People Reporting – what needs to happen next?

Richard Phelps, Former Global HR Consulting Lead

By Richard Phelps

 

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Founder – The Human Times

Founder – Saratoga Analytics

Former Head of Global HR Consulting – PwC

I’m looking forward to co-chairing with David Green one of the leading People Analytics gatherings, which showcases leading practitioners and suppliers in the People Analytics world.

 

www.peopleanalytics2016.com

 

People Analytics is the ‘game changer’ organisations need to transform, adapt and compete in business today. But, while progress has been made, there’s much work to do.

 

People reporting today and why it’s important?

 

Progress in People reporting in the Annual Reports of FTSE 100 and Fortune 500 has been slow.   Over the last 12 years, People reporting has been influenced by bodies such as the Accounting for People Taskforce, the Office of Financial Research (OFR), The Financial Reporting Council (FRC), The International Integrated Reporting Council (IIRC), The Global Reporting Institute (GRI) and, more recently, by a collaboration of professional bodies, led by The Chartered Institute of Personnel (CIPD) and The Chartered Institute of Management (CIMA).

 

These organisations have over many years advocated that businesses write clear narrative in Annual Reports explaining strategy and operational management. In 2013, the UK government introduced regulations requiring publically listed companies to prepare a strategic report as part of their annual report. For this to be truly (or even partially) meaningful, People Reporting should be prominent in this narrative.

 

There has recently been a move towards more Integrated Reporting, with a focus on intangible capitals such as human, relational and intellectual. These intangible capitals are increasingly seen as drivers of significant economic growth. For integrated reporting to work well, the metrics and reporting must be strategic, and linked to the engines of organisational value and sustainability.

This requires understanding from key stakeholders such as investors and other stakeholders, so they can start asking the right questions, and making better decisions.

 

Understandably, there are those that are wary of introducing a new raft of metrics. If it was just about reporting available information and metrics, this would add no value and become a costly administrative burden. However, the creation or destruction of value within any organisation is largely down to the people working within it. The problem is, as an asset or resource they are far more challenging to manage than, for example, a machine or a property portfolio. People are also often the most significant parts of organisation’s cost base, comprising some 80% within professional service firms, for example. This is one of the reasons – the accountant’s argument, if you like – why customers, employees, regulators and communities need better people information and reporting. The quality and standard of People Reporting within Integrated Reporting provides insight into an organisation’s maturity and management capability – and is a strong indicator of the quality and depth of internal capabilities for People Reporting, management, and the facility to interpret and analyse people data generally.

A jigsaw 

 

All major surveys indicate rapidly growing interest and demand from CEO’s and Boards for quality evidence based people reporting and narrative.

 

In 2015, the Investors Association launched a project focusing on long – term value brought by people in business to highlight benefits to investors of considering human capital in their daily decision-making and planning. The National Association of Pensions Funds (NAPF) recently produced a report: ‘Where is the workforce in Corporate Reporting?’ which described workforce reporting as ‘a jigsaw with many missing pieces’’.

 

Recently, the CEO of the Integrated Reporting Council said:

 

‘If people are the greatest assets of these organisations, then information about human capital must be treated with the same rigor and accountability as is afforded to financial statements’.

 

In 2014, the CIPD, in collaboration with the Chartered Institute of Management and other professional bodies, launched a ‘value for talent’ framework which is now evolving and being applied. Further international support from American professional associations and international regulatory bodies would emphatically improve its impact.

 

Yet, despite this interest, the quality of People Reporting is generally not good , or it is hazily integrated into other reporting areas, such as strategic or operational reviews and the Chief Executive’s statement.  Links between people strategy and organisational goals are often unclear and limited information is provided on the impact of people on the business. Furthermore, when it does appear, the relevance of published people information is frequently unexplained.

 

 

According to the 2015 NAPF study, 94% of FTSE 100 organisations report overall headcount, only 47% disclose level of attrition, 10% report number of staff they employ part-time, zero hours or temporary contracts.

 

Some, 11% report of workforce composition or proportion of part time staff, split between genders and diversity. Reporting for other Fortune 500 organisations is no better.

 

Whilst the incidence of People reporting doesn’t equate to quality of reporting, there’s typically limited information reported,  and when there’s  People in reporting it’s not clearly integrated into the core strategy and leaves a ‘so what?’.

 

This shortage of relevant and integrated people reporting means investors and other stakeholders cannot be fully aware of the risks, costs and opportunities facing many companies.

reporting

So what does good People Reporting look like?

