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Human Capital Gains Traction in the Accounting Field

The recent feature articles, “Human Capital’s Big Reveal” in CFO magazine and on “Factoring Workforce Engagement Into a Business Evaluation” in Business Valuation Resources demonstrate the growing importance of human capital and engagement in financial management.
 
Now that over $16 trillion of investment capital and more than 60 ISO (International Organization for Standardization) standards call for a CEO-led strategic and systematic approach to addressing the needs of all stakeholders, the increasing focus on human capital by the accounting profession only adds to the chorus of voices telling CEOs it’s time for change.
 
According to the CFO.com article, “Human Capital’s Big Reveal,” by David McCann, “Disclosing vital data about a company’s workforce will soon be the norm. Will US businesses fall in line? This is one genie that’s not going to be stuffed back into its bottle. A climate ripe for extensive disclosure of human capital data is blanketing the corporate world, with European companies taking the initial lead. The United States has been lagging well behind, but in August the Securities and Exchange Commission proposed that companies be required to report on human capital ‘to the extent such disclosures would be material to an understanding of the registrant’s business.’” He adds, “Over the past two years, a litany of events has combined to create a groundswell of momentum for such disclosure.” 
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The Role of ISO 30414

He explains, “Propelling the idea is the ever-broadening consensus among stakeholders that effective assessments of a company’s performance and prospects require solid information on workforce costs, productivity, and how employees are hired, developed, and managed. Most notably, ISO 30414 disclosure guidelines issued last December by the International Organization for Standardization are expected to have a powerful impact.”
 
McCann notes that ‘Companies in Europe generally take standard-setting organizations more seriously than do US companies. ‘Given that many [European] companies are talking about implementing the standard as soon as possible, it will soon be possible to incorporate human capital issues into fair value analysis,’ noted a recent research report by Deutsche Bank.” The author believes that in the US, “especially considering the SEC’s recent proposal, an eventual, similar move to transparency appears likely—even if it takes some time—as global investors grow accustomed to having human capital information at their disposal when investing in Europe-based companies.”
 
A key driver for change, the author contents, will occur when human capital management is viewed as a market differentiator, a means to reduce material risks and the ability benefit from having clear corporate values. On the other hand, “Concern over industry-to-industry variables was one reason for the commission’s delay in taking action on human capital disclosures.” McCann notes that, “even given the intensifying climate of demand for such data, US companies are unlikely to make such detailed disclosures unless forced to, but therein lies a contradiction,” he writes. 
 
“Human capital disclosure isn’t just good for investors. There’s pretty convincing evidence that companies that disclose more of such information perform better. That conclusion came out of a separate effort to define standards for human capital reporting that was a key aspect of the early activities of the Embankment Project for Inclusive Capitalism (EPIC),” a global project spearheaded by Ernst & Young and involving large corporations, asset managers, and asset owners aimed at establishing metrics that measure long-term value creation.” See ESM: EPIC Coalition Demonstrates CEO-Investor Commitment to an Enterprise Approach to Human Capital.
 

The Impact of Engagement on Business Valuations

The issue of employee engagement recently came up in a webinar held by Business Valuation Resources.  As reported in the Business Valuation Update article, “Factoring Workforce Engagement,” a panel of experts predicted that “Someday, a workforce engagement adjustment will be made to the calculation of the value of an assembled workforce…In the meantime, all valuation experts should be taking this factor into account for any business valuation when assessing specific company risk.” 
 
The article, available only to subscribers, argues that the evidence indicating the connection between engagement and performance will require the industry to develop a means of objectively factoring workforce engagement into the valuations of organizations in asset sales. 


