More than a number: people data missing from annual reports

A CIPD study into human capital reporting in FTSE100 companies calls for greater strategic focus and transparency to address risk, ahead of new EU legislation for large firms being introduced later this year.

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The professional body for HR and people development’s latest research into human capital reporting, Hidden Figures: How workforce data is missing from corporate reports, highlights how many FTSE 100 firms are failing to share important workforce data in their annual reports. It warns this is keeping investors, employees and other parties "in the dark on key business indicators".The deadline later in 2018 under EU legislation for non-financial reporting on environmental and social disclosures, including human rights, could be an opportunity for HR professionals to move from a largely compliance-based to a more systemic approach to gathering data around human capital risks.

Responding to the call for more insight on human capital factors

Edward Houghton, senior research adviser for human capital and governance at the CIPD, said: “Without full transparency there’s a real danger that businesses are painting an overly positive picture of how they manage their people and people risk.Gender pay gap reporting regulations have shown us that a framework and a common language can improve disclosure and prompt healthy debate on important issues among key stakeholders." As well as presenting decision makers with more accurate data, a shift to a more systemic approach to reporting human capital factors could better support internal strategic, rather than external compliance-based measures.

Linking human capital reporting to strategy rather than compliance

Mr Houghton said that it was “positive” human capital reporting overall has increased by 9% between 2015 and 2017, a smaller increase compared with that between 2013 and 2015 (19%).However, the measurement of human resource development, employee welfare, employee equity and workforce risk showed a reduction in the rate of growth. This is a challenge, especially around the quality, consistency and transparency of data being reported.“Organisations seem to focus their efforts on complying with legislation and governance codes and report on very little else voluntarily,” said Mr Houghton. “Reporting is also often subject to trends or pressure from government rather than ongoing strategic imperatives. “We need to see much more consistency in what is being reported, the language used to report it and the measurements being applied so all stakeholders get a complete picture of workforce opportunities and risks.”

What are FTSE100 companies commenting on in their annual reports?

Illustrating the CIPD’s concerns, the study shows the key reporting movements in the two years between the professional body’s previous research and this latest report.Using content analysis of the narrative sections of annual reports and human capital reporting assessment, the CIPD identified those areas seeing the biggest changes in reporting between 2015 and 2017.The largest increases are in the areas of:The largest decreases were noted in:Although overall generally lower than in previous years, the most reported workforce risk items were talent management, succession planning and employee turnover.

Human capital reporting recommendations from the CIPD

To support a better understanding of workforce issues and risks, the CIPD has created a new reporting framework which, alongside improved use of workforce analytics, aims to improve transparency and help with the identification and management of workforce and cultural risks. Its People Risk Reporting Framework (PRRF) explores seven dimensions of workforce risk that employers should look to report against:
  1. talent management
  2. health and safety
  3. employee ethics
  4. diversity and equality
  5. employee relations
  6. business continuity
  7. reputational risk.
It integrates best practice elements of FTSE 100 firms’ risk management frameworks into a single model, and allows for flexibility based on what is most appropriate for each organisation As well as outlining this framework, the report also makes a number of recommendations. Among them is for HR professionals to understand their pivotal role in the annual reporting process and think in a systemic way about the issue of human capital and human capital risk by adopting the principles conveyed in the PRRF.With an appetite among investors for even more workforce data, Mr Houghton concludes: ”Businesses need to be ready to respond to this demand. We need senior leaders to get comfortable with being more transparent.”For related news and features, visit our Human Resources section. Find out who won in this year's Relocate AwardsRelocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Global Mobility Toolkit download factsheets resource centreAccess hundreds of global services and suppliers in our Online Directory