 

  1. People reporting is a core part of the annual report and integrated into the strategy, operational review and highlights.

 

  1. Good people reporting shows how an organisation manages people through HR processes and HR science, integrated into the overall corporate strategy and supported by a set of clear targets and measures, such as: delivering strategy around employee engagement; staff recruitment; retention and development; total compensation and diversity/well being

 

  1. Disclosure of relevant people data, KPI’s, performance targets, objectives, trend data and external benchmarks where relevant.

 

  1. Measures that outline how successful they have been in executing against strategy, and where they haven’t been successful. An explanation of why and what needs to happen next.

 

  1. Quality of people reporting, transparency and a clear strategic narrative with case study examples of specific interventions such as introduction of new reward systems, workforce planning and training and development initiatives, a presentation of linkages in improvement in people management. *

 

  1. Communication of the financial, business results and impact through people management initiatives, such as management of staff costs in relation to revenue. The introduction of a reward plan to encourage different behavior, for example, to satisfy customers through the financial improvements gained through better employee engagement.

 

Annual Reports that contain some of these characteristics include organisations such as  Amlin, Astra Zeneca, Barclays, BAT, Johnson Matthey and  Southern Electric (SSE)

 

The HR functions’ role in People Reporting?

 

The HR function needs a competent, well networked centre of excellence in People Reporting and Analytics that collaborates with the organisation’s key stakeholders . This will provide and assure intelligent , internal and external reporting, ensuring it is integrated into Corporate Reporting working with Finance, Strategy, IT the Board, CEO and Profit Centre heads.

 

The People Reporting and Analytics centre of excellence should have (or should build) the capability to develop key measures, sub-measures, ‘drill downs’ and analytics that support drivers of organisational value and sustainability.

 

Key tools and capabilities required are: business strategy understanding and business partnering skills; technology; management information; workforce definitions; measures; metrics; an understanding of predictive analytics techniques around areas such as hiring, attrition, retirement and skills demand  and supply in strategic workforce management.

people analytics reporting

What needs to happen so decisions can be made from People Reporting?

Currently there are no agreed global or country standards/definitions in relation to People. For example, there is no agreed definition on how to count employees, or how to calculate employee costs, or how to calculate employee attrition. This means that when an organisation reports basic People Information and related financials, it’s not possible to confidently and accurately compare, ‘model’ or  understand relative internal or external performance.

Many of our working lives now take place firmly within a ‘knowledge economy’, and there’s an understanding among stakeholder groups of the importance and materiality of People in terms of an organisation’s success or failure. For example, on April 1 this year, a new law came into effect in Japan that requires large employers to publish statistics on number of female employees and managers, along with plans for promoting them with targets and timeframes.  A EU non-financial and diversity reporting Directive was introduced in late 2014 to be implemented across EU Member States within two years and Europe’s CRD 4  regulations for banks require  the reporting of employee numbers.

These are positive steps, but most intervention is currently ad hoc and tactical with no clear and collaborative vision of how People Reporting will help stakeholders make better decisions and the way to achieve this objective.

Tangible progress has been made in recent years through advances in dedicated technology, applications and the introduction of practical tools such as the Valuing Your Talent framework.

Now is the time for international professional and regulatory bodies such as the FRC, International Accounting Standards Board, CIPD, Society for Human Resource Management , CIMA , Securities and Exchange Commission and IIRC to work together and collaborate to agree not just national but global people reporting standards.

A good first step would be to start with the most important 3-5 global people reporting standards and definitions.  I’d suggest 4 areas for consideration:

  1. Workforce (including contingent labour); FTES, Headcount and total compensation costs.  Split by total organisation, division and most important 2-5 job roles/levels
  2. Workforce attrition (regretted and involuntary). Split by total organisation, division and most important 2-5 job roles/levels
  3. Gender & Age demographics. Split by total organisation, division, senior executives and most important 2-5 job roles/levels
  4. People Metrics training investment and ROI

Reporting the ‘standard/definition’ areas above would allow organisations to better understand and make decisions on a host of pressing, real-world issues, and to consciously shape its future.

 

Richard Phelps

Founder – The Human Times

richard@human-times.com

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*Linkages may, for example, describe a workforce planning initiative to support revenue growth targets in new product or geographic areas by assessing number and types of new skills required, recruiting new skills and roles, retraining and redeploying existing people along with targets, measures and results.

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