November 11, 2011
| Volume VII Issue XLII |
| 5151 North 16th Street Suite E-226 Phoenix, Arizona 85016 Tel: (602) 263-7400 Fax: (602) 263-7401 |
| Information Technology |
| Accounting & Finance |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weather 5 Day Forecast |
| Sports |
NBA: Offseason
NHL:
Phoenix (7-4-3) at
San Jose (9-4-1)
Saturday 11/12 @ 8:30 pm
MLB: Offseason
NFL:
Arizona (2-6-0) at
Philadelphia (3-5-0)
Sunday 11/13 @ 11:00 am
NHL:
Phoenix (7-4-3) at
San Jose (9-4-1)
Saturday 11/12 @ 8:30 pm
MLB: Offseason
NFL:
Arizona (2-6-0) at
Philadelphia (3-5-0)
Sunday 11/13 @ 11:00 am
New in Theatres:
- Immortals
- J. Edgar
- Jack and Jill
- 11:11:11
Top Box Office:
|
New on DVD:
- Harry Potter and the Deathly
Hallows: Part II - Larry Crowne
Links of Interest:
Institute of Management
Accountants—AZ Valley of the
Sun Chapter
American Society of Women
Accountants-East Valley
Society for Human Resource
Management
Construction Financial
Management Association
Arizona Technology Council
Institute of Management
Accountants—AZ Valley of the
Sun Chapter
American Society of Women
Accountants-East Valley
Society for Human Resource
Management
Construction Financial
Management Association
Arizona Technology Council
If a company’s most important assets are indeed its people, as corporate executives parrot endlessly, that’s
news to investors, analysts, and even, as it turns out, many companies.
It is hardly a secret that the industrial economy that prevailed for two centuries has evolved into a talent-
driven, knowledge-based economy. Still, extant accounting standards define “assets” mostly in terms of
cash, receivables, and hard goods like property, equipment, and inventory, even though the value of many
companies lies chiefly in the experience and efforts of their employees.
Public companies are required to disclose virtually nothing about their human capital other than the
compensation packages of top executives, and most are happy to report only that. The furthest most
companies will go in reporting on human capital within their public filings is to mention “key-man” risks and
executive succession plans.
More than two decades ago, Jac Fitz-enz and Wayne Cascio separately pioneered the idea that metrics
could shine a light on human-capital value. From their work grew the notion that formal reporting of such
metrics could add value to financial statements. That discussion simmered quietly for many years, but
recently it has grown more bubbly, as some of the best minds in human-capital management and workforce
analytics work hard to influence the acceptance of such reporting.
Some are crafting detailed structures for what they generally refer to as human-capital financial statements
or reports, which would complement (but not replace) traditional financial reporting. Their goal is to quantify
a company’s financial results as a return on people-related expenditures, and express a company’s value as
a measure of employee productivity.
To be sure, finance and human-resources executives alike have long considered many important aspects of
human-capital value to be unquantifiable. That’s why an effort by the Society for Human Resource
Management, less-granular than some similar efforts but very well organized, shows promise to have a
sizable impact. SHRM’s Investor Metrics Workgroup, in conjunction with American National Standards
Institute (ANSI), is developing recommendations for broad standards on human-capital reporting. The group
plans to release its recommendations for public comment early in 2012. Should ANSI certify the standards,
the next phase would be a marketing campaign aimed at investor groups and analysts, encouraging them
to demand that companies provide the information.
If demand for that data were to reach a critical mass, then presumably accounting-standards setters would
eventually look at adopting some type of human-capital reporting, and the Securities and Exchange
Commission and other regulators would subsequently get involved. Of course, that’s a grand vision, and
even its most optimistic proponents admit that it will take at least a decade, and probably twice that long, to
fully materialize.
But the SHRM group’s chair, Laurie Bassi, is confident that the effort will succeed, however long it may take.
