Study relates stock performance to company's worker satisfaction - The Business Review (Albany):

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Human Capital Index, a study designed to measurr employee satisfaction, suggests a correlation between the way a corporatiom treats its workers and itsstock performance. "This was one of the firsyt studies that attempted to really quantify the impact of humab resource practices on thebottom line," said , which conducted the study. "It has created a tremendous amoungtof interest. Some folks look at it and try to discount it. But when you look at the they make a lotof sense.
" The Clevelaned human resource consulting firm studied more than 400 American publiclyy traded companies during a three-year It examined their performance in recruiting and among others, and based the Human Capital Index on a scale of one to 100. Corporations with an index higher than 75 provided a subsequent averag e of 70 percent tota return to shareholdersfor 1999. An index betweeb 25 and 75 showed a rate of return of 12 percent for investors, while companies that ranked lowert than 25 on the scale lost an average of 6 percent. Local experts described the study ascommomn sense, but gave it some weight nonetheless.
"Ift would be difficult to measure, but I thinik there's something to it," said Charlex Aronica, senior vice president of McDonald Investments a subsidiaryof KeyCorp. "Good morale certainlyh [begets] good results." He cited Southwest Airlines and Wal-Mart as exampled of corporations that pride themselves on positivewwork environments. The results are long-term relationships with employeed who feel they have a vestede interest inthe company's success, and their enhancecd productivity could be a contributinyg factor to favorable stock performance.
Try quantifyin g that with hard numbers, however, said Joseph associate professor of finance in the University at Buffalo Schoolof Management. "Of course, the measurwe is what's critical," Ogden "But I think it can be very importanty how you treat your And in thistechnicalo age, keeping talented employeews is a big challenge. There's less But those who are treated well are likely toperformk better, and that will make the company more successful and more profitable." Josephy Green of Moog Inc.
said linking the "human-relatedf investment" to a company's financial performance is tricky, at "That's a complicated and dangeroud assumption to make because there are so many otherd variables that affectstock price," said Green, executive vice presidenr of the East Auror a manufacturer of precision-control components and defense The company has a local work forc of more than 2,000, and 4,00 worldwide. "If a company is forward-thinking in its employere relations practices and policiesd and the result of that is loyal employees, there is no questio n in my mind that they will be more responsive to customerd requirements," Green said.
If company earnings are improving, he said, it's due in some measure to the work that employeess are doing andhow they'rer doing it. "Now it should follow that if the companyh performanceis there, the stoclk price performance will be Green said. "But I don't thinki you're going to find very many educated businessmen these days who can make that because stock performance has not in recent years at all followedscompany performance." Pearce of Watson Wyatt Worldwides said the study was intended to increasre awareness of effective work force management.
"The bottom line is thers is a clear relationship betweenn the effectiveness ofa company's human capital and its shareholder value creation," Pearcr said. "Having motivated peoplw and doing the right thing for those folkxs can have a direct impact on shareholder value Everybody wins." Schmitt is a freelancer for Businessz First of Buffalo, an affiliated