Managing the value of your talent

This new framework for measuring and reporting on human capital 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.

By CIMA

 

Managing the value of your talent builds on the many years of research on demonstrating and understanding human capital value and metrics and draws on more than 60 interviews across the HR and finance functions of over 40 organisations.

 

Three key objectives have guided the development of this research:

 

  • to better understand how developing and managing people releases and drives value through exploration of existing best practice, drawing on a range of case studies across different sectors and sizes of organisation
  • to define much more clearly the basic people metrics and to promote agreement and consistency in how such measures are used
  • to develop a broad framework against which executives, employees, the investment community and other stakeholders can assess how businesses of all kinds are developing their people and organisations to enable sustained and higher levels of performance. 

 

Main findings

 

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, new levels of scrutiny are being applied to the capacity of organisations to secure optimised and sustained value from their people. Contrary to popular opinion, people have always been a top-table issue. But a new agenda of transparency and reporting is emerging and, with it, our research suggests, five new challenges which business leaders need to address. 

 

First, although leaders have long understood the value of their people, wider stakeholders have become increasingly concerned with establishing the extent to which executives enable their people to succeed. People have always been material in the financial sense. The agenda is now turning to establishing just how material.

 

Second, driven by the clamour for enhanced transparency and a greater understanding of and accountability for the performance of their businesses, leaders are being increasingly required to offer much greater insight into the strategic imperatives of their organisation and the value drivers underpinning supporting business models. HR leaders, CFOs and other members of the finance community interviewed for this research, place people – or human capital – at the heart of such an integrated understanding of the capacity of businesses to deliver sustained value-creation through their people.

 

Third, with new levels of reporting come new challenges to business leaders for establishing and articulating the performance of their people. This in turn emphasises the increasing need for greater collaboration between HR, finance and strategy communities. As a result business requires more common language, measures, and insights on the people and organisation, to understand how and where value is created and the related investments and initiatives which most drive sustainable business performance.

 

Fourth, wider stakeholders – be they investors, customers, current employees, potential employees or regulators – require a greater line of sight through to an organisation’s relationship with its people. This includes gaining understanding of cultures and behaviours critical to both sustainable performance and to risk, to how organisations are building resilient and diverse workforces for the future, and to critical elements of social responsibility. Recent evidence suggests those organisations that meet these requirements achieve lower costs of capital and, perhaps more importantly, build competitive advantage through the superior employee value propositions they can offer existing and potential recruits in the intensifying war for talent.

 

Lastly, our research again highlights the challenges inherent in capturing and understanding human capital data. Beyond the core quantitative metrics, which themselves are not consistently defined, a lot of human capital data is qualitative and subjective. It is the combination of hard and soft data that together can provide useful insights into what drives value, organisational culture and people risk. It is the art of the executive to consider and use that data to improve how investments in people are made to support sustainable performance. 

 

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