Last November the Accounting for People taskforce, sponsored by the Department of Trade & Industry and led by Patricia Hewitt, issued a report which set out recommendations for listed companies to communicate the value of their human capital to shareholders.
The aim is to provide investors and staff with a means to effectively judge how one firm differs from another in terms of how human capital is managed and the value of their return on investment in people. The report's main recommendations were:
lReports on human capital management (HCM) should have a strategic focus, be balanced, objective and based on sound data
lThe report should clearly represent the board's understanding of the links between HCM policies and practices and its business strategy performance
lThe report should normally include details of the size and composition of the workforce, employee retention and motivation, skills, competencies and training, remuneration and fair employment practice, leadership and succession planning
lThe report should be susceptible to review by auditors, provide information in a form that enables comparison over time and use commonly accepted terms and definitions.
The recommendations are due to come into force within the next two years, so IT directors will need to work with human resources departments to ensure that HCM systems are established and can deliver the required data.
Businesses are aware of the high costs of employment as a percentage of total costs, so there is no doubt that meaningful metrics will be a vital aid to effective business management. But the real challenge for IT directors is to establish a system that not only allows for reporting on the performance of people, but also for the data to be analysed and the results acted on.
The information required will come from multiple sources that need to be integrated, such as enterprise resource planning, customer relationship management and legacy HR systems. For many businesses, an ERP system may not yet include HR data.
Data overload, which occurs in many organisations, can potentially blur HCM issues. Business users of HCM data will require simplified access to quality information. This, combined with system functionality and flexibility, could make pulling data together an arduous task.
The data can be collected from existing systems without the need for manipulation or re-keying, which means it will be accurate and suitable for review by auditors. Portal technologies, for example, create an unprecedented opportunity to integrate data from multiple sources.
Single, integrated data sources greatly increase information integrity and control, and when combined with personalised delivery of information, the usability of the data will be greatly improved. Web browsers also make it easier to access information and web-based tools are cost-effective to maintain and use.
IT directors will need to work with the rest of the business to combine data collection with reporting into a clear framework of key HCM metrics and variables suitable for use by the business.
The interpretation, analysis and return on investment business case can then be demonstrated by HR business partners and third parties to provide the business with a value added service called "internet enterprise performance management".
This way, businesses will be able to gain insight into the drivers for improving company performance by measuring and analysing the human impact on financial outcomes and identify and apply people solutions that will improve these outcomes.
Ricky Forde is senior manager at IT professional services firm Deloitte