Workforce reporting describes the way workforce information is shared with key external stakeholders, including investors, regulators, customers and potential employees. There’s growing interest in workforce information from many stakeholders who recognise its value, so workforce reporting is becoming an important part of an organisation’s engagement strategy.
This factsheet explores measuring the workforce for reporting to both internal and external stakeholders. It also investigates the perspective of shareholders and investors, key influencers on the actions of boards and management teams.
What is workforce reporting?
Workforce reporting describes the process by which an organisation demonstrates the value of its workforce to its key external stakeholders. Many leaders often describe their organisation’s people as its ’most important asset’ but, unlike financial accounting standards, business has yet to agree a way of reporting on the value of a workforce’s knowledge capability and skills, often termed an organisation’s ‘human capital’.
Workforce reporting aims to provide quantitative and 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, and ultimately the quality and quantity of an organisation’s human capital.
HR practitioners’ ability to analyse and report on human capital data differs significantly across the profession. Understanding the context of data is key as there’s no single measure, or set of measures, which can adequately convey its human capital value. Organisations need to decide which measures are relevant to them and which provide the information they need to effectively communicate the value and contribution of the workforce, internally as well as externally. Transparent reporting is also important for building trust in business.
Our research The intangible workforce: do investors see the potential of people data? shows that external stakeholders such as regulators and investors are increasingly interested in understanding the quality of human capital in organisations.
It’s now commonly understood that the value of organisations is drawn from a mixture of tangible assets in the form of equipment, money, land or other physical objects, together with intangibles in the form of brand, reputation, knowledge and people.
Measuring human capital
Given the complexity of organisations and the various approaches to managing human capital, measurement can be challenging. The organisation’s context is also fundamental: the emphasis for measurement and reporting is no longer on absolute measures of human capital, but instead on context-specific information to enable informed decision-making.
Human capital data can be grouped according to the different aspects of HR they refer to. Some data groups are cross-cutting and can combine to create additional data groups, for example:
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 and voice: 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.
Valuing your Talent, led by the CIPD, developed a simple framework that illustrates the different types of data HR professionals can collect to understand human capital. Measures are categorised as Inputs, Activities, Outputs and Outcomes, which relates to their position in the business value creation cycle.
Given the increasing importance of measuring and evaluating human capital, 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 economic situation, market forces and customer or social trends.
- The value of people is often expressed in qualitative rather than quantitative terms that make it difficult to represent in traditional accountancy models.
- HR data has traditionally been collected for administrative rather than evaluation purposes.
- HR practitioners do not always have the skills or resources to interpret or explain data to evaluate the contribution of people to business performance.
Find out more in our people analytics factsheet.
Different levels of data collection
There are three clear levels of data collection and analysis for human capital data:
Operational data analysis: simple monitoring 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.
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.
The different levels of data collection that might take place, with their likely outcomes, are:
ActionOperational data analysis:
- Collect basic input measures such as absence data, turnover data.
- Identify useful data already available.
- Use this data to communicate essential information to managers.
- Design data collection for specific human capital needs.
- Look for correlations between data – 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.
- Identify key performance indicators relating to the business strategy, and design data collection processes to measure against them.
- Communicate data in ways that are meaningful to differing audiences.
Operational data analysis:
- Basic information for managers on headcount and make-up of the workforce.
- Information to help design the HR model most likely to contribute to performance.
- Communication to managers not just on how to implement processes, but with accompanying information on why they are important and what they can achieve.
Insights driving performance:
- Identification of the drivers of business performance.
- Information that will enable better-informed decision-making internally and externally.
Reporting human capital
Different types of information will be of value to different stakeholder groups:
Leaders are interested in understanding how effective employees are at creating value for the organisation, and whether people enable the organisation to be sustainable over the long term.
Investors, including shareholders, are interested in the quality of leadership and management, and how the workforce delivers short-term and long-term value.
Customers wish to know if they will get good service and after-sales support.
Employees want to know their jobs are secure and how they can develop themselves and their skills.
Managers need information on actions they can take to improve the performance of their business units.
Regulators and policy makers are interested in understand whether organisations are operating within the correct ethical, moral, social and environmental governance boundaries.
External reporting: what to report
The Financial Reporting Council Lab has published research which highlights the workforce data that businesses should report in their annual reports for external stakeholders:
- Oversight and the actions of the board and senior management team on workforce related matters.
- Descriptive data such as headcount, demographics, contract type, direct operations and supply chain, employee engagement, retention and turnover (regrettable and planned).
- Information on how the workforce model links to and contributes to the business model.
- Risks and opportunities to the workforce, including health and safety metrics.
