A tool designed to put a value on human resources within an organisation received its European launch last month.
The Human Capital Index, introduced in North America last year, was designed by global HR consultancy Watson Wyatt which hailed it as “a single, simple set of measures that quantifies exactly which human resource practices have the most effect on shareholder value”.
It is based on research showing that improvement to key ways of managing people can add up to 30 per cent to the bottom line, and could be the start of a transformation in the way firms are accounted.
The problem of intangibles has increasingly vexed accountants, as the growth of service economy means fixed assets are just a tiny proportion of a firm’s market capitalisation. The balance is largely made up of employee’s skills, knowledge and potential.
Insurance firm AXA welcomed the development. “To be able to quantify the value of the human capital in a business and link that to the bottom line explicitly is something that I think most HR managers are keen to be able to do,” said Dawn Bentley, head of HR operations at AXA. “It will help raise the importance of HR.”
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by Philip Whiteley
