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Dead sea effect is a phenomenon that makes it easier to leave people who do not challenge the organization or people who do not want to change. Originally used in the context of human resources outflow of IT organizations, but it is a risk that investors can not ignore.
In corporate analysis, numbers such as sales, operating income, PER, and dividend yield are often seen. However, it is not enough for mid- to long-term investment.
Who is the company?
Even if the performance is not yet broken, the quality of human resources, on-site morale, recr ment, and organizational culture may be damaged first. The Dead Sea effect is a way of thinking that companies want to see as a sign that weakens before they appear in numbers.
What is the Dead Sea Effect?
The Dead Sea Effect is a phenomenon in which people with high abilities and market value leave the company first, and as a result, the power of the entire organization falls.
The origin of the name is the Dead Sea, which has high salt concentration and is hard to live. The water is thin and goes out, while the salt remains. If you replace it with an organization, it will be the composition that the person who is going to use outside will be leaked and the person who is difficult to move will remain.
Bruce F. In 2008, Webster used IT organization’s human resources issues. In the original text, it is explained in the purpose that it is easy to get other opportunities as an excellent and effective IT engineer, and it is easy to get away without having to withstand the problems of the organization.
In other words, the death effect is the deterioration of human capital.
Moreover, it is not easy to get out of the profit and loss statement.
Why invest in stock
The competitiveness of the company is the last one.
In particular, the following knowledge-in industry is the center of the market.
- AI
- Semiconductor
- SaaS
- Defence
- Bio
- Game・Anime・Content
- Financial DX
In addition to equipment and brands, the quality of engineers, researchers, planners, sales managers and product managers depends on the performance.
Even if the short-term sales remain, it will be effective in new products, quality, development speed, customer response and internal control.
The price is scary here.
It is slow to notice that the financial results are bad. The stock price may start to lower the expected value before the performance is broken.
A typical pattern of the company where the Dead Sea effect occurs
Death Sea effect is not simply a company with a high turnover rate.
What is important is who s and who is affected.
1. from superior
Please note that if you continue to by young ace, core engineer, product planning, sales top layer, and technical manager.
The re ement itself is uncommon in the industry with high human resources liquidity. The problem is the quality of the re er.
If a person who had been thinking about a company, a person who was turning a difficult job, or a person who was trusted by a customer, there is a damage over the number of employees.
2. More voices that cannot be challenged
You can’t take a word-of-mouth website or SNS. Anonymous information is filled with dissatisfaction, ex ation and individual circumstances.
If the same trend continues for a long time, it will be an auxiliary material.
For example:
- I can't challenge
- The top is packed
- Excellent
- Impair the voice
- No failure
- No field proposals
It is a noise if only one. It may be a problem of organizational culture if you have heard of the same direction for years.
3. Good performance, but the site is exhausted
This is an easy-to-understand pattern for investors.
Short-term profit may be made by pressure on the site.
Excessive norma, long working, excessive cost reduction, strong pressure. Even in such a way, if it is 1 year or 2 years, the numbers will appear.
However, we will burn out from excellent people behind it. If you leave it, you can get a better proposal.
In this state, the next growth investment is weakened.
4. Is too much dependent on Karisma management
The strength of the founder and the top is not necessarily bad. There is a situation where a strong leader is required for growth companies.
However, it is dangerous that it is a form that is not opposite to the top, the site is atrophy, becomes a digit supremacy, leaving from an objection.
Short-term decision-making is fast. In the long term, the organization cannot think.
This is why governance and organizational health are emphasized in the Japanese market.
Dead Sea Effect
Dead sea effect is not included in stock price.
However, in the early days, the performance may seem good.
- Reduce labor costs
- Contact Us
- Improve field load
- Re profits from existing businesses
- Forward new investment
You can make short-term profit.
However, in the middle and long term, it returns in the following form:
| Problems | Impact on stock price |
|---|---|
| New business failure | Growing expectations |
| Technology Competitiveness | Cut PER |
| Quality | Brand and profit margin |
| プラud and compla issues | Discount at once |
| Customer | Increased sales growth |
| Contact Us | Increased labor costs and reduced growth |
Before appearing in numbers, it can be broken from people.
Here is the fear of the Dead Sea effect.
Signs for Investors
Dead sea effect is not visible only by financial statements. You need to see multiple materials together.
| ation | See Points |
|---|---|
| Re ement of Officers | が core human resources such as technology, sales, finance, and legal |
| Contact Us | you are investing in growth or lack of labor |
| Average working years | Is it shorter than industry average? |
| Number of employees | Is there a growing number of people or a sudden decrease in sales growth? |
| Work expenses | が the internal human resources are missing and not being external dependent |
| Reviews | Is the same dissatisfaction continued for a long time? |
| Quality/Suc・ | on-site exhaustion does not appear in quality problems |
| New Products | Are the development speeds and planning strengths from the past? |
It is dangerous to decide by one indicator.
However, if multiple signs are facing the same direction, it is better to be alert even if the financial results are good.
Diagram: Flow of the Dead Sea Effect to a Stock Price Risk
Reasons for increasing importance in the Japanese market
In Japan, I think the importance of the Dead Sea effect will rise.
The process is clear.
- Shortage
- Advanced human resources in the AI era
- Expanding Job-type Employment
- Revitalization of the changing market
- Changes in Young Career View
In the past, there were many people who left the company even if there was a little dissatisfaction. It is different now.
The better, the better, the better, the better. Secondary, career change, startup, foreign capital, freeス, overseas companies. The more you choose, the more you choose, the worse your organization will come out.
In other words, the company value of the future is not determined only by the high salary.
Do you have growth opportunities? Can you challenge? Can I learn from failure? Is the boss not crushed? Is governance effective?
This will affect sales and profits a few years later.
How can investors be used?
Dead sea effect is not used as a trading signal.
"Sell because the word of mouth is bad" and simplify, it is quite miscellaneous. There are a lot of dissatisfaction as large companies, and there is a time when the field load is high as a growth company.
It is practical to make an auxiliary line of financial analysis.
For example, if you are a company whose business performance is good, but has an increasing number of talks about leave, you will doubt the quality of profit. If you are a company with a weak new business, look at the staff outflow and set. If you are a company with a quality problem, you will be suspicious about site exhaustion and governance.
See the temperature of the company that cannot be seen only by numbers.
It is the concept of the Dead Sea effect.
The Dead Sea Effect is a phenomenon that makes it easier for people who are disappointing or not trying to change their organization.
The scary thing for investors is that this is going forward before the financial results.
No sales or profit at first. However, it is possible to see the profit by cost reduction and on-site pressure. However, in a few years, new business failures, quality problems, 、iculty, customer abandonment, and governance will occur.
In the medium- to long-term investment, it is necessary to see people as well as profits.
To this company, who is excellent will remain?
In this question, we will tell you the risk that PER or dividend yield alone cannot be seen.
出典
- Bruce F. Webster, "The Wetware Crisis: the Dead Sea effect" https://brucefwebster.com/2008/04/11/the-wetware-crisis-the-dead-sea-effect/
- Bruce F. Webster & Associates, "Hanging on to your IT staff" https://bfwa.com/2008/11/