HCM offers HR a chance to show its impact on the bottom line

The Government-sponsored Accounting for People taskforce report promised so much.

Under it companies would be required to measure and report on their people strategies, thereby recognising the value of HR and increasing the profession’s worth.

But the taskforce’s recommendations have been all but ignored by the Government in its draft legislation, which is under consultation until 28 February.

How HCM guidance came to be ignored


– Directors of companies producing OFRs should include within them information on HCM within the organisation, or explain why it is not material.

– The Government should consult with leading employers, investors, professional organisations and other relevant stakeholders on the introduction of a programme to aid the dissemination of best practice on HCM and HCM reporting.

The Accounting Standards Board be charged with monitoring the extent and depth of HCM reporting in OFRs, reporting to the Industry Secretary within two years of its formation.

Source: Accounting for People recommendations, October 2003


– No reference at all to the Accounting for People taskforce’s terminology of HCM.

– Staff information may be included “depending on the nature of the business”.

– It is up to the directors to decide if they include information about employees on the basis of whether it is a principle risk or uncertainty facing the company.

– Employees are seen almost exclusively as a risk rather than an asset – health and safety and morale are the only areas highlighted as key performance areas.

Source: OFR draft legislation and the Accounting Standards Board regulations, which give legal effect to the OFRs, January 2005

To see in more depth how the recommendations in the Accounting for People Taskforce differ from those in this summary of the draft regulations, click here.

For further information on the exclusion of employee information from the draft Operating and Financial Review regulations, click here.

You can read the full version of the draft regulations here.

How do you feel about this? Tell us your views. E-mail daniel.thomas@rbi.co.uk

Sign our petition

There is still time for you to tell the Government how important it is to legislate these changes. Join Personnel Today in calling for employee information to be included in company reporting legislation. Click here to sign our petition.

Background on Accounting for People


The Taskforce on Human Capital Management Reporting was set up in January 2003 to:

  • look at the performance measures currently used to assess investment in human capital
  • consider best practice in human capital reporting, and the performance measures that are most helpful in reports to stakeholders
  • establish and champion the business case for producing such reports
  • produce a final advisory report.

In November 2003 the taskforce completed its task.

For a summary of the Accounting for People Report click here, or view the full report

The Secretary of State announced her response to the Accounting for People report on 5 May 2004, at the same time as the announcement on the Operating and Financial Review (OFR).

  • 1985 – Companies Act becomes law, designed to ensure businesses conduct themselves properly in relation to financial information

  • March 1998 – DTI launched a long-term fundamental review of core company law, led by an independent steering group

  • July 2001 – Steering Group presents its final report to the DTI

  • July 2002 – Government publishes its response to the major recommendation

  • July 2003 – Government announces its plans for reforming company law, containing three main elements, one of which is introducing a statutory OFR for large companies. It follows corporate scandals such as Enron and WorldCom.

  • January 2005 – Government publishes draft regulations for OFRs

  • April 2005 – OFR legislation due to become law

You can access a range of HCM features, reports and opinion pieces on personneltoday.com

HCM in practice

Actually measuring what your employees want and how that impacts on the bottom line is the best way to begin with human capital management. In our feature, Getting the measure of its people,  you can find out how Royal Bank of Scotland (RBS) involved 130,000 staff in HCM. You can also read about how RBS has introduced a ‘human capital toolkit’ to help HR to identify problems. Click here to view the full article, HCM toolkit takes RBS bank to next level in HR strategy

T-Mobile, Gallup and Nationwide are among the organisations recognised for breaking new ground in measuring human capital return on investment. Click here to find out why these organisations were shortlisted for the Deloitte Award for Innovation in Measuring Human Capital.

Paul Kearns, one of the leading experts on HCM has written two articles for HR directors. In Measure up, he describes the business case and explores the differences between HCM and human resources management. In First step towards human capital management, Kearns provides a step-by-step guide to measuring human capital, including how to develop the right skills in the HR team. Kearns delves deeper in the One-Stop Guide to Human Capital Management.

One-Stop Guide to Human Capital Management 100 x 1

Whereas other reports focus on academic theory, this one uniquely focuses on putting HCM into practice in the real world. Written by Paul Kearns, one of the UK’s leading experts on HCM, this guide will rapidly get you up to speed on the next revolution in HR.





Exclusive research by Personnel Today and global consultancy Deloitte shows that many companies still have a long way to go in implementing its recommendations on HCM. The latest findings are the second joint survey by Personnel Today and Deloitte on human capital.

Click here to read a summary of the findings or get your free copy of the Measuring Human Capital Value 2004 report

Other research finds that companies with higher levels of employee engagement outperform their rivals in terms of profitability, for more click here


Credible people statistics are the way forward

HR functions need to create a credible way of measuring their impact on the bottom line if they are to mainstream strategic people management, according to Denise Kingsmill

HCM must be kept simple if HR wants to engage staff

If HR wants to engage managers with their human capital management (HCM) agenda, it is all about keeping it simple, according to Neil Roden, group director of HR at RBS

HR must stop turning a blind eye to HCM

Exclusive research with Deloitte into human capital management (HCM) shows almost 40 per cent of senior HR professionals don’t see HCM as a priority for their business, and a quarter of organisations do not use any human capital measurement

Comments are closed.