HR needs to take initiative on human capital reporting

 “Human capital is the 21st century equivalent of the 19th century dependence on natural resources. Modern enterprise and wealth creation depend upon the development of people, not their exploitation”.

Tony Blair’s government may have got cold feet on the issue of human capital reporting, and this immediate pre-election period may not see our politicians generally at their most honest. Yet even the most hard-bitten HR manager should be starting to see positive signs of the realisation, even revolution, that the prime minister referred to in his first keynote speech of the election campaign earlier this month.

At about the same time as Blair was speaking, I was listening to Tracy Robbins, of the food services giant Compass Group, at the Chartered Institute of Personnel and Development’s 2005 HRD conference.

She described her company’s three-pronged strategy: to have great people by being a preferred employer, to deliver great service to clients and customers, and to deliver great financial results. The board routinely looks at labour turnover and employee satisfaction data, just as it does the operating margin and return on capital employed figures.

It’s the same at expanding retailer Asda, where the formula is to make it a great place to work, which makes it a great place to shop, which makes for its superlative financial returns. Its employee-oriented approach has helped create a workforce in which more than 90% of staff are proud to work there. Tough for a competitor to copy or poach.

The public services have been at the centre of the election debate, as the main parties attempt to outbid each other on the size of staff cutbacks. Yet, the CIPD’s current action research, with the Cabinet Office and Employers Organisation, examining HR’s role in public service reform shows that the attention needs to shift from efficiencies and economies to staff engagement and empowerment, if the service’s objectives are to be achieved.

A recent study of top performing local authorities found that their staff felt better managed, more involved in decision-making and given the scope to use their own initiative.

At Torfaen Council – winner of the Institute of Customer Services’ annual award – there are weekly team meetings in the call centre, and a variety of recognition awards on offer. According to Gloria Evans, “all staff have input into the customer service plan, allowing them to take ownership of it”. Lost calls and staff turnover figures have plummeted as a result.

Linda Holbeche’s excellent new book, The High Performance Organisation, demonstrates unequivocally that the human factor lies at the heart of the UK’s productivity deficit. She provides numerous similar examples demonstrating that it is the employee and customer-focused organisations that achieve long-term sustainability. As the founders of Google put it in their financial prospectus last year, “our employees are everything”.

Seventy years ago, Elton Mayo, professor of industrial research at Harvard, wrote that, “the need for recognition, security and a sense of belonging are most important in determining workers’ morale and productivity”. After successive tides of scientific management, strategic planning, business process re-engineering and so on, our government and business leaders at long last seem to be recognising this self-evident social and economic truth.

The HR community should be going on the offensive to help reassert the importance of people in management and human capital in the economy.

Duncan Brown is assistant director general, Chartered Institute of Personnel and Development

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