🎥 Watch: Talent Wars
Coach's Corner: GSV Founder & CEO Michael Moe on why Human Capital and Data must be incorporated into the Modern Financial Statement.
In addition to the Income Statement, Balance Sheet, and Cash Flows, a fourth component needs to be incorporated for the Modern Financial Statement…and that’s around enterprises’ Human Capital and Data.
In the Knowledge Economy, the success of an enterprise is directly correlated to the ability to obtain, train, and retain the best talent.
This is a significant shift from the Industrial Economy, where it was the return on property, plant, and equipment that generated more significant financial returns.
50 years ago, the four largest companies in the world sold at a median book value of 1.6 and a Market Cap Per Employee of $83,391.
Today, the world's four largest companies by market cap sell at a median price to book of 16.4X and a Median Market Value Per Employee of $11.2 million. In other words, the Price to Book is 10X higher, the employee count is 1/2, and the market cap per employee is over 100X higher today vs. 50 years ago.
As a leading indicator of future revenues and enterprise value, certain employee metrics deserve integration. These include revenue per employee versus cost, investment in training and development, turnover, and internal advancement versus external hiring, to name a few. We measure R&D spending as an indicator of future growth and sustainability and argue that measuring investment and “return on people” is logical too.
Click below to read this week’s full piece: EIEIO...Talent Wars