Valuing your Talent: measuring and reporting human capital metrics

Peter Cheese, chief executive of the CIPD

If “people are our most important asset”, why are their skills and knowledge so poorly measured and reported by organisations? Peter Cheese discusses Valuing your Talent, a major new research and engagement programme launched at the CIPD annual conference last month.

Valuing your Talent Challenge

£10,000 and additional support to develop the best ideas for improving the way organisations measure and invest in their people – get involved now…

Productivity in the UK is still below its pre-recession level and low in comparison to international benchmarks. Youth unemployment remains worryingly high, and a recent OECD Skills Survey has brought the importance of improving the country’s skills base into sharp focus.

At the same time, concerns about corporate cultures and leadership behaviours, improving employee engagement and productivity, and taking advantage of diversity to build more sustainable and innovative businesses are all recognised as critical challenges that affect the long-term success of the organisations and societies in which we work and live.

Getting the best out of human capital

We cannot overcome these challenges without more insight into how organisations are managing and developing their people, and building the cultures and operating models that ensure they are getting the best out of their human capital. Within the HR profession, we already should know what drives good performance, and many of us are already capturing relevant data to share with stakeholders within our organisations to provide the right focus and support for the interventions that make the difference, be this in staff development and training, performance management, reward or other HR processes and practices.

However, there is little consistency of measurement and reporting practice around our people and organisations, as prior research from the CIPD has regularly confirmed, and no agreed frameworks to help organisations or stakeholders when they ask the questions. It is extraordinary that we do not even have common definitions for headcount – often leading to disagreement between finance and HR as to what the real number is.

This is not just an HR agenda, it is increasingly an agenda shared by the finance and management professions, by business leaders, external stakeholders, and even regulators and governments as more focus is brought to bear on how organisations are developing their workforces, their leadership, and their culture and values which have been so much in debate.

Understanding risks

This debate is not just about better understanding these critical value drivers of enterprises, but also about understanding the risks – people risks, cultural and behavioural risks that have so evidently been at the heart of some of the major business and financial sector failings in recent years.

Yet, despite efforts in the past, such as the Accounting for People initiative from 10 years ago, we still find ourselves struggling to find any consistent definition or understanding of what continue to be termed the “intangible” assets or value of business. Accounting practices have not kept up and continue to focus in great detail on the tangible assets, although these now make up the minority of the value of any business or enterprise.

If all this was easy, we would, without doubt, have fixed it, but now surely must be the time when we finally agree and land a common understanding and framework for measures and metrics in this area.

Developing a common framework

At our annual conference earlier this month, I presented along with Dr Anthony Hesketh of Lancaster University, the Valuing your Talent initiative we’re leading in partnership with the UK Commission for Employment and Skills, Investors in People, the Chartered Institute of Management Accountants, the Chartered Management Institute and the Royal Society of Arts (RSA).

Our goal is to build on prior work and the many sources of practice and research to develop a common and open framework for understanding, valuing and reporting of key human capital metrics and links to outcomes. This will require support from a broad range of bodies and stakeholders beyond the organisations involved in the project, including consultants, researchers, and the investment community and, over time, regulators that can influence the uptake as part of standard company reporting.

The initiative has widespread support and interest and – as part of our work – we are gathering data, reviewing prior research, and highlighting a range of different companies and their reporting practices as case studies and exemplars. We want to shine a light on how leading organisations are understanding, analysing and reporting on their people and organisational metrics and what value and insights this brings to better decision making and focus from the top on the workforce and workplace agendas.

Evolution of management

Given the very wide range of existing practice and maturity of reporting on human and organisational capital, the framework we develop needs to recognise an evolution of measurement from the basics of understanding the make-up of the workforce, including an agreed definition of headcount, through to how we are investing in and growing the workforce, organisational dynamics such as engagement and alignment, and capabilities such as leadership. Not all of the measures and practices can be reduced to quantifiable data, some will continue to be qualitative and some beyond the realms of consistent direct measurement, such as culture.

There is clearly still some “art” alongside the “science” in managing and developing people, and building successful and sustainable organisations, but we need to move firmly towards developing a common business language for HR, gaining more insight, and evolving the measurement and reporting practices in this domain for all types of businesses. We will be sharing our progress at www.cipd.co.uk/valuingyourtalent over the coming months, and actively encourage anyone with an interest in this to put forward their thoughts.

This video from the RSA asks why current systems fail to capture the value that people’s knowledge and skills bring to organisations and the economy.

Peter Cheese

About Peter Cheese

Peter Cheese is chief executive of the Chartered Institute of Personnel and Development (CIPD).
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