Financial valuation Archives -

After reading my last column about how Wall Street values strong leadership, a colleague who coaches Fortune 500 CEOs told me he wasn’t fond of the phrase “monetizing human assets.” This language, he told me, suggests a view of human beings that is precisely the opposite of what he is working to promote. Was I aware of this?

I was and am, so let me round out the picture. Humans are wonderfully complex miracles of creation, and this is true even when our behaviors get distorted by organizational cultures outside of us and personality patterns within us. Even as we serve organizations, it is crucial that organizations serve us. Any language that suggests we are objects to be manipulated should be used cautiously if at all.

In retrospect, by quoting a professor using the phrase “monetizing human assets”–and not offering my own caveat or disclaimer–I was not practicing sufficient caution.

What I was trying to do is offer a provocative perspective to my readers. Isn’t it wildly surprising that Wall Street adjusts its valuation of companies based upon the perceived quality of those companies’ leadership? I think so. And the implications are enormous. This is why my colleague who expressed such distaste for the language also said he would be spending more time with his CEO clients physically and emotionally preparing for visits to Wall Street–perhaps even joining them during these visits to provide coaching in the “in between” moments.

Wall Street is monetizing human assets. Our question is: why aren’t you helping them?

—Bruce Avolio, management professor, to a group of HR executives

The idea that Wall Street values leadership is not new. For more than a decade, research has shown the importance in firms’ stock prices of intangibles like brand, reputation and leadership. But until I heard a talk by Bruce Avolio and Susan Dunn at a recent event on strategic HR, I hadn’t fully realized how much attention equity analysts on the Street pay to leadership.

Avolio, a management professor at the University of Washington, and Dunn, a partner at Mercer Consulting, conducted a fascinating study. They interviewed dozens of equity analysts, the folks who study public companies to determine their overall financial worth, about what factors influence their assessments and what processes they use to make these assessments. What they learned is that these analysts – on both the buy and sell side – don’t just closely study companies’ top leaders, but actually use their (often gut level) take on the quality of this leadership as quantifiable adjustment factors in their valuation of firms. When they said this, I could see a lot of jaws (beside my own) dropping in the room.

How many companies’ heads of investor relations are aware of this? How many people running HR organizations?

And, if you were a really smart company, wouldn’t you be getting your SVP of HR, CFO ,and head of investor relations into a room together to talk about how to strengthen the company’s senior leadership and make this visible to Wall Street?

The implications are potentially enormous. In fact, I’ll be writing more about this in upcoming posts.

Are humans more than “assets?”

What is the financial value of strong leadership?