Quantitative Goals Beat Softer Targets
The 2001 Human Capital Index (HCI), released by Watson Wyatt also found that when technology is used primarily to:
- help reduce costs, the market value of the company increases by 2.3%
- improve employee service, it increases by the same amount, and
- increase transaction accuracy, market value increases
by 1.9%
However, company market value falls by 6.6%, when technology is used to promote a common corporate culture, and drops by 7.7%, when it is used to enhance communication.
The HCI data also measured the impact of HR technology choices on total returns to shareholders over a five-year period. The study found that companies with fewer than 1,000 employees that chose:
- Enterprise Resource Planning (ERP) systems lost 19% for shareholders,
- to take the total outsourcing route, lost 12%, and
- to integrate their HR applications, gained 5% for
stockholders
While large companies, with over 10,000 employees, who chose:
- ERP systems, saw a 92% five year total return,
- the total outsourcing route, posted a 71% return, and
- the integration option, posted a 82% return
The HCI study was based on a survey of human resources
practices at 750 North American and European companies with
a track record of at least three years of total returns to
shareholders, 1,000 or more employees and/or a minimum of
$100 million in revenues or market value.