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Home > News > November 2003 > 7-Nov-2003

CIPD welcomes Government taskforce report on human capital

The Government should endorse the recommendations set out in the Accounting for People report according to Duncan Brown, Assistant Director-General of the Chartered Institute of Personnel and Development (CIPD), speaking yesterday at its launch. In particular, the CIPD urges that while the Government should follow the recommendation for companies to report on their approach to human capital management in their annual report and accounts, it should not adopt a prescriptive set of measures but adopt the flexible and evolutionary approach proposed, based on "general principles to guide decisions."

The report is the result of a five-month consultation as to how organisations should go about reporting on their "human capital", including activities such as training, recruitment, staff turnover and diversity.

Brown comments, "The report emphasises that effective people management is not a 'nice-to-have' but critical to the financial and strategic performance of organisations in our twenty first century economy. Greater transparency on how an organisation creates value through its people and their management will benefit the company itself and all its key stakeholders - investors, customers and the wider community".

As recommended by the CIPD, the Accounting for People Taskforce report proposes that this information is so critical that it should be contained in the main report and accounts, and within the Operating and Financial Review section which the Government has announced its intention to require all larger companies to produce.

Brown comments that, "the OFR which is a more forward looking component in the annual report and accounts is the perfect place for a company to set out their approach to managing their human capital, describing the strategy to generate value through people, the actions they are taking to do this, and the results from taking these actions. Investors should rightly be worried about a company's future prospects and performance if, say, there is no succession planning system in place for the senior management team, of if staff turnover and absenteeism is way above the industry average".

The report includes examples to help companies meet the intended reporting requirement, including Royal Bank of Scotland, who described their detailed approach to measuring and reporting on their human capital, internally and externally, at the CIPD's recent Annual Conference in Harrogate. Their data highlights, for example, the strong links between staff attitudes and financial performance in a number of locations.

However, not all companies are as advanced as this and the CIPD has offered help to the DTI and proposed Standards Board to help develop good practice in this area. The CIPD has already produced guidance in the form of its "Human Capital Change Agenda", downloadable free of charge from its website, which provides a generic reporting framework and examples of the sort of information that companies should provide.

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