Measure for measure people really are your greatest asset

first_imgMeasure for measure people really are your greatest assetOn 27 May 2003 in Personnel Today Comments are closed. Related posts:No related photos. Previous Article Next Article Organisations agree the way staff are managed can affect productivity.  So it makes good business sense to be ableto quantify your peopleIf you look closely at an organisation’s annual report and accounts, thechances are that it will include a phrase along the lines of ‘people are ourgreatest asset’. You might see lots of pictures of happy staff, but more thanthat is unlikely, apart from a paragraph on staff costs and the way theworkforce has been downsized over the past 12 months. As shareholders leaf through pages of minute detail on a senior executive’sremuneration package and potential earnings pot, they might like to stop andthink for a minute. While that sort of information is interesting, is it reallyhelping them to understand how effectively the business is being run? Is it assignificant as hearing how the human capital assets that drive the business arebeing managed? Human capital management is a mix of the way that organisations manage,recruit, retain, train and develop employees. It is about looking at people asa valuable business asset, not just a cost. It is about making sure that youhave people with the right skills and experience to deliver your businessstrategy, both today and in the future. Paradoxically, while external measurement of the people effect is solimited, there is widespread and growing acceptance from within organisationsand investors that the way in which people are managed is a key source ofcompetitive advantage and ultimately, profitability. A plethora of industries from service businesses through to manufacturingadmit there is a causal link between good human capital management and strongfiscal performance. They know they are, to use a cliché, in a bidding war fortalent. If they do not employ, nurture, develop and retain the best people,then their competitive edge will be blunted. If talented workers – which a company spends time and money employing andtraining – are not managed properly, they will leave. Often falling straightinto the welcoming arms of the competition, with potentially devastatingeffects. Organisations then have to spend further time and money on recruitingreplacements. As an investor, the chances are you will not be aware that this hashappened. You won’t have any means of judging the impact, good or bad, that thebusiness’s human capital management has had on performance. Why are organisations so loath to tell people about the measures they use totrack their management of this human capital treasure? Some might argue that todo so would give away competitive advantage, and yet they relatively freely,disclose a mass of financial data that is just as sensitive. Others might claimit is too heavy a burden to undertake. Yet many organisations keep humancapital information internally. What prevents them sharing that with others? A reticence to commit to a proper assessment of human capital managementcould be influenced by many factors. The keepers of human capital informationare still regarded as administrators and are not invited to the boardroomtable. Other anecdotal evidence suggests that organisations simply do not have thesystems or wherewithal to collate or measure the effects of the way in whichthey manage people. How many organisations have at their fingertips simple,accurate information about the number of people they actually employ? Perhapsmost significantly, many organisations don’t have the key performanceindicators that tell them if they are doing a good job. If managers collectedhard data, they would be in a position to manage what had been measured. By this autumn – following extensive consultation with industry, theaccounting profession, trade bodies and the investment community – theAccounting for People Taskforce (which I am chairing) will have delivered bestpractice guidelines that can be used to create a statement for inclusion in theannual report and accounts. We are not looking to put people on the balancesheet, but to at least make a proper assessment of the effect of human capitalmanagement by looking at the number of employees, staff turnover, staffdevelopment and employee satisfaction, for example. That would be ademonstration of the quality of management, that is too often neglected. By doing this, we may finally give ‘our greatest assets’ – our people – theprominence they deserve and begin to properly reward organisations thatrecognise the significance of managing people well. By Denise Kingsmill, Deputy chair, Competition Commission, chairAccounting for People TaskforceTo read the Accounting for People Task Force consultation document go to