About the Human Capital Index Study

The Watson Wyatt Human Capital Index is an ongoing study that quantifies thelink between specific human-capital practices and shareholder value. Conductedevery two years, beginning in 1999, it has a four-pronged objective: 1) toprovide HR with financial-performance metrics; 2) to test the belief that itpays to manage people right; 3) to help managers assess their human-capitalinvestments; and 4) to determine whether some HR practices offer a “biggerbang for the buck” than others.

    Seven hundred and fifty large publicly traded companies in the United States,Canada, and Europe took part in the 2001 study. Human resources executives atthe companies were asked a wide range of questions about how the organizationscarried out their HR practices, including pay, people development,communication, and staffing. Their responses were matched to objective financialmeasures, including market value, three- and five-year total return toshareholders, and Tobin’s Q, an economist’s ratio that measures anorganization’s ability to create value beyond its physical assets.

    The 2001 survey linked 49 specific human resources practices to a cumulative47 percent increase in market value.

    To view the results of the HCI study, go to www.watsonwyatt.com/hci.

Workforce, November 2002, pp. 43 — Subscribe Now!