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CONNECTING RECRUITMENT AND MARKET CAPITALIZATION Tom McGuire Group Director, Global Talent Acquisition The Coca-Cola Compa...
VALUATION Market vs. Book Values Across Industries* Value of Intellectual Capital (80% of Total) *Sampled research,  Value...
TRADITIONAL CAPITAL GROWTH: MCM 2  * *  Robert L. Hielbroner.  The Nature and Logic of Capitalism, 1985.   Money (M) <ul><...
GROWTH IN AN INTELLECTUAL CAPITAL ECONOMY Capital (C) <ul><li>Inventory </li></ul><ul><li>Machinery </li></ul><ul><li>Equi...
<ul><li>Public companies’ shares are valued by the marketplace </li></ul><ul><li>The value of all shares plus debt is a co...
INTELLECTUAL VS. TANGIBLE VALUE *Definitions as presented: EV  is market value of common stock plus net debt; Net Capital ...
THE COCA-COLA COMPANY  Source: The Coca-Cola Company annual reports year ending values for indicated years on the trend li...
<ul><li>Brands* </li></ul><ul><li>Consumer Insight* </li></ul><ul><li>Customer Relationships* </li></ul><ul><li>Franchise ...
FOCUS ON THE DISTINCTIVE CAPABILITIES TO GROW INTANGIBLES AND INTELLECTUAL CAPITAL
FOCUS ON THE DISTINCTIVE CAPABILITIES TO GROW INTANGIBLES AND INTELLECTUAL CAPITAL
RECRUITING FOR INTELLECTUAL CAPITAL <ul><li>Focus on Recruiting for Distinctive Capabilities </li></ul><ul><li>View Prospe...
FOCUS ON RECRUITING FOR DISTINCTIVE CAPABILITIES <ul><li>Develop deep expertise in identified areas </li></ul><ul><li>Opti...
VIEW PROSPECTIVE TALENT AS INVESTORS <ul><li>Know your “market” (the right pipeline) </li></ul><ul><li>Know your “product”...
MEASURE QUALITY OF HIRE <ul><li>Start with the pipeline </li></ul><ul><li>Post-hire survey/feedback </li></ul><ul><li>Mult...
FIND QUALITY CORRELATION AND ADJUST STRATEGY <ul><li>Channel </li></ul><ul><li>Industry </li></ul><ul><li>Employer </li></...
RECRUITING FOR INTELLECTUAL CAPITAL <ul><li>Focus on Recruiting for Distinctive Capabilities </li></ul><ul><li>View Prospe...
How You Can Estimate Intellectual Capital Value CONSOLIDATED BALANCE SHEET                     6,901.2 $   7,534.0 $ Total...
How You Can Estimate Intellectual Capital Value *Definitions as presented: EV  is market value of common stock plus net de...
Questions to Probe for  Distinctive Capabilities <ul><li>What are the intangible assets that account for the premium above...
CONCLUSION <ul><li>Intellectual capital (comprised of intangible assets) is a significant part of market value </li></ul><...
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Connecting Recruitment and Market Capitalization

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Tom McGuire\'s presentation from the ERE Expo 2008 Fall.

