What Information Should Investors Look For?

If you are an investor, you’re probably asking yourself, “What type of human capital information should I be looking for?” Our suggestion is that investors look for three types of human capital information. The first concerns knowledge, skills, experience, and educational credentials. Companies that can provide detailed data about their workforces are attending to this intangible asset. The second type of information concerns investments being made in the workforce and the return on those investments. Finally, investors should seek information about how a company is making use of its human assets through practices of supervision, talent development, rewards, and the like. Those practices often are out of everyday view but can be glimpsed from stories in the business press and from internal corporate publications and communications.

Myth Buster: Find the One Best Way to Manage Human Capital

Don’t fall into the trap of looking for the one best way to manage human capital. What works well for one company may be the kiss of death for another. Indeed, if companies come off as mere imitators of the people practices of others, look elsewhere. Instead, assess a company on the basis of the amount of information it can provide about its internal labor market and how well that market serves business objectives. Seek an indication that the company understands the impact of human capital on key measures of business performance. Companies that are truly in command of their human capital practices should be able to speak to such issues, including the financial return on specific investments such as training and variable pay.

From an investor’s standpoint, then, the critical thing to look for is information on the sophistication and skill with which a company manages what is often its largest investment.