he Watson Wyatt Human Capital Index is an ongoing study that quantifies the
link between specific human-capital practices and shareholder value. Conducted
every two years, beginning in 1999, it has a four-pronged objective: 1) to
provide HR with financial-performance metrics; 2) to test the belief that it
pays to manage people right; 3) to help managers assess their human-capital
investments; and 4) to determine whether some HR practices offer a "bigger
bang for the buck" than others.
Seven hundred and fifty large publicly traded companies in the United States,
Canada, and Europe took part in the 2001 study. Human resources executives at
the companies were asked a wide range of questions about how the organizations
carried out their HR practices, including pay, people development,
communication, and staffing. Their responses were matched to objective financial
measures, including market value, three- and five-year total return to
shareholders, and Tobin’s Q, an economist’s ratio that measures an
organization’s ability to create value beyond its physical assets.
The 2001 survey linked 49 specific human resources practices to a cumulative
47 percent increase in market value.
To view the results of the HCI study, go to www.watsonwyatt.com/hci.
Workforce, November 2002, pp. 43 -- Subscribe Now!
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