Financial Analysis for HR Managers: Tools for Linking HR Strategy to Business Strategy

12. Creating Value and Rewarding Value Creation

At the time of the last economic census, there were 5,767,306 firms in the United States. Their business strategies differed, but they all had exactly the same goal, value creation. People invest in a business because they believe the value of their investment will increase enough to compensate them for the risk they took as well as for the time value of their money. Companies create value by investing capital at rates of return exceeding the cost of that capital. A company’s capability to identify and implement such investments is determined by the quality of its management and workforce. These are the individuals who must develop and effectively execute the firm’s business strategy. Selecting, ...