Some of the companies involved in the Accounting for People (AfP) taskforce have been criticised for failing to provide anything more than basic staff data in their annual reports.
Senior executives from BP, catering company Compass Group and Granada (now ITV) played a key role on the taskforce, which concluded that human capital management (HCM) must be covered in company reports.
But close inspection of their most recent annual reports reveals that some only pay lip service to their staff in their main documentation, with as little as two paragraphs on “employment” in the case of ITV. BP has just one paragraph on “human potential” in its report, although there is quantitative data on staff employee issues. Compass includes only five paragraphs on staff in its 105-page annual report.
ITV and BP point out that they provide more detailed people information in separate “corporate social responsibility” (CSR) and “sustainability” documents.
This is not enough, according to Paul Kearns, director at HR consultancy PWL.
“People stuff should not be buried, sidelined or confused with anything else like CSR or environmental issues,” he said. “It should not even be a separate document. HCM is about the profit and loss and the balance sheet. Nothing should disconnect it, which is exactly what a separate document would do.”
Randal Tajer, a senior HR executive at financial services firm UBS, said most reporting on staff-related issues does not really inform investors and reflects badly on HR.
“There’s lots of ‘data’ out there, but no ‘information’,” he said. “HR wants the respect of a discipline, but not the discipline of a discipline.”
Companies such as the Royal Bank of Scotland, Standard Chartered bank and the RAC have been praised for detailed human capital reporting, but others tend to fall back on purely quantitative data because HR professionals often do not know whether or by how much they are affecting the bottom line, Kearns said.
HR’s lack of business influence was reflected in the Operating and Financial Review (OFR) regulations, he said, which largely ignored the AfP recommendations, and did not include a requirement to include any meaningful data on people.
“HCM has to show a direct causal connection between effective HR strategy and bottom-line business performance,” said Kearns. “But because HR is failing miserably to take up this challenge, when push comes to shove – such as the advent of OFRs – no-one will give it house room.”
Employers struggle with OFR basics
New research from the Chartered Management Institute indicates that many companies will struggle to meet even the basic guidelines for Operating and Financial Reviews (OFRs).
The majority of organisations in the UK (90%) claim to measure the value of their workforce, but only 20% believe that information is of any use.
The institute has published a free guide, in association with Oracle and Capital Consulting, urging organisations to focus on the people measures that relate to the needs of their business.
Sir Paul Judge president, Chartered Management Institute
“The OFRs don’t link people with the bottom line, but it is critical that companies talk the language investors understand – finance.”
Denis Barnard director, HR Means Business consultancy
“CSR in its current form is a red herring for HR to exert some sort of ‘social’ pressure on an organisation. Demonstrate the link between people policies and company performance – anything else is just a waste of time.”
Angela Baron adviser on organisation and resourcing, CIPD
“People can add real value , but this requires measure-ment and management. Too many organisations rely on anecdote and mythology to develop and adjust their people strategies.”
Jim Matthewman, worldwide partner at HR consultancy Mercer
“The ability to communicate the contribution and value of people to key stakeholders is critical to understanding the true worth of an organisation.”