Why Those McKinsey Number Crunchers Should Look at CynkMichael P. Regan
In case you missed it: McKinsey & Co. said in a 2007 report that “companies focus far too much on measuring returns on invested capital rather than on measuring the contributions made by their talented people.”
“Financial performance increasingly comes from returns on talent, not on capital,” Lowell Bryan wrote for the consulting firm, offering ratios of profit and market-capitalization to employees at successful companies.
Hold the phone, did someone say “market-cap-per employee?” Lowell Bryan, we have the company for you! Take a flier on Cynk Technology Corp., a penny stock that mysteriously swelled into a more-than $6 billion company at its peak.
If return on invested capital is out of vogue, no worry: Cynk doesn’t have any! And with a single worker listed in its last filing, it tops the market-cap-to-employee charts. Talk about “talented people!” (Err, talented “person” that is.)
Of course, those sharpies at McKinsey probably would spot the same red flags that caused OTC Markets Group Inc. to slap an ominous skull-and-crossbones logo on Cynk shares and eventually caused regulators to halt trading in what appears to be not much more than a dazzling stock chart and a website.
However, as the U.S. waits for signs of wage inflation to pick up, it does make one wonder about that rarely discussed market-cap-to-employee metric: how many pesky, resource-consuming humans do real companies need to thrive?
Looking at stocks in the Standard & Poor’s 500 Index, real-estate investment trusts, which often outsource much of their property management to outside firms, claim the bragging rights for most market cap per employee, according to worker tallies in their most recent 10-K filings with the Securities and Exchange Commission. (Note not all companies give employee head counts, so this screen may miss a few.)
HCP Inc., Host Hotels & Resorts Inc., Health Care REIT Inc. and Ventas Inc. have an average ratio of about $71 million per head. On the bottom are worker-heavy companies Jabil Circuit Inc., Tenet Healthcare Corp., Safeway Inc., Kroger Co. and Yum! Brands Inc., valued at less than $70,000 a worker.
The most highly-valued non-REIT on the list is Facebook Inc., number five at $27 million per employee.
Another metric for social-media companies is market-cap-per-user, which for Facebook is about 136 bucks based on 1.28 billion active monthly users. Don’t get too excited Zuckerberg - - Cynk is also a social-media company. And with zero members, that gives it a ratio of approximately infinity. Or whatever.