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AIA

There’s still no accounting for folk

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27th Apr 2012
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“Accounting and people are not terms that usually sit easily with each other,” says Robin Roslender, Professor of Accounting & Finance at Dundee University, who has been working on the development of human capital reporting for many years.

The latest evolution of what used to be called personnel or human resources, human capital management (HCM), represents an important cross-over topic for finance professionals.

Never ones to miss (or fuel) a bandwagon, some of the world’s biggest business software vendors have been buying into the concept too, with SAP acquiring Success Factors, Salesforce buying Rypple and Oracle scooping both RightNow and Taleo into its portfolio.

For software companies, HCM represents an opportunity to mingle financial and people-related data to deliver up new numbers for performance management.

Which is where Roslender comes in. As senior academic adviser for a study commissioned by the UK Commission for Employment and Skills and a recent RAND report, he has been at the forefront of broadening management reporting on workforce issues. 

For example “presentee-ism”, where the sick come to work, but are unproductive requires monitoring and reporting as much as absenteeism, he suggests.

“Recent developments hint that through accounting for people, it may prove possible not only to improve the lives of many employees, but empower them to improved personal performances as well as benefiting broader society,” he argues.

Roslender admits disarmingly that “there is no definition” for human capital reporting, but continues: “People are a vitally important asset that is largely absent from current financial statements, except as a cost item. Management development and the success of the business has to be linked with operating and financial reporting.

“Accounting is simply telling the story of a business, so it relates to the work of employees.”

Ulitmately, he suggests, “People themselves should ltimately own the human accounting function as knowledge managers within corporate governance.

“The next step could even be self-accounting, if you could avoid the ranting,” he jokes.

Yet visibility on a range of people-related matters is essential for any businesses, for example monitoring the number of head-hunting approaches that are rebuffed as part of staff turnover accounting, or attracting people back to the business that you didn’t want to lose in the first place.

Roslender might alienate some within the accounting profession by tying HCM into other trendy, but hard to quantify concepts such as that of “natural capital” and environmental sustainability promoted by the academic journal ‘Ecological Economics’ and some green-minded accountants. The sustainability of human capital is as important as the sustainability of water.

The Accounting for People (AfP) initiative was successful in bringing forward recommendations for UK companies to provide employee information in the Operating and Financial Report (OFR), only to abandoned at the eleventh hour following the intervention of then Chancellor, Gordon Brown.

“[This] attests to the power wielded by the UK accountancy profession," says Roslender.
“But a number of developments in the intellectual capital field suggest all is not lost in respect of accounting for people and are an affirmation of the necessity to develop an emancipatory approach to this accounting”.

Replies (2)

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By david5541
30th Apr 2012 13:46

hcm is only effective where the organisation as high volume "HC" numbers

this never applies to the sme sector with less than 10 staff

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By justsotax
30th Apr 2012 15:30

With the all the invariables of a

human being....i fear this sort of performance indicator will provide nothing but a very basic understanding of how the organisation is doing.  

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