1. hrmagazine.co.uk September 2015 HR 2524 HR September 2015 hrmagazine.co.uk
The humanfactor
C
hicken and egg. Catch-22. An
impasse. Pretty opaque. A mess.
These are just some of the terms
used by experts to describe to
me the state of human capital
reporting and the investment
community’s understanding of
the value of people.
But could the tide be turning? Signs suggest
so, and that change is rapidly gaining pace as various
interested parties across the worlds of investment
management, HR, and management more generally
attempt to find an answer to the question that’s
been puzzling business for decades: how can
you quantify the value of people to future
organisational performance?
“Investors are interested in the more nebulous
aspects of human capital management (HCM)
because it’s material to the business, the share price,
and their investment,” says Andrew Ninian, director
of corporate governance and engagement at The
Investment Association. “We want to show there’s
value in good HCM and that investors should be
aware of the issue. The starting point is good
reporting. Have that and investors can take a view
on if HCM is adding value and leading to a better
performing company.”
The Investment Association’s “embryonic” working
group on human capital reporting is just one example
of an initiative here.Others include 2015 reports from
the CIPD (Human capital reporting: Investing for
sustainable growth) and the NAPF (Where is the
workforce in corporate reporting?); Dave Ulrich’s
forthcoming book on a leadership capital index to
help investors make decisions based on organisational
leadership capability (see p30 for exclusive insights
from Ulrich); the continuing ‘integrated reporting’
movement; an attempt to rank the largest listed
companies on the London Stock Exchange by how
well they manage human capital by the Maturity
Institute; and a recent report by culture consultancy
Walking the Talk and investment consultancy
Stamford Associates that found 94% of investors say
culture plays an“important”part in their decisions.
For Paul Kearns, chair of the Maturity Institute, the
relevanceofhumancapitaltoinvestmentmanagement
is a no-brainer.“It may be much less tangible, but it is
much more valuable in the whole equation,”he points
out. “The intangibles have always been interesting,
but people have not been sure what to do with them.
The financial crisis has shown that if we don’t
take this seriously we will be stuck in the same place.
Investors have seen plenty of evidence of what
underlying damage has been caused by poor people
governance. They need lower risk and better returns
– it’s a simple equation. HCM is now acknowledged
as a huge opportunity waiting to be tapped.”
The investment community is finally
waking up to the value people bring to
business, but HCM reporting remains a
challenge. KATIE JACOBS investigates
how HR could help bridge the gap
2. hrmagazine.co.uk September 2015 HR 2726 HR September 2015 hrmagazine.co.uk
The right time
Across the board there is a sense that this
concept – the bringing together of investors
and HR – is very much an idea whose time has
finally come; thrown into sharp relief,as Kearns
alludes to, by the shock waves of the banking
crisis and the desire by many to codify a
more responsible and sustainable way of
running businesses.
In his book Ulrich writes: “Now is the time
[to offer] investors a much more comprehensive
way of assessing leadership as part of their firm
valuation process.” And in a recent Harvard Business
Review essay, David Creeland and John Boudreau
conclude: “There is a slow and steady movement
toward giving investors more precise information
about things
that have traditionally been reported only vaguely
or not at all”, to include human capital management.
Intangibles such as people are also becoming
increasingly important to UK plc. Research by
innovation charity Nesta estimates the value of
intangible assets grew from £50.2 billion to £137.5
billion between 1990 and 2011, rising since the
recession where the value of tangible assets has
fallen. Ninian adds that there’s a“recognition”among
certain investors that “we may be undervaluing
those companies who are doing HCM well”.“There’s
an opportunity there,” he adds. “If we recognise that
we will get more value from those companies.”
Will Pomroy, the NAPF’s policy lead on corporate
governance and stewardship says the drive for
increased awareness on human capital reporting
came from NAPF members “engaging with the likes
of Sports Direct”, and “an increasing frustration” as
the media seized on zero-hours contracts.“It seemed
perverse that as an investor you had no way of
knowing that was the business model being used,”
he explains.“The strategic report isn’t shining a light
on business models as much as investors might
want. Information about how companies use their
workforces is completely missing.”
Increasing transparency is another push factor.
“The world has become more transparent, faster, and
more critical of business, so the alignment of investor
relations and HR has to be closer than it’s ever
been,” believes Alex Gordon-Shute, partner at Ithaca
Partners, an executive search firm that specialises in
corporate affairs, investor relations and HR. “Your
investors see what your employees see and your
employees sees what your investors see. The moment
there is a disjoint the company is in real trouble.