“It’s going to serve as a catalyst for change,” says Bassi, a labor economist and human-capital-management
consultant. “When investors start to demand this information, it’s going to be a wake-up call for many, many
companies. For some well-managed, well-run firms it won’t be a stretch, but others will be hard-pressed to
produce the information in a meaningful way.”
Bassi says that the driving forces behind the effort boil down to two things: “supply and demand, or, you
might say, opportunity and necessity.”
On the supply/opportunity side, advancing technology and lower computing costs have greatly eased the
collection and crunching of people-related data, enabling companies to get their arms around what’s going
on with their human capital in a much more analytic, metrics-driven way than was possible a few years ago.
The demand/necessity side is that, driven by macroeconomic forces, human-capital management is emerging
as a core competency for employers, particularly those in high-wage, developed nations.
Something for (Almost) Everyone
Investors and analysts aren’t demanding human-capital reporting yet, but they might not need much
prodding. Upon hearing for the first time about SHRM’s project, Matt Orsagh, director of capital-markets
policy for the CFA Institute, says that “it sounds fabulous. I want all the transparency and inputs I can have.
Quantifying the worth of human capital would be fantastic, because right now you have to take it on faith,
and I don’t know if I can trust it.”
Predictably, some CFOs are less enthusiastic. “It’s a fair point that the balance sheet doesn’t recognize the
value of human capital, and certainly not the full value of your intellectual property,” says John Leahy,
finance chief at iRobot, a publicly traded, $400 million firm. “For a high-growth technology company like ours,
there is significant intrinsic value in the know-how and innovation of our people, which is why we’ve traded
over the last couple of years at a fairly attractive multiple.
“But I cringe when I hear talk about more reporting requirements and disclosure. Those requirements are
very burdensome for a small-cap or midcap company. Further financial reporting and disclosures would just
add to that burden.”
It will be a difficult task to measure, quantify, and report on human-capital value, observes Mike Lehman,
the former longtime CFO at Sun Microsystems who now heads finance at Palo Alto Networks, a large and
fast-growing private company. And, he opines, companies won’t actually begin doing such reporting for
many years, if ever. Still, he calls SHRM’s effort “worthy and valiant.”
While finance understands the true demands of reporting like no other department within a company, some
say there is no reason to resist or fear the advent of human-capital reporting, even in the short term. In the
same way companies like to be on best-places-to-work lists because it helps attract talent, says Siow
Vigman, an interim division CFO and vice president, finance, for musical-instrument retailer Guitar Center,
they should strive to be ahead of the pack in human-capital transparency. “If you know that what you’re
showing will bring investors, why shouldn’t it be a standard that companies would want to shoot for?” she
says.
Such transparency would benefit any company that’s involved on either side of an acquisition, observes
Sanjeev Singhi, a controller at $1.9 billion, publicly held B/E Aerospace who is currently working on his fourth
M&A deal. Like Vigman, Singhi serves as an advisory board member for the Human Capital Management
Institute, a for-profit consulting, research, and software firm.
A Deeper Dive
There is, of course, a very sizable elephant in the room: Whatever its ultimate value, how, exactly, do you
report on human capital? More pointedly, is there a way to go beyond the broad type of information that the
ANSI standards will stipulate and create human-capital financial statements that match the rigor and
precision of traditional financial statements?
Absolutely, says Jeff Higgins, who has almost certainly created the most scientific, detailed solution to that
challenge. His work illustrates how a metrics-driven approach can capture human capital’s impact on
financial performance.
Although Higgins now considers human-capital metrics his life’s work, his résumé is steeped in finance. He is
a former divisional vice president of finance for Johnson & Johnson and a former CFO of Klune Industries. In
those jobs he became so interested in effective people management that he eventually took a job running
compensation and human-capital analytics for IndyMac Bank. Most recently he launched the Human Capital
Management Institute, where he is CEO.
His sample “Human Impact Statement” is, he says, analogous to the traditional income statement. Higgins
has also created two other documents: a human-capital asset statement (parallel to a balance sheet) and a
human-capital flow statement (cash-flow statement), but he considers them somewhat less important than
the impact statement.
