UK companies lag way behind their European counterparts in measuring ‘intangibles’ such as human capital, according to business consultancy Summit-IMM.
Scandinavian, German and Austrian companies are already required to produce ‘intangible capital’ statements with their annual financial reports, said Susanna Mitterer, managing director of Summit.
However, financial analysts in the UK do not place as much value on non-financial indicators.
“If you look at financial reports you get nothing but latitude. Intangibles give you the longitude and tell you where the company’s going,” she said.
Around a third of the delegates at this week’s FD Futures conference in London, which brought together financial directors from blue-chip companies, believe current accounting conventions in the UK don’t go far enough to measure non-financial performance such as effective people management.
The findings follow the government’s decision to scrap the operating and financial reviews (OFRs), which mean there will be no legal requirement to include people data in annual reports.
Paul Kearns, director of HR consultancy PSL, urged businesses to look beyond profit-and-loss sheets and attach more value to how they managed their people.
“Business performance is judged on short-term financials,” he said. “This misses out the whole people side of the organisation.”