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Why investors/CEOs not yet talking about Human Capital performance as much as they do for Financial Capital?

Source | LinkedIn : By Manoj Kumar

A month ago I attended a round-table discussion in London comprising investors, Human Capital Analytics industry experts, Human Resource practitioners and few C-suite members. The learning from the conversation was immense – investors current mindset, why Human capital measurement is not must-to-have yet, what would they like to see from companies/startups and more importantly what can CEOs/CHROs do to create an appetite for Human Capital in their mind.

Let’s take a quick look at an industry research on investment pattern in intangible assets.  Research by NESTA (Goodridge et al 2014) estimates that between 1990 and 2011, the value of intangible assets in the UK grew from £50.2 billion to £137.5 billion, while at the same time the value of tangible, physical assets has increased much more slowly from £72.1 billion to £89.8 billion. Within intangible investment, the asset categories for which the most investment is observed in 2011 are: workforce training (£33.6bn); organizational change (£25.5bn); and software (£24.3bn).

In the current knowledge economy, the importance of intangible assets is obvious as established by the above research. Still, why investors are yet not asking about Human Capital performance as much as they do for Finance Capital? Or if I reverse the question – Why CEOs/founders are yet not telling their Human Capital performance story as much as they tell Financial performance. There are 2 key problems:

  1. Chicken and Egg: While organizations have started to understand and articulate the importance of Human Capital and measurement (Deloitte – Global HR Trends 2016, ADP – 5 Top HR Trends to watch for in 2016, CEB – 11 trends identified by HR Leaders), investors are yet to catch up with the pace. Their current ask is primarily limited to staff related productivity, cost and attrition only. To be precise, it is not their openness to value Human Capital but the limited awareness and accessibility to Human Capital information – what to ask and the uncertainty about company’s ability to produce and sustain that ask. They are currently consuming what they are being offered by the CEOs/CHROs i.e. a limited set of usual Human Capital metrics and hence they have less appetite. Both of them are stuck between  “push” and “pull”.   

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