- Information culture, behaviour and values, and how the board is embedding these.
- Training and development, including information on performance and progression,
- Pay and incentives, including information on remuneration and other benefits.
The UK government has issued regulations for the future of narrative reporting which are a clear call for improved reporting on workforce information.
Key points in the regulations:
- The importance of strategic reporting for reporting strategy, business models and business risks – includes information on reporting on gender diversity.
- The value of supplementary reporting with financial statements to describe key information on risks and opportunities facing the business.
Published human capital data
Integrated reporting is an initiative designed to help organisations to report on the mix of tangible and intangible assets for their stakeholders. The International <IR> Framework advocates a “process that results in communication, most visibly a periodic integrated report, about value creation over time. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term”. Human capital is one of six principal capitals contained within the integrated report, and which make up the value of the firm. The others are financial capital, manufactured capital, intellectual capital, social and relationship capital, and natural capital. There's more information on the Integrated Reporting website.
As part of the Valuing your Talent project, we have explored the quality and type of data reported in external reports by FTSE 100 organisations. Our report Reporting human capital: illustrating your company’s true value found that there are gaps in the types of data being reported, and that organisations are often missing key issues in their external reports. More work needs to be done to improve the quality of human capital disclosures.
Internal reporting is far more prevalent than external reporting, as this is important in evaluating the effectiveness of HR actions and guiding future HR strategy, while also protecting business confidentiality where desired. It takes a number of forms.
Generally any human capital data reported internally should:
- Be reliable and open to scrutiny.
- Be accompanied by adequate explanation.
- Be presented in a manner that is easily understandable for the audience.
- Be related to business needs.
- Enable managers to identify appropriate actions that will improve business performance.
There’s more in our research report Human capital metrics and analytics: assessing the evidence for the value and impact of people data.
Investor perspectives on workforce reporting
Our research reported in The intangible workforce: investor perspectives on workforce data showed that there are various key workforce dimensions that investors are interested in:
Management quality: the quality of senior leadership, their ability to manage complexity and deliver results is the key human capital measure of interest to investors.
Diversity of senior teams: the representativeness of senior teams is highlighted as a way to understand if the organisation believes in the value of diversity and inclusion. Gender and ethnicity are particularly important to investors.
Employee satisfaction: investors are interested in online platforms, such as Glassdoor, which enable employees to rate their employer. These websites were considered to offer useful insights as to the experience of working for the organisation, beyond basic engagement measures.
Overall investors are interested in receiving more data and insights in the form of better-quality reports from organisations. To have value, these reports must be transparent, with a clear and objective narrative that describes significant risks and opportunities related to the workforce. It's likely this information will help investors make more informed decisions over the long-term.
The International Integrated Reporting Council - improving corporate reporting with a holistic framework of capital
Shareaction Workforce Disclosure Initiative - a voluntary movement by investors and corporates to improve reporting standards on workforce and supply chain issues
Books and reports
BYERLY, B., FITZ-ENZ, J. and PEASE, G. (2012) Human capital analytics: how to harness the potential of your organisation's greatest asset. London: John Wiley & Sons.
HUUS, T. (2015) People data: how to use and apply human capital metrics in your company. London: Palgrave Macmillan.
MAYO, A. (2012) Human resources or human capital? Managing people as assets. Farnham: Gower.
CAMPBELL, B.A., COFF, R., and KRYSCYNSKI, D. (2012) Rethinking sustained competitive advantage from human capital. Academy of Management Review. Vol 37, No 3. pp376-395.
PHILLIPS, J.J. and PHILLIPS, P. (2014) Developing a human capital strategy in today's changing environment: eight forces shaping HC strategy. Strategic HR Review. Vol 13, No 3. pp130-134.
WRIGHT, P.M. and MCMAHAN, G.C. (2011) Exploring human capital: putting human back into strategic human resource management. Human Resource Management Journal. Vol 21, No 2. April. pp93-104.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can see articles on the People Management website.
This factsheet was last updated by Edward Houghton.
Edward Houghton: Head of Research
Edward Houghton is the Head of Research at the CIPD. Since joining the institute in 2013 he has been responsible for leading the organisation's human capital research work stream exploring various aspects of human capital management, theory and practice; including the measurement and evaluation of the skills and knowledge of the workforce. He has a particular interest in the role of human capital in driving economic productivity, innovation and corporate social responsibility. Recent publications have included “A duty to care? Evidence of the importance of organisational culture to effective governance and leadership” for the Financial Reporting Council’s Culture Coalition, and “A new approach to line manager mental well-being training in banks” an independent evaluation of the Bank Workers Charity and Mind partnership to deliver mental health awareness training in the UK financial services sector.