CIPD Championing better work and working lives September

CIPD Championing better work and working lives September 2015 Edward Houghton

Our purpose Championing better work and working lives. . . by improving practices in people and organisation development. . . for the benefit of individuals, businesses, economies and society.

Who we are • The professional body for HR and people development • Voice of a worldwide community of more than 135, 000 members • Setting the benchmark for excellence in people and organisation development for more than 100 years • Experts on the rapidly changing world of work • Career partner of choice for our members • Setting professional standards • Driving the HR and L&D professions forward • Independent and not for profit, with a highly respected Royal Charter.

The CIPD around the world World Federation of People Management Associations (WFPMA) International Federation of Training and Development Organisations (IFTDO) European Association for People Management (EAPM) CIPD Middle East CIPD Asia Australian HR Institute (AHRI)

Our strategic priorities 1 2 3 Extending our impact and voice Broadening our reach, relevance and value Developing progression paths, career development and recognition 4 5 6 Building relationships and support to organisations Strengthening community and connections Prioritising and growing our international presence

Setting the agenda

People are an organisation’s most important asset… …but we struggle to articulate and measure the ways in which we can increase that value. So we’re working together to define a common language and set of metrics. www. valuingyourtalent. co. uk

Valuing your Talent Managing the value of your talent: a new framework for human capital measurement

Key reasons why human capital is important to business Top down information on people Drives the decision making process Valuation of HR’s role in the business Input in to business strategy and direction Quantify business benefits of better people management Nuanced approach to people and performance management 9

It’s the business model, stupid! The structural capitals ‘On day one of economics A-level, you learn that there are three factors of production: land, labour and capital. Why is it we don’t measure labour? There is a much greater willingness in the UK, a kind of encouragement even, to talk about what the business model is, what the risks to it are, and so on. It feels to me that you’ve got to talk about the value of your people when you talk about that. ’ Stephen Haddrill, CEO, The Financial Reporting Council ‘The really smart analysts spent 10 minutes talking about our business results and 40– 50 minutes talking about people. ’ Doug Baillie, Unilever 10

Three factors of production: Labour Land Capital Outputs 11

Understanding the Value Creation Process: 12

Valuing your Talent to date Valuing your Talent Objectives 1. 2. 3. Develop a broad framework of HR Metrics for measuring human capital. Showcase current practice. Develop a tool / methodology. Members of the steering group: Findings 1. 2. 3. 4. People and investment in them should be at the heart of the business model. A new language for business is needed. HR should lead greater data integration across the business. Value = People cipd. co. uk/valuingyourtalent 13

Objectives • To provide the means to better understand how developing and managing people drives value. • To define a common language of human capital measurement and to promote agreement in how such measures are used. • To develop framework against which executives, employees, the investment community and other stakeholders can assess how businesses are developing their people to drive sustained and higher levels of performance. 14

Research methodology 3 Focus groups www. valuingyourtalent. co. uk Literature review of 100 articles 80+ Semi-structured interviews #Vy. T 15

Findings Organisations face 5 challenges moving forward: 1. Materiality: People are material – but how material? 2. Transparency: greater understanding of performance to illustrate people’s role in value creation 3. Language: Common language for HR and Finance 4. Visibility: Line-of-sight to the value people create is needed – greater awareness of the impact of culture on value. 5. Interpretation: Combination of “hard and soft” illustrates value drivers - Leadership craft is how organizations use insight to achieve sustainable business performance. www. valuingyourtalent. co. uk #Vy. T 16

Organisations face 4 challenges moving forward Driver Material Issue The Ascendancy Of People Recognition of the centrality of capability and the need to align talent and its management with people’s aspirations and expectations The Anatomy of Organisation Recognition of the materiality of an integrated approach to human capital in the formulation, implementation and delivery of company business model and strategy Human Capital Measurement Recognition of the need to obtain analytical clarity around the role of human capital in delivering sustainable value, its direction of travel, investment and optimisation The Economies of Materiality Recognising the requirements of the organisation’s expectations of employees, investors, shareholders, customers and other stakeholders for enhanced transparency and reporting www. valuingyourtalent. co. uk #Vy. T 17

The Return on Insight (ROI) 18

The Valuing your Talent Framework www. valuingyourtalent. co. uk #Vy. T 19

Indicative algorithms www. valuingyourtalent. co. uk #Vy. T 20

Case study: Unilever Some organizations are able to predict their talent capability over the short and long term, and begin to forecast impacts on the bottom line: “We have spent an enormous amount of time examining whether we have the talent engine to sustain an 80 billion euro revenue business. There is a significant amount of talent analytics done around the kinds of people we have, the quality, quantity, where the gaps are, how we’re going to close the gap, etc. We track and see how we are doing across all of these areas. We examine the skills, talent and culture to see if we have what it takes to be the 80 billion euro business we want to be. This is one of the essential roles HR plays in the business by ensuring any gaps in the skills, talent or culture across the business that might harm our 80 billion euro aspirations are covered. It’s all about three years from now; five years from now. We are future-proofing the business. ” Leena Nair, Unilever August 2014 #Vy. T 21

Conclusion: • Getting the measurement plane in the air • The business of HR is business • The human capital architectures of value • Increasing integration 22

Thanks for listening Edward Houghton Research Advisor, Human Capital and Metrics, CIPD e. houghton@cipd. co. uk @Ehoughton. CIPD #Valuingyourtalent