Global Firms to Measure Human Capital

Financial News, August 11, 2002 | Go to article overview

Global Firms to Measure Human Capital


Byline: Kit Bingham

Top US and European companies are paying increased attention to measuring the value of their people, according to a new study by the Conference Board, the business research firm..

In the modern age, a company's value depends more on the contribution of its "human capital" as well as brands and reputation than on tangible assets, and companies are seeking to measure how these intangibles impact on performance.

Investors, particularly public pension funds and social responsibility funds, are also seeking greater information from companies on human capital.

Stephen Gates, principal researcher in the Conference Board's capabilities management and human resources strategies research unit, says: "Many people are convinced that the way a company manages its employees makes a difference to the bottom line.

"But people are perhaps the most challenging of all assets to measure and manage. They contribute to the value of a company through what they can produce with their competence, relationship ability and values."

The study is based on a survey of senior executives in more than 100 companies from the Fortune 500 and Europe 500. Nearly 90% of those surveyed said that the main motivation for measuring human capital is to boost the bottom line.

For example, tracking absenteeism can help increase productivity, and benchmarking pay avoids a situation whereby overpaid, unproductive workers are retained while underpaid, competent people leave.

Investors are beginning to ask questions about the link between human capital and long-term shareholder value, and are launching shareholder resolutions and making investment decisions on human capital issues.

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