Investment in human capital is a long-term strategy that should naturally align with business objectives and market forces and be respectful of shareholder scrutiny.
Are companies able to make the case for investment in the long-term and ensure that investors understand the strategy and impact?
Human Resources Directors (HRDs) are now becoming more prevalent on FTSE Boards. If we look at the FTSE 100, 8% now have HRDs on the Executive Committee. HRDs have raised their game as an internal function and created a paradigm shift from the personnel departments of old. They now play a key role in shaping forward-thinking organisations and are at the forefront of aligning human capital to overall company performance.
Within reporting we’re seeing a much bigger focus on the people within an organisation, and how companies attract and retain them. 41% of the FTSE 100 companies show that people, employees or human capital are part of their strategic priorities or objectives for the forthcoming year. Today’s talent has an intrinsic place in future growth, an important role to play in adding value and contribute significantly to bottom line performance.
Today, companies are facing challenges they have never encountered before, including more legislation, increased governance and tighter reporting timelines which are all subject to control and regulation. With shifting employee policies and working conditions, further complicated by an ageing workforce, the dynamics are changing rapidly.
How do companies ensure they attract and retain the best talent?
Organisations now need to equip themselves to manage the demands of company infrastructures, smarter working practices and technological innovation, as these developments impact on people and analytics reporting. And it’s not just about MI reporting; it’s about contributing to the strategic direction of the organisation.
We now have four distinct generations in society, from Baby Boomers to Millennials, all with different needs and aspirations. So how do companies ensure they attract and retain the best talent, while looking at how to exit the older generation and align the impact of pension obligations?
Many organisations agree and comment on their people being a unique resource. Attracting talent is commonly spoken about, but not everyone is looking at how to harness the passion and potential of their employees to help improve overall performance. It’s this that will enable organisations to measure their human capital value.
Measuring employee potential and performance
There are many ways to measure the potential and performance of employees and build this value over time. One way is to ensure that people are accountable and have a framework to be measured against. And this is not just about the softer measure of competencies, but about real performance indicators: the ‘what’ and the ‘how’.
If companies can benchmark performance they can measure improvement, which then equates to value. Not forgetting of course the cost of recruitment, the training, the time spend and the relationships employees build with clients, many of whom would take their business elsewhere if their key contact changed. So creating a sustainable business with strong values and ethics which employees believe in and trust should yield organisational gains and provide a key matrix for human capital value.
Leadership and especially HRDs should keep a close eye on the performance of their people, especially the key players who influence teams and client relationships, as this will help to ensure that human capital is ring-fenced.
There is also pressure from European and UK legislation that impacts diversity, wellbeing, flexible benefits or working environments. Although these elements do create value within a business, there also needs to be a sense of purpose that builds on the company’s reputation and culture.
From mid-2016 we will see much more vigilant reporting observations from the FRC on culture. Company Secretaries will need to review these observations to ensure that the advice they are giving to the Board provides adequate scope for conversation and actions.
Building employable skills through human capital analytics
Organisations need to consider their employees’ motivations. One of the key drivers for many is building employable skills through recognised training, leading to an industry body accreditation.
Ultimately, companies need to find a balance between growth and profit and the values that sustain human capital. They need to consider the values and beliefs that motivate and inspire their people, and align these to their corporate values. Such alignment can enhance attitude and performance and over time can become measurable. Human capital analytics provide insights into the drivers around talent, attraction, retention and employee turnover. The ability to interpret information linked to training, performance and engagement provides HR teams with the tools to plan and create long-term people strategies, which in turn enables employees to build their career.
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