An underlying premise of the impact statement is that the average business gets a return of one dollar for
each dollar of non-human-capital spending, and that profit is created by human effort. As Higgins frames it,
how much money does an empty room make? Zero. Ditto for a bank branch with no bankers, or a plane
without a crew.
“Executives should accept and act on the idea that financial-performance metrics need to focus on returns
on talent rather than solely on returns on financial capital,” Higgins says.
Much of today’s investment marketplace is based on metrics and ratios derived from traditional financial
statements. Human-capital financial statements can be a tool for achieving similar standardization,
measurement, and identification of best and worst, improving investors’ ability to assess a company’s
potential long-term performance.
For example, Higgins’s human-capital impact statement includes a “human-capital ROI ratio” and a “return
on human-capital investment,” or RHCI (which can be found at the bottom of the “Workforce Productivity
Impact” section in Part I of the sample). The former measure compares return on revenue (net of non-
workforce costs) with the total cost of workforce (or TCOW, a term coined by Hewlett-Packard). TCOW
includes all salaries, other wages, cash or equity compensation, and benefits for all employees, including
temporary or contract workers. On the sample statement, for the current year the hypothetical company’s
human capital returned $1.30 for every dollar spent on the workforce.
RHCI involves a similar equation but compares TCOW with a selected operating-profit metric, like net
operating profit after taxes or profit after tax and minority interests. In the example, for the current year the
hypothetical RHCI is 18.5% of every dollar spent (or, when expressed like the other metric, a return of
$1.185 on the workforce).
The two calculations often produce similar results, but they tend to diverge depending on how human-
capital-intensive a business is. For example, telecommunications firms and some utilities generate revenue
with fairly little human involvement once infrastructure is in place, pushing the human-capital ROI ratio
higher.
The total shown at the bottom of the Workforce Productivity Impact box takes into account TCOW as well as
revenue, profit, and market capitalization per full-time-equivalent employee. (It is a complex calculation; Jeff
Higgins welcomes requests for further information on this and other calculations in his sample statement.)
The Management Dance
The Talent-Management Impact section of the sample statement is presented as a series of scorecards,
each based on a set of advanced metrics linked to financial results, that quantify value creation or
destruction. As shown at the bottom of the page, the statement concludes that $40.17 million of the $41.29
million Workforce Productivity Impact is a result of talent-management policies and activities.
For example, the Recruiting and Hiring segment looks at such things as how long it takes to fill key revenue-
producing positions, lost revenue attributable to such openings, and the cost difference between hiring
internally and externally. The total recruiting and hiring impact adds up the value of those calculations, with
a multiplier factor based on quality of hire (something few companies measure).
The quality-of-hire index is based on five factors: the 90-day new-hire turnover rate; the percentage of job
requirements met by new hires; satisfaction surveys of new hires and their supervisors; the percentage of
new hires that become high performers; and the number of qualified applicants per open position.
Similar calculations are used to quantify the financial impact of other major components of talent
management, which also employ indexes as multipliers that help determine the financial impact:
• Mobility. “Career-path ratio” is the ratio of promotions to total movements (including transfers, sideways
moves, and demotions) within the organization. If the ratio is too low, you’re not doing enough promoting
from within, which can impact the bottom line if you’ve already identified in the Recruiting and Hiring
segment that it is less costly to grow talent internally. If the ratio is too high, you’re doing too much
promoting, which also costs money because it puts too many people into high-income positions. The mobility-
impact calculation also factors in the differential in compensation costs for internal versus external hires.
• Leadership and Management. The “talent-management index” is like the quality-of-hire index, except it
measures leaders’ performance in finding high performers and optimizing mobility. The “managerial bench
strength” index measures the percentage of managerial positions for which at least one other person is
qualified. “Management span of control” measures the number of direct reports per manager; the lower the
number, the higher the costs.
• Training. The “training-effectiveness index” takes into account the retention rate of high performers before
and after training, productivity or performance before and after training, training investment per employee,
and employee satisfaction with training.
