How employee knowledge, skills and engagement can drive long-term growth and efficiencies
In brief
- Human capital plays a critical role in driving long-term growth and operational efficiencies at both the macroeconomic and the corporate level.
- Human capital factors, such as employee knowledge, skills and engagement, can materially impact a company’s operational performance and economic value. As a result, analysis of human capital factors can provide insights relevant to investors.
- While the current availability of reliable human capital data is somewhat limited in certain jurisdictions, we expect upcoming regulations and frameworks to improve data quality and granularity in the near future.
Introduction
Intangible assets are accounting for an increasing share of corporate valuations, indicating a paradigm shift in how value is created and future growth potential is viewed. In contrast to tangible assets, such as buildings, machinery and inventory, a company’s intangible assets have no physical substance. These non-monetary assets include intellectual property, brand recognition, customer satisfaction and human capital.
With investors and financial analysts placing greater emphasis on evaluating intangible assets, and a growing emphasis on social themes and disclosures within the regulatory space, this paper discusses the financial materiality of human capital in companies, and reflects on the implications of our findings for investors.