Study: Nurturing Employees Produces Business Success

October 29, 2001 ( - If you're nice to your employees, chances are you're also a business success.

That was the primary message from a new Watson Wyatt study, which found that “superior” HR practices are an effective indicator of healthy financial returns and increased shareholder value.

The year-long study reported that companies with the best HR practices provided a 64 % total return to shareholders over a five-year period, more than three times the 21% for companies with the weakest HR practices.

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The HCI study identifies HR practices that find their way to the bottom line, including 43 that play the greatest role in creating shareholder value. 

According to the study, a significant improvement in all practices is associated with a 47% increase in market value.

The 43 practices are divided into five key areas, and the research quantifies exactly how much an improvement in each area is expected to increase a company’s market value.

HR practices and the amount of bottom-line improvement include:

  • total rewards and accountability 16.5%
  • collegial, flexible workplace 9.0%
  • recruiting and retention excellence 7.9%
  • communications integrity 7.1%
  • focused HR services technologies, 6.5%
  • making a stronger effort to link pay to performance, 6.3%
  • capitalizing on basic communication technology, 4.2%
  • flexible work arrangements, 3.5%.

Watson’s 2001 Human Capital Index (HCI)  study is 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 (TRS), 1,000 or more employees and a minimum of $100 million in revenues or market value

Copies of the report are available for $20 on Watson Wyatt’s Web site .