• Performance and Engagement. The “employee-engagement index” is really just a score; here employers
can plug in the results of employee-engagement surveys. Regarding the “employee-engagement revenue-
linkage impact,” Higgins says it is “probably the most difficult one for an average company to figure out.” He
relies on established bodies of work that estimate what, say, a 10% increase in engagement is worth to a
business. By contrast, high-performer productivity impact is easier to figure out.
• Turnover and Retention. This entails a more straightforward calculation than any of the other talent-
management metrics, and it is the only one that shows a consistently negative impact.
Despite its detailed methodology, it seems clear that even Higgins’s impressive effort to calculate the
financial impact of human capital can’t avoid the fact that there are subjective elements of talent
management that defy quantification. But don’t try to get him to admit it. “I don’t live in that world,” he says.
“I get up every day trying to quantify everything. I would acknowledge that there are things great leaders
and managers do that we cannot yet quantify. But over time, good ones leave a track record of how they
manage people that is very quantifiable.”
Experts in the field increasingly see Higgins as a dominant force and an advocate for change. “Jeff has
merged human-capital analytics and financial accounting into a new configuration,” says Fitz-enz. “As a
result, we can at last unequivocally connect human effort to business results.”
Too Much Detail?
Not all who are close to the subject of human resources are so sure that breaking down financial results in
terms of human-capital investments would be a valuable addition to financial reporting.
“I’m of two minds on that,” says Ellen Hexter, senior adviser on enterprise risk management for The
Conference Board and co-author of a recent white paper on managing human-capital risk. While she likes
the idea of shining a light on the impact that human-capital issues have on organizational success, she sees
“a danger that if it all gets boiled down to numbers, it could become a compliance exercise, and you wouldn’
t necessarily be dealing with the big issues that needed to be dealt with.”
Also, Hexter notes, financial statements by nature are backward-looking, whereas her work lies in
anticipating and planning for risks. She is familiar with and complimentary of Higgins’s work but says she
doesn’t see that it much addresses human-capital risks.
But to Higgins, risk management and the disclosure of human-capital risks are at the heart of all efforts to
connect people-related metrics to financial results.
“The risks and disclosure sections of companies’ public filings are huge, with everything under the sun in
there to minimize liability,” he says. “But with no visibility into the efficient utilization of the typical firm’s
largest expense, one need not be an expert to recognize that some organizations have significant
unreported human-capital risks.”
news to investors, analysts, and even, as it turns out, many companies.
It is hardly a secret that the industrial economy that prevailed for two centuries has evolved into a talent-
driven, knowledge-based economy. Still, extant accounting standards define “assets” mostly in terms of
cash, receivables, and hard goods like property, equipment, and inventory, even though the value of many
companies lies chiefly in the experience and efforts of their employees.
Public companies are required to disclose virtually nothing about their human capital other than the
compensation packages of top executives, and most are happy to report only that. The furthest most
companies will go in reporting on human capital within their public filings is to mention “key-man” risks and
executive succession plans.
More than two decades ago, Jac Fitz-enz and Wayne Cascio separately pioneered the idea that metrics
could shine a light on human-capital value. From their work grew the notion that formal reporting of such
metrics could add value to financial statements. That discussion simmered quietly for many years, but
recently it has grown more bubbly, as some of the best minds in human-capital management and workforce
analytics work hard to influence the acceptance of such reporting.
Some are crafting detailed structures for what they generally refer to as human-capital financial statements
or reports, which would complement (but not replace) traditional financial reporting. Their goal is to quantify
a company’s financial results as a return on people-related expenditures, and express a company’s value as
a measure of employee productivity.
