Smart use of people related data could help businesses make better strategic decisions

Most employers are failing to communicate their people related data effectively and in ways that are relevant and accessible to business decision makers to help them run the business, according to the Chartered Institute of Personnel and Development (CIPD). By effectively reporting on their human capital ñ providing information about the value of people, and crucially how that is translated into organisational value, could help businesses convince potential investors and other stakeholders of their likely future performance.

CIPDís report, Investorsí views of human capital, looks at investorsí views on the contribution of people to business. It focuses on the challenge to close the gap between what investors need and what companies are able to provide. These include:

Standardised framework for measuring human capital but human capital data is at its most useful when explained in context.

Investors and analysts focus on senior managers and their ability to develop and implement strategy effectively.

Concerns about the quality of human capital data. It is often very basic but it is the higher levels of data that are likely to be more useful to the investment community, particularly those that can give insight into business drivers.

Angela Baron, CIPD Organisation and Resourcing Adviser says: ìUK productivity has been a problem for many years but most employers are still failing to effectively report on people related data so that they can make better informed business decisions. So rather than branding the Operating and Financial Review (OFR) as needless red tape and scrapping it in 2005, the government should have embraced the opportunity to stimulate the take-up of productive people management practices by encouraging companies to measure and display their impact on business performance.



ìThe alternative Business Review requirement, introduced by the Government in December 2005, leaves to directorsí discretion what they report on the performance and management of people. In effect this means that directors will only report meaningful information if they believe there is a demand for it.

ìEven if company directors donít necessarily appreciate the value of making fuller disclosure from a corporate perspective, the hope is that they will feel obliged to make such disclosures in order to meet investorsí demand for better information. However the kind of information investors would find useful, such as organisational measures of performance, are not always available because organisations struggle to translate their people information into business outcomes.

ìChanging the attitudes of directors on the use of human-capital-related data in decision-making could bring real performance benefits for UK businesses. But in the coming years it seems certain that investors will demand information on human capital management as it becomes an even greater differentiator between successful and unsuccessful businesses.

ìDirectors and managers that use human capital evaluation as a key analytical technique in running their businesses and link it to strategic objectives will have advantage over their competitors as they seek to influence investors and analysts.î