This question has been puzzling the HR community for many years and most recently was a contentious part of the Valuing Your Talent (VyT) initiative.
When CIPD CEO Peter Cheese launched the project last November, trying to capitalise human capital was one of the bold ambitions. Since then the idea has split opinion, with some parts of the HR community against it.
With a July launch of the human capital framework looming, what do I make of VyT to date?
The ambition to develop a framework to help organisations measure and manage human capital is sound at a time when data analytics is becoming more prevalent in HR.
If you also consider the growing importance of human capital in the wider integrated reporting piece, HR needs to take a lead on this or risk being sidelined by other functions, such as finance.
It is also true that decision makers in business want to see data to back up HR decisions, and having that ability can only help. Often when I meet HRDs, they tell me that being able to use data effectively to show business how HR initiatives add value is key. It's not about using data for the sake of it, or to measure another 'HR fad', but rather using data to illustrate how a HR solution solves a business problem and tying this to a broader strategy.
Where the project has faced problems is in the way it has been communicated and interpreted by stakeholders. There has also been scepticism from some quarters about the framework, how it will work in practice and how rigidly it will be applied.
The RSA’s Julian Thompson, who is facilitating a number of VyT challenges to SMEs and stakeholders, says it could have been made clearer from the start that VyT is a learning project with “iteration, flexibility and agility”.
“What I think happened is everyone got quite excited about this framework and that was going to be the answer. That might have been perceived to be the big ticket item in all of this rather than a means to an end on the broader objective,” he said.
Clearly the framework is a work in progress and project leaders are well aware of this.
Sceptics may view the project as a ‘finance versus HR’ tug of war, but it is important for the HR community to have a strong voice at the table.
CIMA’s Peter Spence, who has provided a management accountant's voice to VyT since its inception, says in the past there has been a lack of appreciation between finance and HR. Having worked as finance journalist for many years, Spence's views are not uncommon, but I believe change is on the way and the HR function is very much at the heart of business.
He says this framework can “raise the visibility and importance of human capital to finance, and finance to HR”. In other words – an opportunity for both functions to benefit.
Time will tell if it succeeds, but I hope HR leads the way.
Related article: VyT scraps ambition to 'capitalise' staff