Shareholders need HR insights

ANNUAL REPORTING requirements have not kept pace with the ability of companies to leverage their people as a source of increased potential and improved financial performance, according to an Australian-based human capital consulting firm

ANNUAL REPORTING requirements have not kept pace with the ability of companies to leverage their people as a source of increased potential and improved financial performance, according to an Australian-based human capital consulting firm.

While the management of an organisation’s people is gradually creeping up the corporate agenda, chairman and CEO’s assertions around attracting, developing and retaining key people often represent airy clichés in the absence of any supporting evidence to substantiate these claims, said Colin Beames, principal of the WRDI Institute.

He pointed to a number of recent studies which have highlighted the importance of people management practices and the significant impact that they can have on the financial performance of firms.

A landmark UK study which involved over 1,000 organisatons found that job satisfaction and organisational commitment accounted for a 23 per cent difference in productivity between companies.

Furthemore, the management of people had a greater effect on a business’performance than competitive strategy, quality focus, manufacturing technology and investment in research and development put together, Beames said.

“Companies need to demonstrate that they produce high value add for shareholders through their people,” he said. “Investors should be informed about the real picture concerning the people asset of companies.”

This could be done through looking how a company generates value through its people management policies and practices, summarising the human capital strategy of the firm or examining whether people management practices are treated as a high level strategic issue, he added.

He argued that considering the emphasis on risk management in other areas of business activity, the people area has been spectacularly lacking in this approach.

CEOs would be fulfilling their due diligence and corporate governance responsibilities more completely by providing such information, and in so doing, Beames said they would demonstrate a risk management approach to protecting and developing a vital intangible asset.

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