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Personnel Today

HR works wonders on share price

by Personnel Today 31 Oct 2000
by Personnel Today 31 Oct 2000

Job security makes staff complacent and has a knock-on effect on the bottom line, research published today has found.

Drawing on its analysis of HR practices in 250 firms across Europe, consultants Watson Wyatt say the paternalistic culture in European firms is lowering shareholder value by up to 7.5 per cent.

“While there is nothing inherently wrong with retaining staff and providing job security, it can be damaging when it is unfocused,” say authors of The Human Capital Index European Survey Report 2000. “It may lead to passive learning and an environment of command and control where seniority, effort and activity are rewarded, rather than performance.” They recommend an optimum turnover rate of 12 to 26 per cent a year.

The report cites excessive employment protection legislation in Europe as a reason for a paternalistic working environment. Overall, the authors estimate that key HR practices can raise a firm’s market value by up to 26 per cent.

Jose Pottinger, HR director at Powergen Worldwide, said turnover of 12 to 26 per cent is extremely high. “It is about getting the balance right between fresh ideas and fresh blood, and stability, continuity and experience.”

www.watsonwyatt.com

Personnel Today
Personnel Today

Personnel Today articles are written by an expert team of award-winning journalists who have been covering HR and L&D for many years. Some of our content is attributed to "Personnel Today" for a number of reasons, including: when numerous authors are associated with writing or editing a piece; or when the author is unknown (particularly for older articles).

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