You lose trust on both sides, which means losing
productivity and shareholder value.”
Push versus pull
That there is an appetite and need for better HCM
information in corporate reporting is pretty clear.
The problem is, says Neil Stevenson, managing
director, global implementation at the International
IntegratedReportingCouncil(IIRC),thattheinvestor
and business communities have reached “a bit of an
impasse”. “There’s this ‘chicken and egg’ thing – this
constant refrain that investors don’t engage with
the information because it’s not good enough, and
companies saying: ‘Why should we produce this
information when investors never ask for it?’”
So who should jump first? In Stevenson’s opinion
the pull should come from businesses. “Companies
own the resources, it’s their value creation, their
business prospects, so why don’t they start?” he asks.
“Then we can put pressure on investors to use that
information. But we can’t put pressure on investors
to take more of an interest in information that isn’t
provided to them. We need to break that cycle. We
will need to educate analysts and investors about the
things that are important.”
However, there’s also a view that investors need
to be the ones providing the pull – while many HR
professionals know instinctively that investment in
goodpeoplemanagementleadstosustainablesuccess,
having investors asking questions about it would
serve to push it up the senior leadership agenda. Yes
shareholder value alone can seem like a pretty blunt
instrument, but expanding the corporate governance
agenda to genuinely include HCM can only serve
to improve matters for all stakeholders. “If investors
start asking the questions it will put pressure on CEOs
to perform better, then CEOs
will turn to HR,” believes
Kearns. “Once we have the
investor community bought
into the idea that human
capital is not that intangible
and is important then the
chain reaction will start.”
An anonymous source
working in private equity is
frustrated that the majority
of investors are missing a trick
when it comes to even considering this area, telling
HR magazine: “The investment community overly
emphasises certain routes to value and doesn’t place
enough emphasis on [HCM].[Investors and analysts]
should be demanding more information on this. If
your job is to understand what the true underlying
performance of a company is and what the lead
indicators are of future performance, then to not be
asking about this is remiss.”
John Dawson, investor relations director at Rolls
Royce and formerly National Grid, adds that “unless
investors are supportive, managers won’t change”.
He uses Cadbury’s as an example of how important
investor support is:“Cadbury’s placed a huge amount
on its culture and as a result did not perform as highly
as some of its ‘black and white’ peers, and was taken
over. The great and good talk about the importance
of behaviours and values, but if investors
aren’t supportive it leaves companies vulnerable
to takeovers.”
Could SRI go mainstream?
Unsurprisingly the investor groups showing the most
interestinHCMreportingarethoseontheresponsible
sideof investment,oftentermedESG(environmental,
social, governance) or SRI (socially responsible
investing).But the investors working in this space that
HR magazine spoke to were confident in their
approach becoming the rule
rather than the exception.
“ESG is going mainstream,”
believes Leon Kamhi, head
of responsibility at Hermes
Investment Management.
“It’s increasingly a theme
in mainstream funds, not
specialist ones. It’s where
the market is going. Asset
managers are clamouring
for fund managers to act
responsibly on their behalf.” But, he acknowledges:
“Some are talking the talk rather than walking
the walk.”
Chair of the Investor Relations Society Sue Scholes
says her members (IR directors) are getting
“more and more questions” from investors
around the topic of HCM, but she points out:
“There are different groups of shareholders.
Some don’t know what you do;
they are trading by machine very
fast. But as the [HCM] agenda
moves forward we are seeing
better co-ordination in these
areas among the more long-
term thinking institutions.”
And she adds: “You get the
shareholders you deserve. The
Thestateofhumancapital
reporting
When it comes to assessing a
company’s future performance,
should human capital be seen as
a risk factor or a value factor?
“The so-called ESG (environmental,
social, governance) stuff is often
put in the risk area,” says the
International Integrated Reporting
Council’s Neil Stevenson. “Having
it as a risk factor does encourage
engagement, which is to be
welcomed, but it does feel
rather pessimistic.”
But now he believes there is
an opportunity for a new era of
corporate reporting, one that
takes intangibles into account, to
change that. “This sort of
reporting can highlight the value
opportunity and move [HCM]
from risk to value creation. It
offers good return for investors
– no one is saying this is about
less ROI.”
Stuart Woollard, managing
partner at Organisational
Maturity Services, agrees that
since the global financial crisis,
“most actions in the HCM
space [have been] risk-related”,
but that the time is right to
move from risk-mitigating to
value-adding.
