Companies with the best people management practices deliver
nearly twice as much value to their shareholders as their average competitors,
according to a study of 600 employers in the UK and Europe.
The research by Watson Wyatt reveals that employers with good HR practices
have increased shareholder value by more than 70 per cent since 1997, compared
with less than 35 per cent among firms with average or poor HR.
The Human Capital Index (HCI) finds that companies with top-rated HR
functions – that help align people with business aims, control costs and make
use of focused HR technologies – can add to shareholder value by as much as 21
Firms with competitive reward strategies and aligned performance management
systems, which help create a sense of staff ownership, can generate shareholder
gains of 21.5 per cent.
Steven Dicker, co-author of the report, said: "The perception that HR
is a non-strategic business overhead still persists but this is wrong. Our
research has again demonstrated the strong link between effective human capital
management and shareholder value."
The report also claims that employers with high HCI ratings for recruitment
and retention can boost shareholder return by more than 14 per cent.