Employees have long been hailed an organisation’s greatest asset, but businesses are still failing to realise their value, believes Oliver Shaw, CEO of Cascade HR.
It is estimated that less than 5% of UK companies currently account for their people on their balance sheets. But in a knowledge-based economy increasingly populated with service-centric organisations, this is surely one of the most important metrics for employers to calculate and safeguard.
Shaw is therefore urging change as businesses prepare for the new accounting year.
“Whilst we are seeing some resurgence in sectors such as manufacturing, and technological innovations are continuing apace, the UK economy has never been so reliant on people,” explains Shaw. “Yet despite us reading headline after headline that true talent is in short supply, the majority of organisations are still overlooking the need to analyse the value of their intellectual property – their workforce.
“Now is definitely the time to change how human resources are measured. They should be managed, optimised and accounted for just like physical ones.”
It has been two years since Oliver Shaw first put his head above the parapet and urged UK commerce to be savvier when it comes to human capital management. Speaking at a CIPD conference in Manchester back in 2015, he underlined the need for HR departments to capture and better harness the power of employee-related data in the workplace.
But industry developments have since accelerated the need for smarter thinking when it comes to employee value. International Financial Reporting Standards (IFRS) rules now state that accrued holidays need to be reported on as a liability, for example – a move that signifies the importance of employees’ time in and out of the business.
“Salary calculations are the first step of course,” Shaw elaborates. “But I’d like to see more companies dividing turnover by their workforce headcount to understand potential contribution figures per employee. Metrics such as tenure need to be attributed too, as employees that live and breathe a company’s ethos and vision are of tremendous value.”
The advice may be all well and good, but in a profession that is already overworked and being placed under immense pressure, HR may be far from impressed with the need to take on even more responsibilities.
“HR, like many critical business functions, is experiencing a significant rate of change. But this reflects the opportunities and challenges facing modern businesses.
“There must be a greater willingness to let technology handle the process-driven elements of HR that can be automated. This isn’t about robots replacing the jobs of people – it’s actually about keeping the ‘human’ in human resources. The more administrative burden technology can handle, the more precious time HR teams have to do what’s important.
“Accounting for human capital on the balance sheet won’t just strengthen the financial picture of organisations – it will provide meaningful data for investors, emphasise the importance of talent retention and help fuel employee engagement as a result.”
Cascade HR is a part of IRIS Human Capital Management – the UK’s fourth largest supplier of people-critical software.