More than 40 per cent of senior HR professionals don’t see measuring human capital as a priority for their business, and a fifth never expect to report on it in their annual report.
Exclusive research by Personnel Today and global consultancy Deloitte shows that, 12 months after Denise Kingsmill published her taskforce’s Accounting for People report, many companies still have a long way to go in implementing its recommendations on human capital management (HCM).
The survey finds that despite an increasing familiarity with the term ‘human capital’, a quarter (27 per cent) of all organisations do not use any measurements. More than 10 per cent of HR professionals admit to never using the term at all.
The latest findings are the second joint survey by Personnel Today and Deloitte on human capital. The first, carried out in September 2002, showed that, despite measuring human capital being regarded as useful by many organisations, only half appeared to be doing it successfully.
This year’s survey examines whether the approach to human capital has changed, and whether organisations are becoming more successful at measuring people.
Results indicate there have been some changes in the past two years, with a greater use of measurement. However, the report still predicts that many organisations will be storing up “significant trouble for themselves” over the next 18 months.
Brett Walsh, European head of human capital consulting at Deloitte, said: “While the Government has not yet provided specific guidance on the level of reporting, the Accounting for People taskforce recommends that operating and financial reviews (OFRs) should include information on employment practices and policies.”
It will become a statutory requirement for listed companies to report on people policies in their OFRs early next year.
“From the results of this survey, it is clear that many organisations will have a long way to go in a very short period of time,” said Walsh.
However, despite the current sluggish pace of change, Walsh predicted a much more dynamic future, with organisations seeking market differentiation through innovative people strategies.
“As public reporting draws nearer, we expect human capital measurement to become more prolific,” he said.
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Feedback from the profession
Lynne Griffin, director (personnel and training), Northern Rock
“I don’t believe anything has really changed in the past 12 months since Kingsmill published her report. While it was very admirable, it did not provide the level of detail that is needed to make it add value to the business. I have attended strategy sessions with the expectation that they might help, but they did not even begin to scratch the surface in expanding on the detail needed.”
Duncan Brown, assistant director general, CIPD
“To some extent the Department, of Trade and Industry weakened and softened the Accounting for People Taskforce’s proposals. The DTI recommended a review after five years instead of the initial two, and we’re still waiting for the Accounting Standards board to publish its rules. Human capital management is vital to the organisation and you cannot report externally if you aren’t doing it internally.”
Debbie Hewitt managing director, RAC Roadside
“Things are changing, but it takes time to become meaningful. HCM is getting higher on the corporate agenda. There was a risk that the Department, of Trade and Industry could have been too prescriptive [with the draft regulations] and told organisations what they must do. That’s not the best way. To make a difference you have to be talking about real changes in behaviour and culture within organisations.”
Clare Chapman, group HR director, Tesco
“It is staff who make the difference where it matters most – for your customers. So, I do believe the Accounting for People report matters. It’s a helpful reminder that business cannot be healthy without listening and responding to the views of staff. We have a balanced scorecard that measures how well we are delivering for customers and staff every month, so we support making such measures transparent.”
Key findings from the survey
The Measuring Human Capital Value survey of more than 820 HR directors and senior HR practitioners found:
– 65% understand human capital to mean ‘the employee asset value of an organisation’
– 47% use HR benchmarking and metrics to measure human capital
– 21% of respondents expect to report on human capital in their annual report in the next six to 12 months
– 21% see ‘being able to adhere to the Account-ing for People recommendations’ as a key benefit of human capital reporting
Recommendations of the taskforce
– Reports on HCM should have a strategic focus, be balanced and objective, and based on sound data
– The report should clearly represent the board’s understanding of the links between HCM policies and practices and its business strategy and performance
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– Companies producing OFRs should include information on HCM or explain why not
– A standards board should monitor the extent of HCM reporting in OFRs, reporting to the DTI within two years
