Table 2. Changes in Company Profits as a Result of Changing People Management Practices. Profit growth measured over 3 years.

Table 3. Changes in Total Return to Investors as a Result of Changing People Management Practices.

the eight companies with declining PMP scores, they had $16 million less in profits than earlier, a decline of about 3% over the three years.

 This difference of over $200 million in profits per company over three years is very significant. Many a CEO has had a career made or broken over far smaller changes in profit, though it must be remembered that these are very large corporations.

 The predictive data, like the correlational data, is quite clear. Companies that manage the people-side of the business more effectively increase their profits more rapidly. And the same is true for the other financial results such as the growth in sales and profit margins.

 Table 3 shows changes in total return to investors over the same three years for these 52 companies. Total return here includes both gains in the value of the stock plus dividends, assuming the dividends are reinvested. Stockholders would clearly value by purchasing the stocks of the companies that have the best people management practices.

 If someone invested in the stocks of companies that improved their people management practices, they would have gained 69% over three years (23% per year compounded). This is more than three times what they would have gained from investing in the stocks of companies that decreased in people management practices. Altogether, investors would have an additional $490 in total return for each $1000 invested. CEOs whose bonuses are based upon stock appreciation should take note. Not only would their shares be worth more, but they would likely see larger bonuses as well.

Survival

 Many people commonly think that companies, once they are large, will be around forever. Actually, there are no guarantees. Forbes magazine pointed out in a recent special issue that only two companies in the 100 group today were in that same group in the year 1900 (they were AT&T and U.S. Steel). As the table below shows, things can change rapidly in just ten years.

 Companies profiled here are those who made our Top 20 and Bottom 20 list in 1987. These lists were calculated by simply ranking companies based upon their overall PMP scores at the time. We then calculated how many of these companies exist at all today as separate entities. A total of 80% of the Top 20 group is still around while only 30% of the Bottom 20 have survived.

A total of 80% of the 20 group is still around while only 30% of the Bottom 20 survived

 Many of these companies that no longer exist went through mergers or were acquired by others "to increase shareholder value." But many of those in the Bottom 20 had severe financial difficulties and this was the reason for their being acquired. None of those in the Top 20 which no longer exist had severe financial problems. This still shows the powerful and pervasive link between people management and success. Even with something as basic as survival.