To be sure, finance and human-resources executives alike have long considered many important aspects of
human-capital value to be unquantifiable. That’s why an effort by the Society for Human Resource
Management, less-granular than some similar efforts but very well organized, shows promise to have a
sizable impact. SHRM’s Investor Metrics Workgroup, in conjunction with American National Standards
Institute (ANSI), is developing recommendations for broad standards on human-capital reporting. The group
plans to release its recommendations for public comment early in 2012. Should ANSI certify the standards,
the next phase would be a marketing campaign aimed at investor groups and analysts, encouraging them
to demand that companies provide the information.
If demand for that data were to reach a critical mass, then presumably accounting-standards setters would
eventually look at adopting some type of human-capital reporting, and the Securities and Exchange
Commission and other regulators would subsequently get involved. Of course, that’s a grand vision, and
even its most optimistic proponents admit that it will take at least a decade, and probably twice that long, to
fully materialize.
But the SHRM group’s chair, Laurie Bassi, is confident that the effort will succeed, however long it may take.
“It’s going to serve as a catalyst for change,” says Bassi, a labor economist and human-capital-management
consultant. “When investors start to demand this information, it’s going to be a wake-up call for many, many
companies. For some well-managed, well-run firms it won’t be a stretch, but others will be hard-pressed to
produce the information in a meaningful way.”
Bassi says that the driving forces behind the effort boil down to two things: “supply and demand, or, you
might say, opportunity and necessity.”
On the supply/opportunity side, advancing technology and lower computing costs have greatly eased the
collection and crunching of people-related data, enabling companies to get their arms around what’s going
on with their human capital in a much more analytic, metrics-driven way than was possible a few years ago.
The demand/necessity side is that, driven by macroeconomic forces, human-capital management is emerging
as a core competency for employers, particularly those in high-wage, developed nations.
Something for (Almost) Everyone
Investors and analysts aren’t demanding human-capital reporting yet, but they might not need much
prodding. Upon hearing for the first time about SHRM’s project, Matt Orsagh, director of capital-markets
policy for the CFA Institute, says that “it sounds fabulous. I want all the transparency and inputs I can have.
Quantifying the worth of human capital would be fantastic, because right now you have to take it on faith,
and I don’t know if I can trust it.”
Predictably, some CFOs are less enthusiastic. “It’s a fair point that the balance sheet doesn’t recognize the
value of human capital, and certainly not the full value of your intellectual property,” says John Leahy,
finance chief at iRobot, a publicly traded, $400 million firm. “For a high-growth technology company like ours,
there is significant intrinsic value in the know-how and innovation of our people, which is why we’ve traded
over the last couple of years at a fairly attractive multiple.
“But I cringe when I hear talk about more reporting requirements and disclosure. Those requirements are
very burdensome for a small-cap or midcap company. Further financial reporting and disclosures would just
add to that burden.”
It will be a difficult task to measure, quantify, and report on human-capital value, observes Mike Lehman,
the former longtime CFO at Sun Microsystems who now heads finance at Palo Alto Networks, a large and
fast-growing private company. And, he opines, companies won’t actually begin doing such reporting for
many years, if ever. Still, he calls SHRM’s effort “worthy and valiant.”
While finance understands the true demands of reporting like no other department within a company, some
say there is no reason to resist or fear the advent of human-capital reporting, even in the short term. In the
same way companies like to be on best-places-to-work lists because it helps attract talent, says Siow
Vigman, an interim division CFO and vice president, finance, for musical-instrument retailer Guitar Center,
they should strive to be ahead of the pack in human-capital transparency. “If you know that what you’re
showing will bring investors, why shouldn’t it be a standard that companies would want to shoot for?” she
says.
Such transparency would benefit any company that’s involved on either side of an acquisition, observes
Sanjeev Singhi, a controller at $1.9 billion, publicly held B/E Aerospace who is currently working on his fourth
M&A deal. Like Vigman, Singhi serves as an advisory board member for the Human Capital Management
Institute, a for-profit consulting, research, and software firm.
A Deeper Dive
There is, of course, a very sizable elephant in the room: Whatever its ultimate value, how, exactly, do you
report on human capital? More pointedly, is there a way to go beyond the broad type of information that the
ANSI standards will stipulate and create human-capital financial statements that match the rigor and
precision of traditional financial statements?
