Frequently Asked Questions
Absence; Benchmarks; Documentation; Facilitation; Grievances; Investors in People; Our People Review; Qualifications; Results; Tenure; Technical; Team; Trust; Turnover; Timing.
In the context of this Report, absence from work is that due to ill health, stress, strains, injuries, carer responsibilities etc. That is, for any reason other than holidays and maternity leave.
Typical levels of absence - the average number of days lost per employee per year - are:
All UK industries 6.3
- UK Small to Medium Enterprises 5.5
- Manufacturing and production 5.4
- Not for profit sector 6.9
- Private sector services 5.2
UK Industrial Sectors
- Accommodation and food service activities 5.1
- Administrative and support service activities ??
- Agriculture, forestry and fishing 4.0
- Arts, entertainment and recreation ??
- Construction 4.9
- Education 7.4
- Electricity, gas, steam and air conditioning supply 5.2
- Financial and insurance activities 5.9
- Human health and social work activities 8.9
- Information and communication 3.7
- Manufacturing 6.6
- Mining and quarrying 3.9
- Professional, scientific and technical activities 4.4
- Public administration and defence 7.3
- Real estate activities 5.9
- Retail and wholesale 6.5
- Trade and repair of motor vehicles/cycles ??
- Transportation and storage 7.0
- Water supply; sewerage and waste management 5.2
Source: Absence Management Report (2016), CIPD.
The benchmarks were established by multiplying ratings of investor interest by ratings from participating enterprises:
Investor interest was assessed by surveying the views of investors attending the London Investor Show 2016. Of those 60 % had relevant professional qualifications.
100+ investors responded using ratings of interest relating to each management practice 1-5 (1 = of no interest; 5 = absolute must).
200+ enterprises were surveyed. They also used ratings for each management practice of 1-5 (1 = not relevant to us; 5 = we are leading edge)
The 'Supporting Documentation' option is mainly for use when your Report is requested by an Investor. The documentation should provide information on which your ratings are based in order to improve the credibility of your ratings. Examples would include policy statements, employee newsletters, minutes of meetings, training records etc.
If you are carrying out a Review for the pupose of creating / updating your people management strategy, you may wish to list the need for documentation which would draw attention to your policy decisions.
That would depend on the relationships existing between those carrying out your Report.
If you know of an external Consultant you would like to use, by all means contact them.
If you feel the need for a Facilitator, and do not know who to approach, please contact Peter
peter@fargus.co.uk
People-based finacial ratios, such as total pay over revenue or revenue per head, are best benchmarked against organisations in the same industry and of similar size to yours.
The research associated with Human Capital Report is not yet extensive enough to provide this.
In the UK It is recommended you contact Xpert HR at https://www.xperthr.co.uk/ who may be able to help you.
More information on ratios will be added to this site in due course.
Financials used by investors - surely workforce quality is incorporated into existing 'financials' ?
The research into Human Capital / Human Resources has shown only a small correlation with financial results (e.g. correlations of 0.2. to 0.3). As such workforce quality may be better viewed as a leading indicator of enterprise results. This is likely to be valued by those focusing on longer term investments.
In the context of this Report, employee grievances are concerns, problems or complaints at work which, after an informal discussion, an employee progresses to a formal (written) stage.
Typically the number of grievances per 100 employees per year is in the region of 1.35.
Source: ACAS research paper 2014 for all UK industries
HCR is the output of academic research supported by commercial piloting.
It can be used by a senior management team to review current people management practices and improve them if necessary.
The approach can also provide Investors and Analysts with a relatively quick and low cost approach of obtaining a comprehensive report on a workforce - to be added to other investment criteria before making an investment decision.
For more detailed information please access the article Can HR professionals generate human capital data that will influence investment decisions? which can be found on the Chartered Institute of Personnel and Development website: https://www.cipd.co.uk/learn/events-networks/applied-research-conference/2017-papers
There is research which backs up the intuitive assumption that there is a relationship between a quality workforce and the achievement of business objectives. Although dated, a well-reasoned discussion on this may be found in the book People Management and Performance (Purcell et al. 2009).
However, there are many and varied barriers to establishing a causal link (e.g. differences in what is meant by ‘people management’; different definitions of ‘performance’) but one study which strikes a chord with us is the research by Watson Wyatt (2001). To read this, search: Human Capital as a Lead Indicator of Shareholder Value. Here the researchers found ‘Superior human capital practices are not only correlated with financial returns they are, in fact, a leading indicator of increased shareholder value’ and ‘superior HR management leads financial performance to a much greater extent than financial outcomes lead good HR’.
Investors in People is a 'standard' which takes time and expertise to implement.
It is relevant to organisations aiming to reach and maintain a commonly accepted standard of people management.
The Human Capital Report aims to take a snapshot of current workforce quality.
The snapshot can be used either to inform investment decisions or to crystalise / improve your people strategy.
Of course The HCR can be used regularly (e.g. anually) to update thinking on your people strategy and management.
