There is an increasing amount of hard evidence that good people management, strong leadership and healthy organisational culture have a significant and long-term impact upon a company’s performance. So why don’t analysts get it?
By Craig Donaldson
There is an increasing amount of hard evidence that good people management, strong leadership and healthy organisational culture have a significant and long-term impact upon a company’s performance. So why don’t analysts get it?
This is often a thorny issue for both HR professionals and chief executives who do lead by good example. At Human Resources magazine’s most recent editorial board meeting, members discussed this very topic and bemoaned the fact that many analysts fail to understand the real indicators of company performance and, as a result, take a shortsighted view when making assessments of future performance.
CEOs such as ANZ Bank’s John McFarlane and St.George Bank’s Gail Kelly spend a considerable amount of time educating analysts about true lead indicators versus lag indicators. It’s often a frustrating exercise, but there are few early and promising signs that some analysts are beginning to get it.
As our front page story, ‘Time to deal with ‘short-termism’,’ notes, there is a compelling argument for change given international alignment of accounting principles, particularly in the area of new corporate reporting models based on true value drivers such employees’ professional development and other intangible assets.
Old habits are hard to break. It can be much easier for analysts to simply look at the figures and make assessments based on these. But, as the story notes, companies can work with analysts to educate them about extra-financial indicators of performance in order to build a durable, long-term portfolio.
HR can play a significant role here, but it is a much more demanding and accountable one that previously undertaken. Many organisations and their HR departments are ill-prepared to provide the workforce data required. The development of a solid portfolio also requires a significantly expanded skill set from HR professionals themselves.
There is plenty of research out there to support the links between real lead indicators and long-term value. But it also takes a willingness on the part of HR, and the listening ear of a chief executive to get past first base – something that many practitioners often struggle to get, unfortunately.
