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Cable and investors call for better ‘dialogue’ around human capital reporting

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Business secretary Vince Cable and a panel of investors have called for a better ‘dialogue’ and more consistency around the reporting of human capital metrics.

Speaking at an event to launch the latest report from the CIPD’s ‘Valuing your Talent’ initiative, which focuses on the barriers to human capital reporting from an investor perspective, Cable praised a focus on human capital as a way of encouraging more long-term thinking.

“Long-term thinking has been sadly missing from British boardrooms for many years,” he said, adding that human capital reporting could help get away from “the obsessively short-term approach that has dominated British equity markets”.

He added that reforming reporting frameworks and scrapping quarterly reports had gone some way towards encouraging longer-term thinking in business. Improved reporting around human capital would help develop ideas around transparency in reporting, he added.

Any further move towards integrated reporting, which focuses on long-term, sustainable and holistic value creation, would also place more pressure on companies to provide better people metrics.

CEO of the Financial Reporting Council Stephen Haddrill said investors were looking for a more “holistic business model” from companies, and said the reporting narrative was key.

“Dialogue is very important,” he said. “[Share] aspects of human capital management that investors are interested in, rather than shooting data that no-one is interested in into a vacuum.”

Representing the investor community, Newton Investment Management CEO Helena Morrissey said that she “did not see mainstream investors taking the people side of companies as [seriously] as they should be”.

She also called on companies to disclose better quality information about the people side of their business. She said this was "vital to sustainable growth".  

However, she dismissed the idea that the value of people can be distilled into a simple number and that all companies should report on the same measures.

“Everyone has systems and they should know what’s important to [their organisation],” she said. “We shouldn’t just be trying to distil into numbers, it’s got to be about what’s important to companies.”

CIPD CEO Peter Cheese added that as well as focusing on metrics, businesses needed to get “more comfortable debating qualitative stuff”. “Not everything can be reduced to a number on a spreadsheet,” he added.

Unilever CHRO Doug Baillie said: “By adopting human capital reporting we are increasing our accountability, and presenting a more transparent and coherent picture to our stakeholders on the health of our business.”

He added that his HR function was moving from “’I think and I feel’ to ‘I know’”.

Report recommendations

The CIPD report – Human Capital Reporting; Investing for Sustainable Growth – makes several recommendations. They include:

Investors should ensure an interest in HCM extends all the way down to the investment processes that determine how company performance is appraised and valued, and that fund managers are held accountable for analysing HCM information.

Professional education bodies should review their curriculum to place more emphasis on the subject of business model configuration and strategy.

Reporting companies should present better information on HCM to external stakeholders such as investors, by providing a clear narrative underpinned by key metrics.

Policy makers and governments could create voluntary public reporting targets among FTSE 350 companies on agreed human capital metrics.

Further reading

Integrated reporting: Can HR step up?

HR missing out on integrated reporting benefits

Can HR add value to its data and analytics?