In this Review, two levels of qualifications are used. Graduate level and ‘Other’
Graduate level qualifications:
Include level 6 and 7 qualification (levels 9/10 and 11/12 in Scotland) and professional qualifications such as chartered accountant; chartered manager; chartered secretary; lawyer / solicitor.
Level 6 qualifications (levels 9/10 in Scotland): Examples include degree apprenticeships; degrees with or without honours (e.g. BSc. BA.);
Level 7 qualifications (level 11 in Scotland): Examples include master’s degrees; postgraduate certificates / diplomas;
Level 8 qualifications (level 12 in Scotland): Examples include doctorates or level 8 awards / certificates / diplomas /
Other qualifications.
Include only level 4 and level 5 qualifications (levels 7 and 8/9 in Scotland)
Level 4 qualifications (level 7 in Scotland): Examples include higher apprenticeships; higher national certificates (HNC); advanced highers.
Level 5 qualifications (levels 8/9 in Scotland): Examples include diplomas of higher education; foundation degrees; higher national diplomas.
Sources:
What qualification levels mean. https://www.gov.uk/what-different-qualification-levels-mean/list-of-qualification-levels
UK Qualifications comparison chart. http://eal.org.uk/support/document-library/7-uk-qualifications-comparison-table/file
Your results should be interpreted in the context of your business objectives.
Workforce quality is defined as the characteristics of a workforce which enable business objectives to be met now, and in the future.
Your Report identifies both strengths and opportunities for improvement that you have identified as you progressed through your Review. Take a second look at each Factor and identify (from ratings of individual Descriptors) why the Review has highlighted a strength or opportinity for improvement. Then decide how best to establish / update your Human Capital Strategy.
If you judge you need help with this, contact us at:
peter@fargus.co.uk
In this context Technical Specialists are employees who are not Directors, Managers or Supervisors, and who provide technical expertise within their area of specialism. This may be a business area or a particular technology. The Report focuses on Directors, Managers and Supervisors separately and so it is imporant not to 'double count'.
In this context, tenure is the average length of time employees stay in your employment. This could mean either in the same role or in a series of roles.
Tenure figures differ depending on, for example, state of the economy, different industries, age, gender, role, part-time versus full-time work and educational level.
Please use the average figure below (64 months) as a guide and separate your data into Board level; Managers and Supervisors; Technical Specialists and other members of Staff.
- Males: 67 months or 5.6 years
- Females: 61 months or 5.1 years
- Average: 64 months or 5.3 years
Source: Resolution Foundation analysis of Labour Force Survey (2014). Office for National Statistics
If you are carrying out a Report in order to provide information to an investor / funder,
then the results may well be seen to be most convincing if based on team consensus.
A Report made by an individual could be used to create a personal review of workforce
quality before presenting to a Board of Directors or Senior Managment Team.
However, during the piloting, no individual reviews were carried out. Executives judged the minimum requirement in order to generate a convincing report was to combine the judgement of:
- one person with responsibility for a large number of employees, plus
- one person with a knowledge of the enterprise's accounts.
In addition, of course, it would be good practice to include a human resource professional if your enterprise employs one.
The content is relevant
The content has been reviewed by subject matter experts (academics and practitioners), as well as investors, and judged to be relevant when assessing the quality of a workforce.
Technically, its 'validity' has been demonstrated.
That is, it assesses what is advertised as being assessed.
Technically speaking, that being assessed is 'Human Capital', sometimes described in this approach as 'People'.
As well as relevance, validity has been assessed by comparing content with other approaches such as 'The Human Capital Monitor' and The European Foundation for Quality Management 'Business Excellence' model.
Its reliability has been demonstrated.
Reviewers who have been willing to assesses their workforce twice have found the results of their second run to be similar to those of their first run.
'Generalisability' has also been demonstrated.
Executives from 14 of 21 industrial sectors have made a successful Review using a questionnaire.
An investor still needs to get to know the management team of a potential investment, and make a judgement as to whether information provided can be trusted.
The results of Human Capital Report are most likely to be accurate when the ratings :
- have been made by consensus of your Directors / Senior Management Team and
- when ratings have been backed up with relevant documentation.
Documentation can be uploaded during the Review at the base of each Factor .
Employee turnover varies depending on the state of the economy, industry, etc. For the purposes of the Review please base your answers on the data below. Employee turnover is calculated as follows:
(Total number of employees who have left voluntarily in a 12 month period)
divided by
(the average total number employed over the same 12 month period)
x 100
Typical turnover figures are:
- Board level and senior managers - 12%
- Managers and supervisors - 20%
- Technical specialists - 25%
- Other members of a workforce - 15%
Source: Resourcing and Talent Planning report (2017), CIPD / HAYES
The initial data collection will depend on how comprehensive your existing information is.
During piloting an enterprise with information in diverse spreadsheets took one person one day to collect relevant data.
Another already had most of the required data in its electronic information system.
During the piloting the Descriptor ratings took approximately 4 hours, although this was with external facilitation.