Human capital reporting

 Matthias Ruziwa : HR Issues

“Gone are the days where HR used to write qualitative reports just mentioning issues such as in January 2016, the HR department recruited 10 skilled workers, trained 55 operators and had a labour turnover of 2,5 percent.

One HR scholar mentioned in simple terms that HR needs to speak the Chief Executive Officer’s (CEO) language. Human capital reporting must in clear terms establish a link between HR’s activities and Return On Investment (ROI)”. HR’s role in collecting, analysing and communicating information on the value of people and their contribution to the business is vital and will assist in the design and implementation of HR policies and practices that enable organisations to achieve long-term sustainable business performance.

Business leaders are looking to HR data for evidence of HR’s value-adding capability and capacity to address challenges being faced by their respective organisations.

Given the increasing importance of measuring and evaluating the human capital aspect of the organisation, a number of challenges still remain for business leaders and HR practitioners.

The contribution of people is difficult to isolate from other factors such as the prevailing economic situation in Zimbabwe, market forces and customer or social trends.

Furthermore, because the value of people is often expressed in qualitative rather than quantitative terms, business leaders and HR professionals find it difficult to present human capital reporting in traditional accountancy models.

This in my view is the major reason why we still have a situation where HR data in some organisations is still being traditionally collected for administrative rather than strategic and evaluation purposes.

It is more likely that HR practitioners do not always have the skills or resources to interpret or explain data to evaluate the contribution of people to business performance.

The term human capital is widely used within the HR fraternity to describe people at work and their collective knowledge, skills, abilities and capacity to develop and innovate. Human capital reporting aims to provide quantitative, as well as qualitative, data on a range of measures such as labour turnover or employee engagement levels to help identify which sort of HR or management practices will drive business performance.

From a strategic human resource management perspective, it’s now commonly accepted that the value of organisations is drawn from a mixture of tangible assets in the form equipment, money, land or other physical objects together with intangibles in the form of brand, reputation, knowledge and, of course, people — critically important in an increasingly knowledge-based global economy.

Given that organisations are different, hence the value given to the human resource function is not the same everywhere, there are various approaches to managing human capital and certainly measurement can be challenging. The context of the organisation is also a fundamental aspect of human capital measurement.

HR reporting now needs to be context specific information to enable informed decision making. Gone are the days where HR used to write qualitative reports just mentioning issues such as in January 2016, the HR department recruited 10 skilled workers, trained 55 operators and had a labour turnover of 2,5 percent.

One HR scholar mentioned in simple terms that HR needs to speak the Chief Executive Officer`s (CEO) language. Human capital reporting must in clear terms establish a link between HR`s activities and Return On Investment (ROI).

In order to effectively present the HR report, human capital data can be grouped according to the different aspects of HR they refer to. From my experience, HR data tends to fit into the following groupings:

Workforce composition: Demographics data including age, gender and ethnicity.

Recruitment and retention: Number of resignations/vacancies/applications, length of service.

Skills, qualifications and competencies: Levels of expenditure on training, types of training provided, length of time to reach competence levels, data on training needs.

Performance management: Performance management results, productivity and profitability data, targets set and met, levels of customer satisfaction, customer loyalty.

Employee relations: Findings from employee attitude surveys.

Pay and benefits: Overall wage bill costs, distribution of individual performance-related pay awards, level of total reward package.

Regulatory compliance: Includes data on the compliance of employees to established standards and guidelines for working practices in particular disciplines.

Organisation development and design: Includes data on spans of control, skills mix and talent pipelines.

Once the HR professional has been able to collect and understand human capital data based on inputs, activities, outputs/outcomes, a proper position of the HR function in the business value creation cycle can be established. There are three clear levels of data collection and analysis for human capital data namely.

Operational data analysis: This is simple monitoring of data with no analysis, for example, reporting absence and retention data.

Basic insights: Basic data is analysed and correlations are explored between types of data to draw simple human capital insights for example, whether high levels of job satisfaction occur when certain HR practices are in place, such as performance management, career management or flexible working.

Insights driving performance: Human capital data is triangulated with other business data to identify performance drivers; and may be used to illustrate how organisations can leverage human capital to drive performance more effectively.

Disclaimer: Opinions expressed herein are solely those of the author.

 

Matthias Ruziwa is an experienced and progressing Strategic Human Resource Practitioner based in the Midlands Province, City of Kwekwe. You can contact Matthias at the following email address: [email protected]/whatsapp 0773 470 368.

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