“Now we can more easily put
forward a value-based argument,
which fits in with the much
broader questions being raised
by many about the nature of the
capitalist system,” he says. “Our
big idea has been linking human
capital to sustained value.”
So while the risk factors
associated with HCM areas such
as poor succession planning for
key roles, a lack of critical skills,
and unethical behaviour, have
been useful for getting HR issues
on the wider business agenda,
perhaps the time has now come
to focus on where good HR
strategy can add value to future
organisational success.
HCM:Fromrisk-mitigatingtovalue-adding
Once we have
the investor
community bought
in the chain
reaction will start
What do FTSE 100 companies currently report on?
Source: Where is the workforce in corporate reporting, NAPF
Workforce
composition
(number of
part-time and/
or temporary
staff):
11%
Total head count:
94%
Levels of staff
turnover or
attrition:
47%
Total investment
in training and
development:
24%
3. hrmagazine.co.uk September 2015 HR 2928 HR September 2015 hrmagazine.co.uk
more you help them understand the value of
the business, the more high quality shareholders you
will get.”
Some are more sceptical. A former reward
director now working in investment
management, who asked not to be
named, says although there is vague
awareness around the value human
capital can bring “there is still a long,
long way to go” adding: “CEOs are
surprised by being asked questions
around culture and day-to-day there
isn’t a huge amount of debate about
the value people are adding.
There’s a big tendency to focus on the
numbers. I have never seen a slide on
corporate culture in an investor
presentation. Companies need
to help investors to get it on
the agenda.”
Louise Aston, director of
Business in the Community’s
(BITC’s) Workwell campaign,
goes even further. “While responsible
investors are beginning to get this, normal
investors are light-years away,” she says.
Interestingly while BITC was ahead of the game in
this area, campaigning for public reporting of
wellbeing-related information about four
years ago, Aston is now taking a step
back, believing organisations need
to get their own houses in order
before they start trying to
engage investors in
HCM information.
“Clearly, bringing a
profound shift in
attitudes and behaviour
will take time, [so we are]
shifting our focus away from
public reporting and
concentrating instead on
supporting companies to
accelerate the pace of change
internally,”she says.
From the HR director perspective,
the group HRD of a FTSE-listed firm tells
HR magazine he doesn’t sense investors are
“mature enough” to ask for HCM metrics, but he
thinks “increasingly they want to see that you have
that side under control”. He adds that at a recent
investor dinner every guest approached him
to ask about leadership capability and
succession planning. “The two main
optics investors get are succession
planning and making sure
there’s a clear line of sight
between the strategy and the
organisation,” he says.
“The question I often get asked is, if they spoke to
someone on the frontline would they say the same
[as me]?”
The HR reporting problem
All this is irrelevant unless we crack
how to actually report on people
issues. When it comes to judging the
future value of an organisation
through the lens of human capital,
there are a couple of seemingly
inextricably linked problems facing
investors. The first is something HR
and business more widely has been
grappling with for years: there are no recognised
comparable standards around measuring the value of
people. Leading on from that comes the question:
when you lack credible data can you trust the
information provided by an organisation’s senior
leadership team? The CIPD’s report concluded that
while investors are increasingly interested in human
capital measures as indicators of performance, most
of their information in this area comes from personal
contacts and casual conversation – hardly rigorous.
“While we know the merits and importance of
HCM, trying to get consistent information to quantify
it in an investment context is a lot harder,” says Iain
Richards, head of responsible investment, EMEA at
Columbia Threadneedle Investment. “What can or
should be measured and disclosed? Will it be
meaningful, consistent and comparable?”
Stephen Dando, a former HRD and trustee board
member of the Engage for Success movement, adds
that the HR profession hasn’t “made it easy” for
investors because of a lack of standardised metrics.
“People can present their set of numbers any way they
like,” he says. “It’s a mess. There’s so little established
benchmarking and structure around [reporting] it
allows [organisations] to present data in the most
favourable way. [Narrative reporting] is better than
nothing, but it’s freeform reporting. You can write it
the way you want to. With financials numbers are
numbers – you can read them, pump them through
models, analyse them. It’s not perfect but it’s more
systematic, structured and logical. I’m not saying the
numbers should be solely deterministic but you’ve
got to start with a robust set of numbers,and then you
tell your story and people can believe it or not.”
