Human Capital Financial Statements? What are they?
HCMI’s Human Capital Financial Statements (HCF$™) provide a standard means with which to measure, report and disclose a company’s human capital. The three statements, modeled after traditional financial statements, quantify workforce value. HCFS quantify and trend shifts in workforce productivity, costs, and value creation across the talent management lifecycle. They establish a relationship between an organization’s financial performance and its workforce, and allow organizations to make better informed strategic workforce decisions.
So why do I need Human Capital Financial Statements? Modern Finance has been plugging away in the dark without these for nearly 100 years.
That’s exactly why you need them. Business has changed. For most companies, the industrial age is over and people are not disposable. The increasing number of knowledge workers and investments companies make in their people require a new way to measure and value the workforce. Here are the top 5 reasons you need them:
#5) Because you know you can school your Finance person if you just had the right tool. Come on, admit it. You know your human capital is worth more than they say it is. You also know that when cuts are made equally across the board that it’s not the right way to make a decision. You just need the right tool to tell the story to your Finance person, right?
#4) You know Talent Management isn’t just a buzz word: it’s key to your business success. I don’t know about you, but I was preaching Talent Management before Talent Management was cool. It makes sense. You have to not only hire the right people, but you have to grow them well, treat them well, and make sure they represent your company well. But here’s my beef about Talent Management over the past 10 years: we’ve been working so hard to define it and build processes around it that we forgot to figure out how to measure that it’s working. Things like recruiting cycle time or whether or not someone got promoted are all fine and stuff. But what did the company gain from that? Can you show the (financial) value of those talent management efforts? I’m talking dollars, not fuzzy words and transactional stuff.
#3) It’s about time someone recognizes and reports the tangible value of human capital. Quantifying the value of talent management is a priority. But it goes beyond just managing the talent. How do you measure that thing we all want to measure: productivity? For some jobs it may be easy. But for a majority of the jobs, it’s not so easy. You have to link your workforce to your business results and ultimately to financials.
#2) You want to prove that your workforce is an asset; not just an expense. Because we haven’t really figured out how to measure that wiggly thing called human capital, Finance has told us how. It’s an expense. But wait. Really? I mean, I don’t know about you, but human capital provides strategic value to the organization. According to the International Accounting Standards Board: “An asset is a resource controlled by the enterprise as a result of past events and from which future economic benefits are expected to flow to the enterprise.” I suppose you can argue that you can’t control people. But don’t we try as an organization? And don’t we expect our people to bring benefits, revenue, profit, and more to the company?
#1) So you can finally quantify the workforce impact on financial performance. And that’s what it’s all about, right? What gets measured gets done? And things that positively impact company performance get more money and attention. It’s time we prove the actual value people make to the bottom line.
So what’s your reason for needing Human Capital Financial Statements?
To read more about Human Capital Financial Statements, download the HCMI HCFS whitepaper.