According to research by Watson Wyatt, companies with the best people management deliver nearly twice as much value
to shareholders as their average competitors.

The research studied people management practices in over 600 companies from 16 countries across Europe and combined this with independent financial data. It showed a clear link between specific people management practices and financial performance.

Steven Dicker, a partner at Watson Wyatt and co-author of
the HCI (Human Capital Index) report said: “Great people management is linked with a 90% increase in shareholder value. It is an amazing figure at first sight. As well as highlighting the gulf between the best and the rest, we believe it reflects the growing emphasis on people management within businesses as other sources of competitive advantage prove increasingly difficult to sustain.

“With the return to real-world economics after the bursting of the ‘tech’ bubble and unwinding of the 1990s’ creative accounting, most businesses are fundamentally ‘people businesses’. Increasingly, it is the quality of a company’s people management that determines its real success or failure.”

Doug Ross, also a partner at Watson Wyatt and co-author of the report, highlighted three practices that stand out in the Watson Wyatt study as undermining financial performance: using contract workers to provide ‘a disposable workforce’, developmental training and excessive
paternalism.

According to the HCI study, companies that have avoided the ‘disposable worker’ approach delivered up to 5.6% more
shareholder value than average performing companies.
Companies that limit their use of developmental training deliver up to 5.2% more shareholder value than average companies. Companies that were overly paternalistic
lost up to 5.2% of shareholder value compared with average companies.