Have you progressed on measuring HCM?

The Accounting for People Taskforce’s long-awaited report was published in
November last year. It gave examples of how companies can report on human
capital to shareholders, but did not recommend exact measures. Instead, the
responsibility for devising best practice was given to businesses.

This announcement was followed in May this year by draft regulations for
operating and financial reviews. They stated that by 2005, all listed companies
must provide shareholders with an overview of their strategy and future
prospects, including some information about the company’s employees.

Reporting on human capital is clearly on the agenda for listed companies and
shareholders, but what is not obvious at this time is exactly how businesses
should be responding. Our joint research with Personnel Today in September 2002
highlighted the need for a recognised framework by which companies can report
to their investors and enable investors to judge how one company differs from
another.

Although the Accounting for People Taskforce refrained from prescribing best
practice, there is still a lack of clear guidance on establishing measurement
and reporting methodology. There is a danger that human capital reporting will
not be consistent for some time, and that investors will not fully benefit from
data.

The most valuable information will be outcome-focused and directed at
demonstrating bottom line improvement. For example, resource allocation and
deployment will be made more efficient by tracking workforce trends by job
level and location, years in position and retention. Productivity will be
increasingly important for corporates in a low-growth environment.
Demonstrating how business is doing more with less will be significant.

Businesses should be aiming to create and use data that will improve
decision making by providing the type of knowledge that enables leaders to run
businesses better. This will help to identify ways to grow revenues, instead of
cutting costs.

With Personnel Today, we are running our research again this summer to find
out how far businesses have progressed. Although we expect to find improvement
– some businesses will have made huge progress – it will be clear that others
still have a long way to go.

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