The development of an instrument for enabling investors to assess the quality of human capital in medium sized enterprises

Fargus, Peter Charles Grindell (2018) The development of an instrument for enabling investors to assess the quality of human capital in medium sized enterprises. Doctoral thesis, Birmingham City University.

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Abstract

According to the Chartered Institute of Management Accountants, intangible assets generate up to 80% of the value of businesses listed on a stock exchange ranging from multinationals in the Financial Times Stock Exchange (FTSE) to SMEs in the Alternative Investment Market (AIM).
Large enterprises are aware of the value of their intangibles, including human capital, use sophisticated approaches to evaluate them internally and describe them in annual reports. Some medium sized enterprises do use such approaches but they are time consuming and expensive to implement and maintain.
The aim of this study, therefore, was to develop an instrument for assessing the quality of human capital in medium sized enterprises which could be implemented quickly at relatively low cost. It was hypothesized that information on the quality of human capital made available by this instrument to ‘relationship building’ and ‘buy and hold’ Investors would influence their view on its value and so influence their levels of investment.
The literature review enabled the generation of a long-list of human capital issues used to create surveys which were completed by subject matter experts and investors. The surveys resulted in a short-list of items which were used to create a pilot instrument. The instrument was piloted using structured interviews in two commercial businesses, two not-for-profit businesses and a Business School. The pilot was then developed into an assessment instrument which was completed by 211 senior executives from medium sized enterprises.
The resulting Human Capital Report (HCP) was found to demonstrate good internal consistency; test – retest and inter-rater reliability; content (face) validity; construct validity; concurrent and predictive validity. Information generated by the senior executives was found not correlate with financial data used by investors but did correlate strongly with enterprise flexibility. As such it is argued that the HCA offers investors information additional to the ‘financials’ which they currently use to inform investment decisions. Some categories of investors agree: 97% of those completing the investor survey indicated that, assuming they could trust the information, they would vary their levels of investment by up to 50%.

The approach has been made available to interested parties in the form of two websites. The first is aimed at mature SMEs wishing to demonstate the quality of their workforce to funders / investors: www.HumanCapital.Report.
The second is aimed at rapidly growing SMEs wishing to introduce a more sytematic approach to managing their workforce: www.ScaleupLeader.Guide

Item Type: Thesis (Doctoral)
Date: May 2018
Uncontrolled Keywords: Human_Capital; Intangibles; Due_diligence; Merger; Acquisition
Subjects: N100 Business studies
Divisions: Faculty of Business, Law and Social Sciences > Birmingham City Business School > Department of Strategy, Management and Marketing
REF UoA Output Collections > Doctoral Theses Collection
Depositing User: Kip Darling
Date Deposited: 02 Oct 2020 14:59
Last Modified: 05 Oct 2020 10:45
URI: http://www.open-access.bcu.ac.uk/id/eprint/10021

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