This was the topic of an excellent talk at last week’s CIPD Conference presented by Edward Houghton CIPD Research Advisor for Human Capital Metrics and Standards and Greg Aitken, Head of People Strategy & Insight for Royal Bank of Scotland.
The Valuing your Talent Framework is built around a business-model concept, and designed to be a diagnostic tool by business professionals to assess how they measure human capital value in their organisation.
Summary of content of key findings and conclusions of research
Times are changing; in the 70s it was all about buildings capital, now it is about people. The way in which we understand the value of our talent is transforming, driven by the increasing recognition of the role people play in delivering the strategic challenges leaders set for their organisations.
A new agenda of transparency and reporting is emerging with five new challenges business leaders need to address.
- People have always been material in the financial sense; the agenda is now turning to establishing just how material.
- Greater understanding of the accountability for the performance of their businesses is needed. Leaders required to offer greater insight into the strategic imperatives of their organisation and the value drivers underpinning supporting business models. HR leaders place people – human capital – at the heart of an integrated understanding of the capacity of businesses to deliver sustained value-creation through their people.
- There is an increasing need for collaboration between HR, finance, and strategy communities resulting in more common language, measures and insights on people and organisations to understand how and where value is created and the related investments and initiatives which most drive sustainable business performance.
- Wider stakeholders – investors, customers, current employees, potential employees or regulators – require a greater line of sight through to an organisation’s relationship with its people. Recent evidence suggests those organisations that meet these requirements achieve lower costs of capital and build competitive advantage through the superior employee value propositions they can offer existing and potential recruits in the intensifying war for talent.
- There are challenges inherent in capturing and understanding human capital data. A lot of human capital data is qualitative and subjective. Combination of hard and soft data together can provide useful insights into what drives value, organisation culture and people risk.
Valuing Your Talent Framework
Strongly emphasised in the research is the lack of consistency with which human capital data is collected, analysed or reported.
The framework has evolved through the research and is a start point from which to shape the debate and create momentum. It reflects the collective views of leaders from the HR and finance community as well as experts from the major accountancy firms, consultancies and researchers in this space.
Organisations will want to prioritise what they focus on and measure within the framework the concepts that they regard as material to their own strategy, business model and associated people-based metrics.
The onus is very much on understanding the journey that organisations are currently travelling. Boardrooms will gain here an insight not just into where they might locate the maturing of their own human capital analytical techniques and its direction of trave, but they also get to see what ‘good’ looks like.
Taken together the following are the four indicators as to what organisations should report on to provide a basis for the ongoing analysis of the level of investment made by organisations in their people.
- Many companies do not publish information on the total costs of their labour. This is incongruous to the growing need for enhanced transparency. Valuing Your Talent sets out examples as to how organisations can meet the call for transparency into the level of investment made by organisations into their talent.It also sets out:
- How organisations report their employee ‘churn’ and three-year rolling average recruitment costs are clearly set out.
- How organisations can report a three-year rolling average for their training and development costs.
- How employers can report on the three-year rolling average of their annual staff engagement surveys.
Organisations should begin by voluntarily reporting on an annual basis to enhance transparency and demonstrate the sustainability of their talent base in the near, medium and long term.
• Key to any business: knowledge skills; experience; brand value
• Leadership: where is the business going in the future
• Organisations are becoming aware of the need to change
• Questioned: where does your value lie?
• Think strategically
• Line of sight always difficult to understand when you are at the top; too protective of employees
• Hard to build and maintain knowledge and skills of the workforce
• Value creation; value is your people
• Huge skills gap of analytics in HR
• Managing data and keeping it safe is difficult
• Membership of the RSA important gives a bigger picture
• Glassdoor.com – great way of sharing voice of human capital. Transparency should be seen as value to HR
• Culture on value understanding and appreciating measures of human capital
• Value of employee engagement
• People are value creators
• Don’t need more data, need insight
• Poor data does not support the business make informed decisions
• Costs 1/10th amount of time and money to build excellent leaders versus buying -in her/his replacement
• Break even point for a new manager to become productive = 6.2 months
• Great people in your organisation are fickle, they only want to work with A Class leaders