“Culture is difficult to assess when you are using
data provided by the company and one-to-one
meetings with management,” agrees Dawson. “Do
you accept at face value what you’re being told? How
do you properly assess it? Companies need to accept
not everything they publish is going to be rosy, and
HRDs have an important role. Just looking at
[benchmarkslike]GreatPlacestoWorkandemployee
surveys is too simplistic. There needs to be more that
you can build into your measures and more holistic
ways of looking at things.”
Andrew Ninian, director of
corporate governance and
engagement at the Investment
Association, advocates
“identifying the metrics that are
most important to your business
and structures, and demonstrating
what is happening to them over
time and what you are doing to
drive them in the right way”. “You
need to explain why this metric is
relevant, what you are trying to
achieve, and how far you have
progressed. Just talking about
KPIs doesn’t tell investors enough.”
Hermes Fund Management’s
associate director Tim Goodman
adds that while compliance-
related metrics will often appear
on a report these don’t give a full
enough picture. “Companies will
report on things like lost time
injury rates, but aren’t sickness
rates, wellness rates, and mental
health absence far more
powerful indicators of how well a
company is being managed?” he
asks. “Companies often do
what’s legally required, but if
they are serious about this
agenda they should think about
internal KPIs for measuring
performance. Don’t just lob out
engagement statistics. Wellness
and mental health stats tell us
more.”
There’s also a desire from
the investment community for
organisations to move beyond a
focus on executive pay. “At our
quarterly IR forum, which brings
together investor relations
directors and investors, we heard
strongly that people want the
debate to move on from
executive pay and remuneration,”
says Investor Relations Society
chair Sue Scholes. “They want to
move the conversation to talking
about other governance issues
like board composition, succession
planning and supply chain.”
There’s also a growing
recognition of the importance of
matters pertinent to the whole
workforce. Recent NAPF research
found that members put greater
weighting on whole workforce
issues such as health and safety
records (65%), and pay and
conditions of employees (58%),
than the level and structure of
management pay (48%) when
making investment decisions.
“Investors are now provided with
page after page of reporting
about pay and other governance
matters. It is possible to know
exactly what metrics an executive
is rewarded against. It is
however, not uncommon to have
little idea about how many
employees an organisation
employs,” says NAPF chief
executive Joanne Segars.
“As investors we are there to
hold companies to account and
encourage good practice,”
concludes Hermes’ head of
responsibility Leon Kahmi.
“We are looking for a happy,
productive workforce – what data
do you have that reflects that?”
For those HR directors
considering where to start
in producing metrics that can
both add value internally and
help investors assess your
organisation, the recent NAPF
report, Where is the workforce in
corporate reporting?, offers four
suggested categories. While
some of these areas may be
overly simplistic (for example, the
issues inherent in engagement
scores), they offer a good
jumping off point for developing
stronger metrics.
1. The composition of
the workforce
Core metric: Total number of
employees and workers.
Additional metrics:
Proportion of full-time, part-time
and contingent labour; diversity
of ages and gender; divergence
between benefits awarded to full-
time employees and to part-time
or temporary staff.
2. The stability of the
workforce
Core metric: Employee
turnover in a
defined
period.
Additional
metrics: Regrettable turnover;
remuneration policies and ratios;
number of applicants per post;
offer/acceptance statistics;
levels of skills shortages;
industrial relations issues;
retention rates after parental
leave; benefit entitlements
of employees.
3. The skills and
capabilities of the
workforce
Core metric: Total investment
in training and development.
Additional metrics: Average
hours spent on training per
worker and for each employee
category; number of courses
taken; leadership/career
development plans; internal
hire rate; the proportion
of professionally qualified
employees.
4. Employee satisfaction
Core metric: Employee
engagement score(s).
Additional metrics:
Absentee rates; number of
accidents and work-related
fatalities; lost days to injury;
occupational diseases rate.
Themetricsthatmattertoinvestors
Some of this isn’t unique to HCM. Richards
points out that there are also inherent issues with the
financial data presented to investors by organisations,
but explains that starting from a comparable base
means investors are able to look deeper, something
they are unable to do with human capital data. “As
investors we are all too aware that people can hide
behind numbers, and we do have to spend time re-
engineering them,”he explains.“However, on human
capital we aren’t even at a stage where we are able to
contemplate doing that.”
As Dando alludes to, when there is information
about people on an annual, strategic, CSR or even
integrated report, it tends toward the shallow and
cliché-ridden. And lumping HCM information in
with the CSR report can also, perhaps inadvertently,
see it labelled as ‘fluffy’ rather than strategically
important. In the words of the IIRC’s Stevenson:“We
have to put an end to this mantra of ‘our people are
our greatest asset’; we need to find a way of describing
the value that asset is bringing in a way that helps
investment decisions.”
