People, a good investment

Laurie Bassi is a rare individual. Research convinced her that companies that invest in their people just had to do better than penny-pinchers that cut training and payroll the moment the economy sours. She invested in a portfolio of stocks of companies that invest heavily in their people. The returns are "in line with a growing body of empirical research showing that organizations that make extraordinary investments in people often enjoy extraordinary performance on a variety of indicators, including shareholder return."


March 2004

How's Your Return on People?


Companies that invest in employee development can outperform the market. Just ask their shareholders.


by Laurie Bassi and Daniel McMurrer


"Managers are always claiming, “People are our most important asset.” But deep down, they can’t shake the feeling that employees are costs. Big costs. And they treat them that way. Quarterly earnings off? Cut the perks, rein in training, and downsize. This strategy may increase earnings in the short term, but it’s myopic. Recent studies suggest that layoffs actually destroy shareholder value. And our research shows that treating employees like the assets they are—by investing in their development—boosts returns over the long term."

"For years now, our research has measured the effect of spending on employee education and training—a “cost” that is buried in general and administrative expenses—on the stock prices of 575 publicly traded firms."

Every year for three years, Laurie and Daniel selected a portfolio of 20 to 40 companies that spent at least twice as much as their peers to develop their human resources. In 2003, these heavy investors in human resources outperformed the S&P by 17% to 35%.

Laurie Bassi ([email protected]) is the chairwoman and Daniel McMurrer ([email protected]) is the chief research officer at Knowledge Asset Management, a money management firm in Bethesda, Maryland.


Posted by Jay Cross at March 21, 2004 05:16 PM | TrackBack
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