ROI of HR Policies

Peter Cappelli talks on the ROI on HR Policies in an article on HR Executive online.

He tells how a paper written by his Finance colleague Alex Edmans shares that In Does the Stock Market Misvalue Intangibles? Employee Satisfaction and Equity Prices, he found that the firms in this category in 1998 earned a rate of return that is double the market average by the end of 2005.

In a world where everything about public companies is driven by stock prices and where investment managers kill for one basis point improvement in portfolios, finding an attribute of firms that predicts a 100 percent gain in shareholder value -- that is 10,000 basis points -- is a truly stunning finding.

And unlike the "flavor of the month" findings from the world of consultants showing the performance effect of using this tool or that tool, these results are carefully done and credible. The question, though, is what do they mean for us?

In particular, what do they mean for people who are interested in human resources, especially for those who advocate that companies spend more time and money becoming better employers?

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Since this study found a lot of takers from the HR world, it does suggest the impact it can create on the future performance of the organization. Organizations that are typically " Best employers today" just go on to show that they would be more profitable than the market average. This also means that a foundation of profitability and productivity is set on the value / emphasis that organizations place on the talent.
However I would like to view it as a concerted effort to build the " Employer Brand" that can really make an impact here. I think this is the rise of HR Marketing and the important of marketing professionals in the HR function.

HR is being increasingly seen as the external face to the organization, this changed role is making it imperative on the organizations to ensure that adequate steps are taken to not just to ensure that employer brand is built but with Enterprise 2.0, we would see newer ways of employer branding. Would that mean that all organizations would be doing it, not really it would require an organization to reach a certain threshold before they can do anything in this area.