This Week's Herman Trend Alert

Leadership in Normal 2.0

  The Herman Trend Alert

March 26, 2003

Workforce Issues Moving to the Bottom Line

We have emphasized how employee retention, worker productivity, recruiting, and training costs affect a company's bottom line. These "soft costs," hard to quantify, influence capacity to meet customer expectations and, consequently, affect financial performance.

Though not particularly prevalent yet, monitoring of corporate workforce issues by industry analysts is growing. Researchers at stock brokerage houses gather a wide range of information to guide their professionals who advise investors. Employee turnover, on both an industry-wide and individual employer basis, is becoming part of that picture. Since standardized human resource metrics are not in consistent use, researches rely on news reports, industry studies, and other indicators. One analyst told us that he gives preference to companies that have earned recognitions that include a workforce stability or satisfaction component in the qualification process. "Earning these designations at least demonstrates a deliberate consciousness on the part of management," he explained.

In addition to stockbrokers and investment advisors watching workforce issues, bond analysts are sensitive to employee loyalty and performance. For example, healthcare organizations striving to expand usually raise capital through the issuance of bonds. The rate of interest they are required to pay for the funding is determined by the organization's bond rating. Specialists who establish, review, and modify those ratings now include issues like workforce stability and vacancy rates in their evaluations.

Employers will increase attention to workforce issues as they discover that investors are giving more weight to concerns like employee turnover rates, workforce capacity, and strategic staffing. Senior executives, most concerned with how their companies are perceived by wary investors, will expect higher results from their human resource professionals. Much of this responsibility, however, will fall to line managers who are directly responsible for performance and retention. Wise employers will increase training and people performance standards for their managers.

Difficulty achieving desired human resource results will build a new vulnerability among publicly held corporations. This emerging sensitivity will influence management of corporations that are not publicly traded, as well.

As the economy heats up, creating more job opportunities and stimulating employee turnover, investment analysts will be watching. Workforce stability will be important.

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