Togetaroundthechallengesof biasandinconsistent
data some investors are turning to more sophisticated
tactics. According to the Walking the Talk research,
investors who are interested in culture use on average
5.9 different sources of information to assess it, and
Dawson says he has noticed bigger investors and
hedge funds seeking out third party research. “A lot
of people are resorting to triangulating testimonies,”
Day-to-day
there isn’t a
huge amount of
debate about
the value
of people
4. hrmagazine.co.uk September 2015 HR 3130 HR September 2015 hrmagazine.co.uk
DaveUlrichonthemarketvalueofleadership
In an exclusive
article, Dave
Ulrich explains
why he thinks
the time is
right to bring
HR and
investors together.
When two disciplines collide, bad
or good things can happen. Bad
things happen when the collision
fragments a discipline into
disparate parts. Good things
happen when discipline collisions
inform each discipline.
The intersection of HR and
investors has the potential to
benefit each discipline. In recent
years, HR professionals have
worked to define and create value
for key stakeholders. Clearly, HR
drives positive employee outcomes
(productivity, wellbeing), helps
execute business strategies
(strategic HR), and enhances
customer share (HR from the
outside in). But HR’s value may be
further enhanced when it
demonstrates the impact on a
firm’s financial performance,
focused on market value.
In recent years, investors have
learned that defining the market
value of a firm may be based on
earnings, but goes beyond that.
For decades, GAAP and FASB
standards have required financial
reporting of earnings, cash flow,
and profitability. Recently these
financial outcomes have been
found to predict about 50% of
a firm’s market value. Investors
have shown increased interest in
intangibles like strategy, brand,
R&D, innovation, risk, and
information flow. These
intangibles predict firm
profitability. A next step
for investors is to analyse
the predictors and drivers
of intangibles.
Wise, long-term investors
recognise that leadership matters.
In our research, we found that
investors allocate about 30% of
their decision-making on the
quality of leadership. Quality of
leadership becomes a predictor
of intangible value, which in turn
produces financial results. To
move firm valuation discussions
from financials to intangibles to
leadership requires synthesising
HR, organisation, leadership,
intangibles, and financial insights
in a quest to offer a simple
valuation solution while
acknowledging the complexity of
the overall problem of value.
My forthcoming book, The
Leadership Capital Index:
Realizing the Market Value of
Leadership draws on a useful
metaphor for how to include,
conceive, and audit leadership
in the assessment of firm value.
A leadership capital index is like
a financial confidence index –
Moody’s or Standard & Poor’s. It
offers a more thorough way to
assess leadership. Most
acknowledge that leaders affect
an organisation’s value, but they
use simplistic and intuitive
approaches to apply that insight.
I believe it is time to offer a
more rigorous way of evaluating
leadership through the eyes of
investors to more fully determine
a firm’s value.
To create a leadership capital
index, I also looked at dozens of
studies by consulting firms and
experts who attempted to put
substance behind the assessment
of leadership. In general, these
studies offered deep insights on
one piece of an overall leadership
puzzle. Some focused on
compensation practices, others
on personal style, and still others
on organisation governance and
design. Few attempted to prepare
a comprehensive approach to
leadership as a whole.
I believe that a leadership
ratings index would have two
he says. “They are talking to former
employees and using testimonials rather
than data. It’s a pragmatic approach –
expensive but it yields results.”
Looking beyond metrics
Not everything
can come down
to numbers and it’s not as
simple as, in Richards’ words,
“bringing it down to
a formula like market cap
divided by number of
employees, which would be
wrong”. “It’s about really
understanding how human
capital contributes to the
success of the business,
workingouthowtomeasurethatandcommunicating
it consistently,” says Scholes. “Some needs to be in
numbers[tomake]peoplepayattention,butnumbers
don’t tell the whole story.”
All the investors HR magazine spoke to agreed that
a mix of quantitative and qualitative reporting was
most effective.“Metrics are important for any fund
manager to take this seriously,” says the NAPF’s
Pomroy. “But those metrics should be company-
specific and qualified with qualitative information to
flesh out that story.” Much like financial data often
is, in other words.
Rather than seeking to impose a strict reporting
framework there’s also a
desire from investors for
companies to report on what
really matters to them, as
every business will have
different strategic priorities.
