Marina del Rey, CA – May 01, 2013 - In December, Human Capital Management Institute (HCMI) released a preview white paper to introduce the idea that human capital metrics can impact stock price changes. HCMI is pleased to announce that the full-length version is now available. This white paper clearly shows the impact of human capital metrics on a company’s stock price and continues to challenge the exclusion of human capital data in traditional public company reporting.
Can changes in human capital metrics explain movements (i.e., predict) in stock performance for companies? The answer is yes.
For this paper, over 22,000 companies across 12 industry sectors were analyzed in a multivariate statistical model. Six human capital metrics were tested along with other variables using 16 years of public company data from 1996 to 2011. Key findings include:
- Human capital impact on stock performance can be calculated and predicted. A 10% increase in select human capital metrics is associated with stock price gains of up to 29%.
- Human Capital metrics are significant for all sectors explaining 35% to 64% of the change in stock prices, far more than the typical 1-2% explained by net income.
- A New Financial Metric “Total Cost of Workforce” (TCOW) proves superior to traditional Revenue per FTE or Profit per FTE in explaining stock price changes.
- This study reveals surprising and alarming pictures of industry performance and productivity.
Jeff Higgins, CEO of HCMI says: “We can now answer the question not of ‘if’ effectively managing human capital using the right metrics impacts stock price, but how much it impacts stock price. We believe these metrics from the Human Capital Financial Statements (HCF$™) to be the most definitive means to quantify workforce productivity in existence.”
According to Dr. Don Atwater of Pepperdine University’s Graziadio School of Business and Management, Department of Economics, “The old news is that ‘people are our greatest assets (and costs)’, but what our research is showing is that there is a connection between companies that actually show that with their actions and those that do not in terms of shareholder value. There really are leaders and laggards.”
The Human Capital Management Institute was founded on the belief that organizations can, and must, find better ways of measuring their investments in human capital. We strive to fundamentally change the way organizations make decisions about their workforce, and our vision of the future is one in which human capital measurement and information is as integral to business decision making as financial information is today. Serving global clients, HCMI delivers advanced workforce intelligence training, assessments, consulting, and the world’s most advanced analytics and workforce planning modeling tools.