Absolutely, says Jeff Higgins, who has almost certainly created the most scientific, detailed solution to that
challenge. His work illustrates how a metrics-driven approach can capture human capital’s impact on
financial performance.
Although Higgins now considers human-capital metrics his life’s work, his résumé is steeped in finance. He is
a former divisional vice president of finance for Johnson & Johnson and a former CFO of Klune Industries. In
those jobs he became so interested in effective people management that he eventually took a job running
compensation and human-capital analytics for IndyMac Bank. Most recently he launched the Human Capital
Management Institute, where he is CEO.
His sample “Human Impact Statement” is, he says, analogous to the traditional income statement. Higgins
has also created two other documents: a human-capital asset statement (parallel to a balance sheet) and a
human-capital flow statement (cash-flow statement), but he considers them somewhat less important than
the impact statement.
An underlying premise of the impact statement is that the average business gets a return of one dollar for
each dollar of non-human-capital spending, and that profit is created by human effort. As Higgins frames it,
how much money does an empty room make? Zero. Ditto for a bank branch with no bankers, or a plane
without a crew.
“Executives should accept and act on the idea that financial-performance metrics need to focus on returns
on talent rather than solely on returns on financial capital,” Higgins says.
Much of today’s investment marketplace is based on metrics and ratios derived from traditional financial
statements. Human-capital financial statements can be a tool for achieving similar standardization,
measurement, and identification of best and worst, improving investors’ ability to assess a company’s
potential long-term performance.
For example, Higgins’s human-capital impact statement includes a “human-capital ROI ratio” and a “return
on human-capital investment,” or RHCI (which can be found at the bottom of the “Workforce Productivity
Impact” section in Part I of the sample). The former measure compares return on revenue (net of non-
workforce costs) with the total cost of workforce (or TCOW, a term coined by Hewlett-Packard). TCOW
includes all salaries, other wages, cash or equity compensation, and benefits for all employees, including
temporary or contract workers. On the sample statement, for the current year the hypothetical company’s
human capital returned $1.30 for every dollar spent on the workforce.
RHCI involves a similar equation but compares TCOW with a selected operating-profit metric, like net
operating profit after taxes or profit after tax and minority interests. In the example, for the current year the
hypothetical RHCI is 18.5% of every dollar spent (or, when expressed like the other metric, a return of
$1.185 on the workforce).
The two calculations often produce similar results, but they tend to diverge depending on how human-
capital-intensive a business is. For example, telecommunications firms and some utilities generate revenue
with fairly little human involvement once infrastructure is in place, pushing the human-capital ROI ratio
higher.
The total shown at the bottom of the Workforce Productivity Impact box takes into account TCOW as well as
revenue, profit, and market capitalization per full-time-equivalent employee. (It is a complex calculation; Jeff
Higgins welcomes requests for further information on this and other calculations in his sample statement.)
The Management Dance
The Talent-Management Impact section of the sample statement is presented as a series of scorecards,
each based on a set of advanced metrics linked to financial results, that quantify value creation or
destruction. As shown at the bottom of the page, the statement concludes that $40.17 million of the $41.29
million Workforce Productivity Impact is a result of talent-management policies and activities.
For example, the Recruiting and Hiring segment looks at such things as how long it takes to fill key revenue-
producing positions, lost revenue attributable to such openings, and the cost difference between hiring
internally and externally. The total recruiting and hiring impact adds up the value of those calculations, with
a multiplier factor based on quality of hire (something few companies measure).
The quality-of-hire index is based on five factors: the 90-day new-hire turnover rate; the percentage of job
requirements met by new hires; satisfaction surveys of new hires and their supervisors; the percentage of
new hires that become high performers; and the number of qualified applicants per open position.
