The state of human capital in the UK part 3

SAP’s Thomas Otter recently ran what sounds like a fascinating session on HR best practices in Berlin. He points out that:

The finance function is finally realising that traditional accounting and controlling methods don’t work in a world where intangible assets dominate the balance sheet. The challenge now is to find a viable alternative

I agree. There’s no doubt that traditional accounting no longer tells the whole story.

So just how do you get a grip on your intangible human assets?

The problem is that – as I’ve noted elsewhere – there isn’t enough work being done on this. Or, to clarify: there is plenty of work on the practical side of managing human capital assets, and at the same time lots of work on the theoretical side of understanding and measuring human capital assets. They just don’t seem to link up.

On the practical side, organisations such as Norwich Union (which is an InfoBasis client) and the Royal Bank of Scotland (which isn’t) are doing a good job of understanding their skills base and putting it to good use through more effective deployment, and developing it efficiently for the future strategy of the business. They are also – in different ways – using the information in other HR processes.

On the less immediately operational side, there is plenty of good stuff – in fact a bewildering range of metrics. I would say there are four types of human capital metrics:

  • Operational measures
  • Accounting measures
  • Academic measures
  • Policy measures

These sit on a 2×2 grid defined by how practically focused they are, and what their scope of reference is (from dealing with aggregated industries and entire economies to dealing with teams and individuals). 

The thumbnail at the top of this posting shows the basic grid. It builds up to a final view that includes a number of current metrics. To see the grid being built up, click this slideshow. For more on what each of the mentioned measures is, check out the Resources page.

Undoubtedly there are other ways to cut this, and also undoubtedly people will disagree with omissions, or with where I have placed their reports/measures on this grid. Whatever the issues, the key thing is the gap between the grey circle of ‘Disparate operational methods’ at the top right and the measures that the rest of the world is providing.

I plan to share more practical examples of good reporting when time allows, but time doesn’t always allow, nor indeed should it. At the end of his recent post, Thomas points out that there are more important things in life than software. Amen to that, Thomas.

3 responses to “The state of human capital in the UK part 3

  1. Donald,
    Much to ponder here. I hope that one of the main drivers for better HCM reporting will come from the investment community. If analysts start demanding clearer return on HC measures it will do us all good.

  2. Pingback: People are our greatest asset – you just can’t say it « Donald H Taylor

  3. Donald, thanks for your concise summaries and attempts to map the different approaches. I have finally taken up my pen again to try and complete my sequel to “The Human Value” book. I have been looking for examples of any companies that DO report people measures. Apart from the incredible Infosys (which actually has an intangibles balance sheet), and Systematic A/S in Denmark which follows Sveiby’s Intellectual Capital Monitor, the best I have found is Shell (2005 and 2006). Do you have any other examples? Andrew

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