Watson Wyatt’s 2005 Human Capital Index® also links performance- and
stock-based compensation programs with higher shareholder returns
WASHINGTON, August 16, 2005 – Organizations with superior recruiting practices — such as filling jobs quickly, hiring their first-choice candidate and using employee referrals — financially outperform those with less effective programs, according to a new study by Watson Wyatt, a leading human capital consulting firm. The study also found that pay-for-performance and stock-based compensation programs are associated with higher shareholder returns.
Watson Wyatt’s Human Capital Index (HCI) study found that successful recruiting is a strong indicator of higher shareholder value. Companies that fill positions within two weeks provided total return to shareholders (TRS) of 59 percent between 2002 and 2004 versus 11 percent at companies that required at least seven weeks to fill positions. Additionally, companies that typically fill a position after just one offer is made had a three-year TRS of 44 percent versus 32 percent for companies that typically have to make two or more offers to fill an opening.
“An organization’s first opportunity to increase value is effective recruiting,” said Paul Platten, global director of human capital consulting at Watson Wyatt. “Companies that minimize the disruption and lost productivity caused by turnover create a significant advantage that allows them to outperform their competition financially.”
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