Similar calculations are used to quantify the financial impact of other major components of talent
management, which also employ indexes as multipliers that help determine the financial impact:
• Mobility. “Career-path ratio” is the ratio of promotions to total movements (including transfers, sideways
moves, and demotions) within the organization. If the ratio is too low, you’re not doing enough promoting
from within, which can impact the bottom line if you’ve already identified in the Recruiting and Hiring
segment that it is less costly to grow talent internally. If the ratio is too high, you’re doing too much
promoting, which also costs money because it puts too many people into high-income positions. The mobility-
impact calculation also factors in the differential in compensation costs for internal versus external hires.
• Leadership and Management. The “talent-management index” is like the quality-of-hire index, except it
measures leaders’ performance in finding high performers and optimizing mobility. The “managerial bench
strength” index measures the percentage of managerial positions for which at least one other person is
qualified. “Management span of control” measures the number of direct reports per manager; the lower the
number, the higher the costs.
• Training. The “training-effectiveness index” takes into account the retention rate of high performers before
and after training, productivity or performance before and after training, training investment per employee,
and employee satisfaction with training.
• Performance and Engagement. The “employee-engagement index” is really just a score; here employers
can plug in the results of employee-engagement surveys. Regarding the “employee-engagement revenue-
linkage impact,” Higgins says it is “probably the most difficult one for an average company to figure out.” He
relies on established bodies of work that estimate what, say, a 10% increase in engagement is worth to a
business. By contrast, high-performer productivity impact is easier to figure out.
• Turnover and Retention. This entails a more straightforward calculation than any of the other talent-
management metrics, and it is the only one that shows a consistently negative impact.
Despite its detailed methodology, it seems clear that even Higgins’s impressive effort to calculate the
financial impact of human capital can’t avoid the fact that there are subjective elements of talent
management that defy quantification. But don’t try to get him to admit it. “I don’t live in that world,” he says.
“I get up every day trying to quantify everything. I would acknowledge that there are things great leaders
and managers do that we cannot yet quantify. But over time, good ones leave a track record of how they
manage people that is very quantifiable.”
Experts in the field increasingly see Higgins as a dominant force and an advocate for change. “Jeff has
merged human-capital analytics and financial accounting into a new configuration,” says Fitz-enz. “As a
result, we can at last unequivocally connect human effort to business results.”
Too Much Detail?
Not all who are close to the subject of human resources are so sure that breaking down financial results in
terms of human-capital investments would be a valuable addition to financial reporting.
“I’m of two minds on that,” says Ellen Hexter, senior adviser on enterprise risk management for The
Conference Board and co-author of a recent white paper on managing human-capital risk. While she likes
the idea of shining a light on the impact that human-capital issues have on organizational success, she sees
“a danger that if it all gets boiled down to numbers, it could become a compliance exercise, and you wouldn’
t necessarily be dealing with the big issues that needed to be dealt with.”
Also, Hexter notes, financial statements by nature are backward-looking, whereas her work lies in
anticipating and planning for risks. She is familiar with and complimentary of Higgins’s work but says she
doesn’t see that it much addresses human-capital risks.
But to Higgins, risk management and the disclosure of human-capital risks are at the heart of all efforts to
connect people-related metrics to financial results.
“The risks and disclosure sections of companies’ public filings are huge, with everything under the sun in
there to minimize liability,” he says. “But with no visibility into the efficient utilization of the typical firm’s
largest expense, one need not be an expert to recognize that some organizations have significant
unreported human-capital risks.”
Power from the People
By David McCann - cfo.com
By David McCann - cfo.com
| This information is intended for the exclusive and confidential use of our clients. If you have received the message in error, or wish not to receive informative emails from ATS, please click here ATS is an equal opportunity employer, copyright 2011 All rights reserved. |
*click link to view resume
As the economy improves, are
you concerned with employee
turnover?
1. Yes, somewhat concerned
2. Yes, very concerned
3. No, not very concerned
4. No, not at all concerned
5. Don't know
you concerned with employee
turnover?
1. Yes, somewhat concerned
2. Yes, very concerned
3. No, not very concerned
4. No, not at all concerned
5. Don't know