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  • Transcript of "Connecting Recruitment and Market Capitalization"

    1. 1. CONNECTING RECRUITMENT AND MARKET CAPITALIZATION Tom McGuire Group Director, Global Talent Acquisition The Coca-Cola Company ERE Leadership & Strategy October 30, 2008
    2. 2. VALUATION Market vs. Book Values Across Industries* Value of Intellectual Capital (80% of Total) *Sampled research, Value Rx , Giniat/Libert. Value of Traditional Capital
    3. 3. TRADITIONAL CAPITAL GROWTH: MCM 2 * * Robert L. Hielbroner. The Nature and Logic of Capitalism, 1985. Money (M) <ul><li>Investor’s cash </li></ul><ul><li>Reinvested cash </li></ul>Capital (C) <ul><li>Inventory </li></ul><ul><li>Machinery </li></ul><ul><li>Equipment </li></ul><ul><li>Buildings </li></ul><ul><li>+ </li></ul><ul><li>LABOR </li></ul>More Money (M 2 ) <ul><li>Net cash generated </li></ul>
    4. 4. GROWTH IN AN INTELLECTUAL CAPITAL ECONOMY Capital (C) <ul><li>Inventory </li></ul><ul><li>Machinery </li></ul><ul><li>Equipment </li></ul><ul><li>Buildings </li></ul><ul><li>+ </li></ul><ul><li>LABOR </li></ul>Money (M) <ul><li>Investor’s cash </li></ul><ul><li>Reinvested cash </li></ul>More Money (M 2 ) <ul><li>Net cash generated </li></ul>Organization IC 3 Customer IC 2 Brands IC 4 Patents IC 5 Global Reach IC 1 IC x Others Intellectual Capital (IC)
    5. 5. <ul><li>Public companies’ shares are valued by the marketplace </li></ul><ul><li>The value of all shares plus debt is a company’s “enterprise value” </li></ul><ul><li>The difference between a company’s enterprise value and its book value represents the value of brands, relationships, innovation, and other intangible assets that drive cash flow but are not on the books </li></ul><ul><li>These intangible assets and their value (and those accounted for through acquisition) can generally be called a company’s “intellectual capital” </li></ul><ul><li>In high percentage “intellectual capital” companies, growth and productivity of underlying intangible assets are the primary drivers of profit and shareowner value </li></ul>MARKET VALUATION AND INTELLECTUAL CAPITAL
    6. 6. INTELLECTUAL VS. TANGIBLE VALUE *Definitions as presented: EV is market value of common stock plus net debt; Net Capital is shareholder equity plus net debt; IC on-books is reported intangibles and goodwill; IC off-books is difference between EV and Net Capital. All numbers sourced from recent company annual reports and Hoover’s Online. Approximate Recent Values Company Enterprise Value (EV)* Net Capital* Estimated Value of Intellectual Capital (IC) Intellectual Capital % of Enterprise Value On-Books* Off-Books* Total IC P & G $218 Billion $103 Billion $94 Billion $115 Billion $209 Billion 96% Microsoft $257 Billion $36 Billion $14 Billion $221 Billion $235 Billion 91% Coca-Cola $147 Billion $27 Billion $12 Billion $120 Billion $132 Billion 90% Merck $107 Billion $18 Billion $2 Billion $89 Billion $91 Billion 85% Motorola $36 Billion $15 Billion $5 Billion $21 Billion $26 Billion 72% Deere $53 Billion $25 Billion $1 Billion $28 Billion $29 Billion 55% Target $60 Billion $30 Billion --------- $30 Billion $30 Billion 50% Weyerhaeuser $23 Billion $15 Billion $2 Billion $8 Billion $10 Billion 43% Archer Daniels $32 Billion $23 Billion $1 Billion $9 Billion $10 Billion 31%
    7. 7. THE COCA-COLA COMPANY Source: The Coca-Cola Company annual reports year ending values for indicated years on the trend line. Enterprise value* defined as value of common stock plus net debt. Net capital** defined as share-owner equity plus net debt. ($ Millions) 90% of Total Value
    8. 8. <ul><li>Brands* </li></ul><ul><li>Consumer Insight* </li></ul><ul><li>Customer Relationships* </li></ul><ul><li>Franchise System* </li></ul><ul><li>Corporate Reputation* </li></ul><ul><li>Global Reach* </li></ul><ul><li>Innovation* </li></ul><ul><li>Execution Ability* </li></ul>PEOPLE ARE THE SOURCE OF INTELLECTUAL CAPITAL Active Inert The Need to Grow Intangible Assets Drives Talent Demand <ul><li>Organization* </li></ul>*Source: Investor Relations presentations
    9. 9. FOCUS ON THE DISTINCTIVE CAPABILITIES TO GROW INTANGIBLES AND INTELLECTUAL CAPITAL
    10. 10. FOCUS ON THE DISTINCTIVE CAPABILITIES TO GROW INTANGIBLES AND INTELLECTUAL CAPITAL
