New guidelines developed to help measure workforce value

The majority of organisations in the UK (90 per cent) claim to measure the value of their workforce, but only 20 per cent believe that the information they gather is of use. However, with 80 per cent of a companyís worth tied to the value of its employees2, managers need more practical guidance in developing relevant measures, if future investment and corporate decision-making is to be better informed.

This is the view expressed in a new guide published today by the Chartered Management Institute. ëGetting the basics right: a guide to measuring the value of your workforceí, provides organisations with a process for better understanding the contribution made by their workforce. Published in association with Oracle and Capital Consulting, the guide urges organisations to focus on the key measures that relate to the needs of their business. It also gives practical examples of how measures are being used across a range of public and private sector organisations.

The guide has been developed within the context of Government moves to improve corporate governance. One of these, the Operating and Financial Review, being introduced on 1 April, requires companies to report only the minimum information about the workforce which would be needed to run any major organisation. However, this latest research suggests that many organisations would be unable to meet even these basic standards.

The guide has been produced as a result of in-depth research into workforce governance and human capital management. Conducted by the Institute and the Centre for Applied HR Research (Oxford Brookes University Business School), it found that managersí views about the factors having the greatest impact on organisational performance are often different from the limited measurement that is actually undertaken.

Addressing these concerns, the guide proposes a number of key principles for measuring workforce value. These are:

Measure what makes a difference: workforce measures should focus on issues with a direct bearing on performance

Identify clear links between measures and strategy: strategic goals can only be achieved if measures are used as the basis to plan and manage activity

Ensure measures remain dynamic: revisit the chosen measures are revisited regularly to check that they are still the key drivers for assessing value

Produce simple measures and demystify the jargon: measures are there to be used, so make sure they are easy to understand

Focus on the value to the business, not legal compliance: emphasis should be on the value of the chosen measures in helping to manage the organisation more effectively. If information is collected that helps monitor and manage the organisation, compliance will follow.

Mary Chapman, chief executive of the Chartered Management Institute, says that there is little point reporting on measures that make no difference to an organisation. She comments: ìThere have been many attempts to demonstrate the value of the workforce, but efforts to predict its contribution to the balance sheet have, so far, been inconclusive. This guide represents a first step in the search for measures that can be understood by all stakeholders responsible for investment and corporate decision-making.î

Ian Smith, Senior Vice President and UK Managing Director, at Oracle UK, comments: ìMeasurement of the value of the workforce has always been important, but recent Government moves to improve corporate governance and information provision have highlighted the need to develop a framework for action. However, it must be stressed that the measures taken should not simply be a response to regulation, but should provide the fundamental information that is critical for those running an organisation.î

ëGetting the basics right: a guide to measuring the value of your workforceí is the first part of a series looking at measuring and maximising the competitive value of an organisationís workforce. It will be followed, in Autumn 2005, by a practical framework for strategic human capital measurement.