DECODING THE MARKETS

A Signal Worth Saluting: Who You Hire Matters

Nov 8, 2021
  • BlackRock

The results of hiring high quality, skilled workers can impact several business functions for companies. But is there added potential for talent acquisition strategies to lead to positive social outcomes and improved financial results? BlackRock’s systematic investment experts break down the possible implications of hiring more veterans on organizational excellence, social dynamics, and long-term results.

A Signal Worth Saluting: Who you hire matters

Today, companies need to stay nimble and evolve quickly to remain competitive. From adapting to rapidly changing technology to innovating new ways to enhance productivity and improve margins, getting ahead requires continuously working towards excellence. The search for a competitive edge that boosts company results has led many firms to rediscover their most valuable asset – their employees.

As firms seek to gain a competitive edge, investors too are looking for informational advantages to better identify organizational excellence. BlackRock’s Systematic investing experts increasingly rely on alternative data and deep research capabilities to uncover environmental, social, and governance (“ESG”) alpha opportunities. Data-driven ESG insights provide a new lens to view business practices that can be potential indicators of future performance – to help find the winners of tomorrow’s economy. Rigorous research and testing have revealed that measures of sustainability and improved business results are inextricably linked. In our research, we find this link to hold true. In particular, companies with talent acquisition strategies aimed at hiring more veterans not only deliver impactful outcomes for veterans, but also have the potential to outperform.

Heroes for Hire: The benefits of employing veterans

Many leading firms across sectors and industries have recognized the benefits of hiring veterans. Veterans are known to masterfully navigate high-pressure environments. They can lead high-performing teams and keep calm in stressful situations. They have a predisposition to overcoming challenges to get the job done, and this skill set undoubtedly transfers to dynamic workplace situations companies face today. However, despite often being well-equipped for a variety of roles, obstacles to re-entering the workforce have made it increasingly difficult for veterans to find jobs. This is especially true for protected veterans – veterans who are disabled, who were released from active duty within the last three years, as well as badge and medal recipients.1 Recent veterans have faced higher unemployment rates than the civilian population, a gap that has remained consistent over the last 20 years.2

Along with higher unemployment rates, challenges to returning from active duty have become more prominent for today’s veterans versus past generations. Today’s veterans are more likely to be redeployed and many have experienced mental health issues resulting from their military experience3. Higher rates of veteran unemployment compound these issues, with various medical studies linking unemployment with a heightened risk of depression.4 We’ve found that states with increased levels of protected veteran hiring demonstrate lower numbers of veterans needing Veterans Affairs health care services,5 reinforcing the benefits of a smooth transition into the workforce on the mental and physical well-being of veterans.

2015-2020 Analysis of Employment Rate and Likelihood of Seeking Medical Care for Protected Veterans by State

Chart showing veteran employment rate and the likelihood of seeking medical care for protected veterans by state from 2015-2020. The chart shows that at higher employment rates, protected veterans tend to be less likely to seek medical care.

Source: VETS-4212 Reports, Veterans Affairs Geographic Distribution of Expenditures across all US states, BlackRock Systematic Research as of December 2020.

Increased veteran hiring can lead to big gains in hard-working, resilient employees impacting multiple dimensions of organizational operations. At the same time, companies have the power to help veterans reintegrate and contribute to a better future for our nation’s heroes.

Boosting the (double) bottom line

Beyond significantly improving the quality of a corporate workforce, there is added potential for this talent acquisition strategy to directly impact financial results.

Government contractors with a higher proportion of veteran hires tend to be awarded more government contracts.6 The business impact can be significant, including new revenue streams, improved margins from productivity enhancements, and an overall potential to outperform peers. These business incentives may have a tangible impact that can help companies harness a competitive edge.

This is just one example of a differentiated insight leveraged by our BlackRock Systematic investing experts that helps solve for the double-bottom line: improved ESG and financial outcomes. Commonly used ESG standards and metrics that tend to be predominately exclusionary fail to recognize veteran hiring as a positive social outcome or as an improvement to diversity and inclusion within an organization. Despite this oversight, companies who hire more protected veterans tend to have higher MSCI ESG Social Scores. This showcases the power of a data-driven approach, deploying real-time insights that may not yet be widely accepted or priced into markets.

Dual value creation: business success and social improvement

Sustainability and financial profitability are inextricably tied, and our goal as investors is to understand which companies will outperform over the long run. ESG data is increasingly an important indicator of future performance potential and should be incorporated into the investment mosaic of all types of data that are used to predict performance.

Leveraging alternative data and deep ESG research capabilities allows us to see how veteran hiring leads to better company results and increased social good. As firms look to support those who have served our country, they’re knowingly or unknowingly solving for the double-bottom line: a better social outcome and better financial results for businesses and investors.

Anna Hawley, CFA
Anna Hawley, CFA
Lead ESG Portfolio Manager for Systematic Active Equity
Travis Cooke, CFA
Travis Cooke, CFA
Head of North American strategies for Systematic Active Equity
Joshua Kazdin, CFA
Joshua Kazdin, CFA
Director, Systematic Active Equity
Aaron Niskin (US Army Retired)
Aaron Niskin (US Army Retired)
Quantitative Researcher for Systematic Active Equity
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