustain. After all, IIP, according to Collins, is based on simple and proven principles. ''You can benchmark yourself tomorrow against this most important of national standards by accepting the challenge of undergoing a simple diagnosis. It costs little, takes very little of your time and will give you a fascinating insight into the strengths and gaps in your business.''

The Scottish Investors in People office has issued further information for interested companies on the time and cost involved in preparation for IIP status. ''Some organisations will be ready now,'' it says. ''Some will take longer. Most companies will require at least one year to undertake the development activities necessary to reach the national standard. All organisations are eligible - large or small - whether in the public or private sector, service or manufacturing, independent or part of a larger group.''

It has no doubts about the value of achieving IIP status. ''Proven business benefits include increased productivity and efficiency; increased profits; increased market share; maximised effect of training budget; higher skill levels; a more flexible workforce; reduction in staff turnover and absenteeism; competitive edge when seeking preferred supplier status; becoming employers preferred by graduates, skilled workers and school leavers.''

It all seems appealing, so why has the rush for IIP status not materialised in Scotland to the extent that it has south of the Border? ''Scotland came in two years behind England,'' says Collins. ''For that reason it has more ground to make up, though there is evidence of real interest growing now. I have been speaking recently to groups of business people in Glasgow and Grampian, and I am scheduled to visit Dumfries and Galloway later in the year.

''Our research has made people take notice. I find that they are more in tune with the message that it is good for their business. They accept that something of significance is lost when the personnel function is not represented at board level. Marketing is becoming more human-resource orientated all the time.''

He speaks warmly of the strong sponsorship of the IIP programme being offered in Scotland by bodies like Glasgow Development Agency and highlights the high-quality performance already delivered by some IIP adherents such as the Moat House Group and Gleneagles Hotel.

It all comes down to the firm's vision, motivation and commitment. ''IIP forges a visible contract for a successful relationship between employer and employees, thus enabling the company's business objectives to be achieved. It assists any organisation to develop its own best practice model to govern the development of its business to world class standards of performance.''

Large or small, with the right attitude there is no reason why you can't do it, says Collins. Go ahead and ''be recognised as a world class business''.