Master the Principles of Enterprise Engagement to Achieve Organizational Goals and Enhance Your Career

  • Profit from a new strategic and systematic approach to engagement to enhance your organization’s brand equity; increase sales, productivity, quality, innovation, and safety, and reduce risks.
  • Get trained to become a Chief Engagement Officer for your organization.
  • Achieve ISO 10018 Quality People Management Certification to demonstrate your organization’s strategic commitment to people to your customers, employees, distribution partners, vendors, communities, investors, and regulators.
  • Learn how to create Sustainability or Integrated Reports for Your Organization or Clients.
  • Get up-to-speed on ISO human resources standards and guidelines to enhance HR performance.

Live Education: Enterprise Engagement in ActionTake advantage of scheduled monthly live webinar preparation courses for the Certified Engagement Practitioner designation consisting of three one-hour classes and of quarterly Advanced Engagement Practitioner courses consisting of three one-hour webinar classes. The AEP course is for individuals or teams seeking preparation ISO 10018 professional certification status. ICEE periodically runs regional one-day workshops on ISO 10018 Quality People Management principles and certification.

Resources: The Brand Media Coalition, the only guide to the story-telling power of brands and where to source them for business, event, promotional gifting, and rewards and recognition. 2019 Enterprise Engagement Solution Provider Directory. The only directory of engagement solution providers covering all types of agencies and tactics as well as insights on how to select them.
 
Communities: The  Enterprise Engagement Alliance and Advocate and the  Brand Media Coalition free resource centers offering access to the latest research, news, and case studies; discounts, promotions, referrals, and commissions, when appropriate to third-party solution providers from participating coalition solution provider members.
 
A CEO's Guide to Engagement Across the Enterprise cover
In Print: 
Written specifically to provide CEOs and their leadership teams a concise overview of the framework, economics, and implementation process of a CEO-led strategic and systematic approach to achieving success through people.  (123 pages, $15.99)

Enterprise Engagement: The Roadmap 5th Edition
The first and most comprehensive book on Enterprise Engagement and the new ISO 9001 and ISO 10018 quality people management standards. Includes 36 chapters detailing how to better integrate and align engagement efforts across the enterprise. (312 pages, $36.) 

Online:  
•  10-minute short course: click here for a 10-minute introduction to Enterprise
•  Engagement and ISO standards on Coggno.com.
•  5-minute Audiopedia summary of the Enterprise Engagement field.

Services: 
•  The International Center for Enterprise Engagement at TheICEE.org, offering: ISO 10018 certification for employers, solution providers, and Enterprise Engagement technology platforms; Human Resources and Human Capital audits for organizations seeking to benchmark their practices and related Advisory services for the hospitality field.ISO 10018 Cerfified. Quality People Management
•  The Engagement Agency at EngagementAgency.net, offering: complete support services for employers, solution providers, and technology firms seeking to profit from formal engagement practices for themselves or their clients, including Brand and Capability audits for solution providers to make sure their products and services are up to date.
•  C-Suite Advisory Service—Education of boards, investors, and C-suite executives on the economics, framework, and implementation processes of Enterprise Engagement. 
•  Speakers Bureau—Select the right speaker on any aspect of engagement for your next event.
•  Mergers and Acquisitions. The Engagement Agency’s Mergers and Acquisition group is aware of multiple companies seeking to purchase firms in the engagement field. Contact Michael Mazer in confidence if your company is potentially for sale at 303-320-3777.

Enterprise Engagement Benchmark Tools: The Enterprise Engagement Alliance offers three tools to help organizations profit from Engagement. Click here to access the tools.
•  ROI of Engagement Calculator. Use this tool to determine the potential return-on-investment of an engagement strategy. 
•  EE Benchmark Indicator. Confidentially benchmark your organization’s Enterprise Engagement practices against organizations and best practices. 
•  Compare Your Company’s Level of Engagement. Quickly compare your organization’s level of engagement to those of others based on the same criteria as the EEA’s Engaged Company Stock Index.
•  Gauge Your Personal Level of Engagement. This survey, donated by Horsepower, enables individuals to gauge their own personal levels of engagement.

For more information, contact Bruce Bolger at Bolger@TheEEA.org, 914-591-7600, ext. 230.

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