Human capital management is a phrase that brings many HR professionals out in a rash. But while it might be painful jargon, failing to measure the value of your people is no longer an option.
The trouble is, no-one seems to be sure exactly how to do it effectively – even the most senior HR directors.
Rob Lake, head of corporate engagement at Henderson Global Investors, works with companies on corporate governance and reporting. He has been interviewing group HR directors at FTSE 100 companies to find out what they do and how they measure their effectiveness.
“People’s reaction to the second question is interesting,” he said. “Some people can’t even answer it. It’s odd that so many firms come out with platitudes about ‘people being their greatest asset’, but even those that are thought to be leading the way in measurement don’t tell their investors.”
Cloak of invisibility
This is backed up by research from Investors in People, which reveals that 57% of the 400 employers questioned do not publish any information about their employees.
Separate research from the Chartered Management Institute (CMI) reveals that 68% of senior directors claim to measure the contribution made by their workforce. But this is mostly restricted to static measurements, such as staff costs, rather than dynamic indicators, such as evidence of absence management.
Owing to the high levels of inconsistent reporting, only 5% of investors take human capital management metrics into account when valuing a company, according to the CMI report. This, in essence, means the hard work being done by HR professionals is largely being ignored.
It is with this lack of real progress in mind that Investors in People has set up a standards group with the aim of creating a universal set of metrics that can be used for external comparisons of companies (Personnel Today, 4 July).
The group includes representation from employers, HR bodies, consultancies, business groups and universities, but questions have been raised about its make-up.
Gillian Hibberd, corporate director of HR and organisational development at Buckinghamshire County Council, criticised Investors in People for completely ignoring the public sector.
In a letter to Personnel Today this week, she wrote: “What a shame that Ruth Spellman failed to recognise the talent and contribution that the public sector could make to the human capital management standards board.
“Public sector bodies are not only required to produce their equivalent of a company report, but also have years of experience of developing performance systems that measure the impact of people across their business.”
Paul Kearns, director of HR consultancy PWL, has been advising leading companies about human capital management for many years, but he was not invited to take part in the group.
“After several years of telling Ruth Spellman she doesn’t even know how to measure or evaluate her own Investors in People scheme that is no surprise,” he said. “It will be a talking shop of the blind leading the blind.”
Nick Higgins, chief executive of human capital management consultancy Valuentis, said: “Investors in People appears to be expanding its remit once again. Organisations are perhaps left thinking as to the selection criteria for this board.”
Spellman admitted the board was not representative of all opinions, but said a key criterion for inclusion was “reasonable representation”.
“We had an enormous problem choosing the members and we could have filled whole buildings,” she said. “We had to have a cut-off.”
Responding to Hibberd’s comments, Spellman said the group’s first task was to find generic human capital management metrics that “provide shareholder value”. But she said the pilot roll-out of the metrics – as and when they are finalised – would go out to 3,000 employers, including some public sector organisations.
There is clearly a long way to go before human capital management is a comfortable subject for HR professionals, but Spellman is confident standard metrics will provide the answer.
“If we can crack this,” she said, “it might change the whole culture of this country.”