    11. 11. RECRUITING FOR INTELLECTUAL CAPITAL <ul><li>Focus on Recruiting for Distinctive Capabilities </li></ul><ul><li>View Prospective Talent as Investors </li></ul><ul><li>Measure Quality of Hire </li></ul><ul><li>Find Quality Correlation and Adjust Strategy </li></ul>
    12. 12. FOCUS ON RECRUITING FOR DISTINCTIVE CAPABILITIES <ul><li>Develop deep expertise in identified areas </li></ul><ul><li>Optimize efficiency on remainder </li></ul><ul><li>Consider outsourcing non-core recruiting </li></ul>
    13. 13. VIEW PROSPECTIVE TALENT AS INVESTORS <ul><li>Know your “market” (the right pipeline) </li></ul><ul><li>Know your “product” (value proposition) </li></ul><ul><li>Know your tools (sustained engagement) </li></ul>
    14. 14. MEASURE QUALITY OF HIRE <ul><li>Start with the pipeline </li></ul><ul><li>Post-hire survey/feedback </li></ul><ul><li>Multi-year performance, advancement, retention </li></ul>
    15. 15. FIND QUALITY CORRELATION AND ADJUST STRATEGY <ul><li>Channel </li></ul><ul><li>Industry </li></ul><ul><li>Employer </li></ul><ul><li>Methodology </li></ul><ul><li>Onboarding </li></ul>
    16. 16. RECRUITING FOR INTELLECTUAL CAPITAL <ul><li>Focus on Recruiting for Distinctive Capabilities </li></ul><ul><li>View Prospective Talent as Investors </li></ul><ul><li>Measure Quality of Hire </li></ul><ul><li>Find Quality Correlation and Adjust Strategy </li></ul>
    17. 17. How You Can Estimate Intellectual Capital Value CONSOLIDATED BALANCE SHEET                     6,901.2 $   7,534.0 $ Total Liabilities And Shareholders’ Equity             1,976.7   2,579.4   Total Shareholders’ Equity             (437.5 )   ) (654.8   Common stock held in treasury, at cost (17,761,696 shares at December 31, 2007 and 14,090,913 shares at December 31, 2006) ) (260.8   14.4     Accumulated other comprehensive income (loss) 666.5       1,054.8     Income retained in the business   1,313.3       1,453.1     Additional paid-in capital 695.2   711.9     Authorized 200,000,000 shares; issued 142,372,162 shares at December 31, 2007 and 139,041,884 shares at December 31, 2006 (excluding 14,000,000 shares held by a wholly owned subsidiary)               Common stock — $5 par value   Shareholders’ Equity 1,721.7     1,562.9     Long-term debt and capital lease obligations 1,634.1   1,742.6 Total Current Liabilities 11.8 $     21.9 $   Short-term debt 6,901.2 $ 7,534.0 $   Total Assets 472.0   452.1 Identifiable intangible assets  1,341.3     1,363.2   Goodwill 3,082.2   3,548.8 Total Current Assets   (Dollars in millions, except share amounts)     2006     2007     December 31,                       Cash and cash equivalents $ 406.0 $ 201.3 Form 10-K GOODRICH CORP - GR Filed: February 19, 2008 (period: December 31, 2007) Annual report which provides a comprehensive overview of the company for the past year
    18. 18. How You Can Estimate Intellectual Capital Value *Definitions as presented: EV is market value of common stock plus net debt; Net Capital is shareholder equity plus net debt; IC on-books is reported intangibles and goodwill; IC off-books is difference between EV and Net Capital. All numbers sourced from recent company annual reports and Hoover’s Online. Shares Outstanding @ 12-31-2007: 142,372,162 X $70.61 Share Price = $10 Billion + Net Debt $ 1.2 Billion = $ 11.2 Billion EV Shareholder Equity @ 12-31-2007: $2.6 Billion + Net Debt $ 1.2 Billion = $ 3.8 Billion EV Company Enterprise Value (EV)* Net Capital* Estimated Value of Intellectual Capital (IC) Intellectual Capital % of Enterprise Value On-Books* Off-Books* Total IC Goodrich Corp $11.2 Billion $3.8 Billion $1.8 Billion $7.4 Billion $9.2 Billion 82%
    19. 19. Questions to Probe for Distinctive Capabilities <ul><li>What are the intangible assets that account for the premium above book value (Net Capital) that investors are willing to pay for Goodrich? </li></ul><ul><li>What are the key competencies of people that are involved in creating those intangible assets? </li></ul><ul><li>What are the jobs in the organization that have these key competencies at the heart of their profile? </li></ul>
    20. 20. CONCLUSION <ul><li>Intellectual capital (comprised of intangible assets) is a significant part of market value </li></ul><ul><li>Intellectual capital has both active and inert components </li></ul><ul><li>The “active” component is essential and begins with recruiting </li></ul><ul><li>By optimizing recruiting you will drive market value </li></ul>

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