“With data you can end up
making false comparisons,”
acknowledges Tim Goodman,
associate director at Hermes
Fund Management.
“Qualitative analysis and
face-to-face meetings can differentiate between good
and bad performance in a much richer way than just
looking at data. Companies should be reporting on
the metrics that tell a richer story.”
That acknowledgement of the value of qualitative
information,although with a solid grounding in hard
metrics, should be music to HR’s ears. But Susannah
dimensions, or domains:
individual and organisational.
Individual refers to the personal
qualities (competencies, traits,
characteristics) of the key leaders
in the organisation. Organisation
refers to the systems (often
called human capital) these
leaders create to manage
leadership throughout the
organisation and the application
of organisation systems to
specific business conditions.
Using these two domains,
previous leadership and human
capital work may be synthesised
into a leadership capital index
that investors can use to inform
their valuation decisions and
HR professionals to enhance
their impact.
Five leadership factors define the
individual domain of a leadership
ratings index that covers half of
leadership capital. They are:
1 Personal proficiency:
to what extent does the
leadership demonstrate the
personal qualities required
of an effective leader?
2 Strategist: to what
extent does the leadership
articulate a point of view
about the future and
strategic positioning?
3 Executor: to what extent
does the leadership make
things happen and deliver
as promised?
4 People manager:
to what extent does
the leadership build
competence, commitment,
and contribution of their
people today and
tomorrow?
5 Leadership
differentiator: to
what extent does
leadership behave
consistent with customer
expectations?
Leadership capital not only
includes personal or individual
leadership traits, but also
investments made to build future
leaders within the organisation. To
build future leaders, leaders
create organisation cultures and
invest in human resource
practices (often called human
capital) in five domains:
1 Culture capability: to
what extent has the
leadership created a
customer focused cultural
capability that is shared
throughout the organisation?
2 Talent: to what extent has
the leadership invested in
practices that manage the
flow of talent into, through,
and out of the organisation?
3 Performance
accountability: to what
extent has the leadership
created performance
management practices
(e.g.,compensation) that
reinforce the right
behaviours?
4 Information: to what
extent has the leadership
managed information flow
to gain information
asymmetries?
5 Work: to what extent has
the leadership created
organisation and work
practices that deal with the
increasing pace of change in
today’s business setting?
The intersection of HR and
investor fields benefits both. HR
becomes even more central to the
business and investors have more
comprehensive data to determine
firm value. A leadership capital
index is a wonderful beginning of
this journey.
Dave Ulrich is the Rensis Likert
Professor at the Ross School of
Business, University of Michigan
Clements, former deputy chief executive of the CIPD
andfounder of IthacaPartnersHR practice,questions
if “HR people get the idea of shareholder value”.
“A lot of HR professionals have grown up feeling
that shareholder value and people engagement are
incompatible; they have got to realise that they are
one and the same,” she says.“While some HR people
have a commercial idea of business and are bought
into [shareholder value], others see it as the thin end
of the wedge and think people issues are above it.”
She draws a comparison between CSR and HR
reporting: “How did CSR reporting come to be? HR
people failed to get people issues on the agenda but
CSR played a blinder and got [their] issues to be
reported on every year.”
And she warns if HR doesn’t seize this opportunity
to take the same ownership of people reporting, it
might be taken out of its hands.“There are a series of
people on the edge of HR – investor relations, legal,
corporateaffairs–tryingtoworkouttheirplace.If HR
doesn’t stake out‘people’now, someone else will.”
Kearns believes investors are “only going to get
more and more frustrated” by the lack of people-
related reporting and that “the next people who are
going to get it in the neck are HR directors”.According
to The Maturity Institute’s analysis of top FTSE
companies the average score for capability in human
capital management was 51.5%. “This represents a
colossal shortfall in value that is being lost by
shareholders, customers, employees and society at
large,”says Kearns.“This is an accountability agenda.”
It’s easy to be sceptical. Previous initiatives to
quantify the value of people have failed; however it
could be argued those initiatives lacked the necessary
pull from communities outside of HR – a pull that
evidently now exists.
But crucially, despite the interest from the
investment community, this issue is about more
than just providing shareholder returns. It’s about
good governance and the business community
at large recognising the value excellent
people management and effective HR
strategies bring to all stakeholders,
including employees. As
Dando puts it: “This is as
strategic as it gets in the
HR field. There is no better
way of reinforcing the
relevance of all things
human capital.” HR
Companies should
be reporting
on the metrics
that tell a
richer story