Government publishes Task Force report on human capital

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Patricia Hewitt MP

The Accounting for People Task Force has now published their conclusions and recommendations in a report to the Secretary of State for Trade and Industry, Patricia Hewitt.

The report is the result of a five-month consultation on how organisations should go about reporting on their "human capital", including activities such as training, recruitment, staff turnover and diversity.

Speaking at its launch yesterday, Duncan Brown, Assistant Director-General of the CIPD, said the Government should endorse the recommendations set out in the report.

The CIPD is urging the Government not to adopt a prescriptive approach to human capital measurement and reporting, but stick to a set of "general principles to guide decisions". Brown commented: "Take a typical workforce measure such as labour turnover. How would you assess a company rate of say 20%? For a retailer this would be incredibly low, while for a research-based manufacturing company it might threaten its competitive survival."

Brown said: "The importance of the report should not be underestimated both within and outside the profession. Within the profession, the success of organisation rests increasingly on the shoulders of HR practitioners as they look to find a human capital management and reporting formula that suits their organisation. A uniform style of reporting is therefore simply unworkable."

He continued: "And what is more, the dynamic and intangible nature of human capital means that it should not be included in the financial statements of the firm, nor imposed as a common and inflexible set of measures. It would be most effectively reported in the Operating and Financial Review (OFR)."

The CIPD would like to see another recommendation to the list set out: for organisations to set out the barriers to meeting any of their targets. For example, the CIPD says that, while many have laudable aims regarding recruiting a diverse workforce, the geographical demographic constraints might prove such aims unworkable in reality.

Patricia Hewitt said: "The Accounting for People Task Force, under the watch of Denise Kingsmill, is to be congratulated. They have provided valuable insight into the impact of HCM, and some sensible guidelines on what a HCM report might cover."

She continued: "Their work should help those already reporting and those who want to report. I hope it will encourage others to follow their example, and convince sceptics of the importance of human capital management reporting."

You can download the pdf Accounting for People report along with frequently asked questions

You can also download the CIPD's guidance: Human Capital Change Agenda

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HR Zone welcomes the views of members on the Accounting for People report. Why not post your comments below?

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5th Nov 2003 12:47

My initial (cynical) response to the Accounting for People Task Force was that it was a clever response from CEOs and their business advisors looking for another way to raise their share price. I could imagine boardrooms echoing with the comments “How can we raise the value of our company? I know, our people are really good, how do we get them on the balance sheet?”

Whatever the motivation behind the Task Force might be, it has already managed to get HR (or Human Capital) on the Board agenda more rapidly and successfully than the CIPD ever has – which possibly explains CIPD’s initially guarded response.

The key now for HR professionals is to take this opportunity to influence this agenda and work with their business to ensure that the recommendations are applied to add value to the business. Otherwise, the recommendations could become merely a reporting process put in place purely to influence shareholder value. The challenge facing HR professionals is one that has faced them for some time; namely to embrace the language of the boardroom and have HR take its rightful place at the table. Judging by the initial recommendations, it is not difficult to imagine a point at which a Board Director must be named as solely accountable for Human Capital Reporting. Senior HR practitioners should be acting now to ensure that they, and not the Finance Director, are the obvious choice for this post.

Paul Flavin
The HR People

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11th Nov 2003 18:11

The recent Taskforce report and Talent Management survey are a sign of the growing recognition that the value of people needs to be identified, managed and developed as a key component of productivity, competitiveness and organisational agility. As such they correctly identify that the phrase 'our people are our greatest asset' cannot be a throw away line but be a core business strategy. Winning and retaining the best people is as important today as winning and retaining the best clients. Now and in the near future it will increasingly take its place as a core boardroom issue.

Both of these reports come at the subject from different perspectives. However, I believe that you cannot look at talent management or human capital management in isolation. They are fundamental to the business and any strategy that is put in place to address these areas must be linked to business goals.

At the same time both of these reports fail to identify the need to address the specific needs of the individual. They emphasise the importance of board level recognition of people management but do so in a top-down fashion. The reality is that one of biggest reasons for people churn is that the individual's needs are not being addressed. The fact that the reports fail to address this is because they are not taking into consideration the processes that can and are already being put into place. However if you look at what leading public and private sector organisations are doing you will see that technology, such as strategic people management software, is playing a key role in this area.

This technology gives the reporting and strategic overview of people management that the reports both call for as well as offering tailored systems to the individual. By doing so organisations can track, match and identify their people's aspirations to ensure that their needs are being met and their abilities recognised and honed. This is essential if the concerns and recommendations of these reports are actually going to be enacted and provide tangible benefit to the people management agenda.

Stephen Doran
www.zynap.com

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