People Processes Can Provide an Investor Upgrade

 -  2/1/12

Financially high-performing firms have executives in partnership with their talent development professionals.

What if a financial analyst or brokerage firm, when advising a client to buy or not buy stock, put forth information about the company’s talent strategy rather than more traditional information around financial performance? This fictional scenario about Talntco illustrates the impact people processes can have on investors and their organizations.

BROKERAGE ALERT: We are upgrading the Talntco target stock price following a recent meeting with the senior management team. While other brokerage firms have recently written positively about the company, we now have insight into a less visible aspect of the organization that will distinguish its long-term performance from industry competitors.

Simply put, its people are better.

Following presentations on financial strength, business growth strategies and previews of upcoming products that reinforced recent success, we also reviewed how Talntco leaders systematically built the talent capabilities central to their winning formula.

It was called the Strat-Tal program, a disciplined and well-ingrained management practice that produces superior-quality people throughout the organization. We were asked not to share program particulars, but the provided material did bolster our confidence in the firm’s ability to achieve its ambitious growth agenda and out-innovate and out-perform competitors.

The implications of a firm with a well-conceived and integrated talent program caused us to revise our economic valuation model to translate business metrics, and then model probability of future earnings growth for expected stock price appreciation. We now believe in the underlying value of an organization going beyond traditional business metrics, which should include:

Pipeline: We usually assess the future business prospects of a firm’s marketplace success to test the robustness of its product pipeline. We now add the robustness of the leadership pipeline in critical business areas. Talntco’s Strat-Tal program showed in solid companies there is a well-tended pool of up-and-coming talent to fill roles vital to strategic growth plans. We will begin challenging other firms to provide evidence of leader pipeline health, with a concern for those who may be over-reliant on externally sourcing leaders to fill gaps.

Article Keywords:   financial  


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