Operating and Financial Reviews (OFRs) present an ideal opportunity to highlight the value of staff, but it will take some time for companies to adjust to the new reporting regulations, according to leading City figures.
With quoted UK companies required to produce the statements for financial years commencing after 1 April 2005, the first wave of OFRs will appear next summer.
Despite the lack of legal requirement to include meaningful people data in OFRs, the best companies will focus on employees, according to the chief executive of Standard Chartered Bank, Mervyn Davies.
“We want shareholders to quiz us on how we are getting the best from our people,” he said. “The more OFRs focus on people, the better.”
Although Davies admitted it might prove difficult to get City investors to look seriously at staff factors, he urged companies not to reduce employee information to mere statistics.
“There is a danger in reducing things to simple measures and figures,” he said. “It is much more important to educate the business community about what is significant to us.”
Stephen Bevan, research director at the Work Foundation, said that OFRs could act as a vehicle to provide greater transparency on the intangible aspects of business performance.
“The government must make sure that OFRs really do have an impact and aim to broaden and strengthen their remit,” he said.
However, Bevan added that it would take a while for OFRs to settle down. “It is a new and very different challenge for companies,” he said.
Greig Aitken, head of HR research and measurement at Royal Bank of Scotland, agreed.
“There does need to be a level of consistency [in reporting] and how it demonstrably affects business performance,” he said. “In terms of OFRs, it will take a period of time to settle.”
The executives were talking at the launch of Work Foundation research which revealed how the UK’s productivity growth could be raised by 0.25% per year, per worker, if poor performing companies raised their game.