Workforce Reporting | Factsheets

Introduction

Workforce reporting describes the way workforce information is shared with key stakeholders, including investors, regulators, customers and potential and current employees. It's becoming an important part of an organisation’s engagement strategy. There’s growing interest in workforce information from many stakeholders who recognise its value.

This factsheet explores measuring the workforce for reporting to both internal and external stakeholders. It also investigates the perspective of shareholders and investors, key influencers on the actions of boards and management teams.

Explore our viewpoint on people analytics, along with actions for government and recommendations for employers.

What is workforce reporting?

Workforce reporting describes the process that organisations take to show the value and impact of its workforce, the effectiveness of management, and how value creation is supported by the organisations’ approach to people. The value of a workforce’s knowledge, skills and abilities are often called an organisation’s ‘human capital’. Unlike financial accounting standards, there’s no standard way of reporting on workforce matters. Workforce reporting can include simple metrics, more complex data analytics and narrative, and often a combination of all three.

Workforce reporting provides data to help identify the types of HR or management practices that will drive business performance. Measures could include labour turnover and employee engagement levels.

Context is key because there’s no single set of measures that can truly convey the value of a workforce. Organisations need to choose relevant workforce measures and communicate these measures effectively to stakeholders.

There’s a growing expectation on organisations to be transparent about workforce matters, and this is important for building trust in business.

The value of organisations is drawn from both tangible and intangible assets. Tangible assets are equipment, money, land and other physical objects. Intangible assets include brand, reputation, knowledge and people.

External stakeholders such as regulators and investors are increasingly interested in understanding how an organisation makes the most of its workforce,, how the workforce creates value, how that value is maintained and what risks and opportunities may arise. See our research The intangible workforce: do investors see the potential of people data?

There’s more in our report Human capital theory: assessing the evidence for the value and importance of people to organisational success.

Human capital standards

There’re a number of metrics that might provide insight into workforce matters and how they impact company performance, but there’s no single approach.

In 2015, the British Standards Institution, the business standards company, issued BS76000 - the first national standard to recognise the importance of valuing people in organisations. In 2018, the International Organization for Standardization issued ISO 30414, guidelines for transparent human capital reporting to internal and external stakeholders. Deutsche Bank adopted ISO 30414 in its HR report and became the first DAX30 company to meet this standard (the DAX is a German stock market index). Find out more in our HR and standards factsheet.

Measuring human capital

Measuring workforce matters is challenging because organisations are complex and there are many ways to manage a workforce. Organisational context is key. At the same time, investors and other stakeholders will be looking for ways to compare organisations with each other, so it's important to have reliable measures.

Meaningful workforce reporting will often require some level of people analytics. ‘Analytics and creating value’ is a core knowledge element in our Profession Map, with ‘people analytics’ as a specialist knowledge element.

One way to group workforce data is by HR activity, for example:

Workforce composition: demographics data including age, gender and ethnicity.
Recruitment and retention: number of resignations/vacancies/applications, length of service.
Skills, qualifications and competencies: expenditure on people development, types provided, length of time to reach competence levels, data on learning needs.
Performance management: performance management results, productivity and profitability data, targets set and met, levels of customer satisfaction, customer loyalty.
Employee relations and wellbeing: employee engagement rates, health and safety, employee wellbeing.
Employee representation and voice: findings from employee surveys, workforce engagement mechanisms, unions
Pay and benefits: overall wage bill costs, distribution of individual performance-related pay awards, level of total reward package, pay gap reporting, senior remuneration.
Regulatory compliance: includes data on the compliance of employees to established standards and guidelines for working practices in particular disciplines.
Organisation development and strategy: includes data on spans of control, skills mix and talent pipelines.

Valuing your Talent, led by the CIPD, developed a simple framework that illustrates the different types of data HR professionals can collect to understand human capital. Measures are categorised as Inputs, Activities, Outputs and Outcomes, which relates to their position in the business value creation cycle.

Measurement challenges

Challenges to measuring workforce-related matters still remain:

The contribution of people and management practices is difficult to isolate from other factors such as the economic situation, market forces and customer or social trends.
The value of people is often expressed in qualitative rather than quantitative terms that make it difficult to represent in traditional accountancy models.
HR data has traditionally been collected for administrative rather than evaluation purposes.
People professionals don't always have the skills or resources to interpret or explain data to evaluate the contribution of people to business performance.

Levels of data collection and analysis

There are three levels of data collection and analysis for human capital data: operational data analysis, basic insights and insights driving performance.

Operational data analysis

Simple monitoring data with no analysis, for example, reporting absence and retention data.

Action

Collect basic input measures such as absence, turnover or recruitment data.
Identify useful data already available or develop simple ways of collecting data.
Use this data to communicate essential information.

Outcome

Basic information on, for instance, headcount and make-up of the workforce.

Basic insights

Basic data is analysed and correlations are explored between data to draw simple insights.

Action

Design data collection for specific human capital needs.
Look for correlations between data – for example, whether high levels of job satisfaction occur when certain HR practices are in place, such as performance management, career management or flexible working.

Outcome

Information to help design the HR model most likely to contribute to performance or wellbeing.
Communication not just on how to implement processes, but with accompanying information on why they are important and what they can achieve.

Insights driving performance

Workforce data is triangulated with other business data to identify performance drivers. This may be used to show how organisations can use people management drive performance more effectively.

Action

Identify key performance indicators relating to the business strategy, and design data collection processes to measure against them.
Communicate data in ways that are meaningful to differing audiences.

Outcome

Identification of the drivers of business performance.
Information that will enable better-informed decision-making internally and externally.

To find out more on measuring human capital and HR theories related to human capital, read our report Human capital analytics and reporting: exploring theory and evidence.

Reporting human capital

Different types of information will be of value to different stakeholder groups:

Leaders are interested in understanding how workforce matters and decisions create value for the organisation and whether it is sustainable over the long term. They may also be interested in the ‘bigger picture’, for example organisation culture.
Investors, including shareholders, are interested in the quality of leadership and management, and how the workforce delivers short-term and long-term value.
Customers wish to know if they will get good service and after-sales support. They are also increasingly interested in how organisations treat their workforce.
Employees want to know their jobs are secure and how they can develop themselves and their skills.
Managers need information on actions they can take to improve the performance of their business units.
Regulators and policy makers are interested in understanding whether organisations are operating within the correct ethical, moral, social and environmental governance boundaries.

External reporting: what to report

The Financial Reporting Council Lab has published research which highlights the workforce data they expect businesses to include in their annual reports for external stakeholders:

Oversight and the actions of the board and senior management team on workforce related matters.
Descriptive data such as headcount, demographics, contract type, direct operations and supply chain, employee engagement, retention and turnover (regrettable and planned).
Information on how the workforce model links to and contributes to the business model, and how each aspect creates value for the organisation.
Risks and opportunities related to the workforce; how they are mitigated and identified, including health and safety metr.
Information about culture, behaviour and values, and how the board is embedding these.
How the organisation is investing in and incentivising its workforce, including training and development, performance and progression, pay and incentives, and other benefits.

The UK government has issued regulations for the future of narrative reporting which are a clear call for improved reporting on workforce information.

Key points in the regulations:

The importance of using the strategic report to reporting strategy, business model and business risks – includes information on reporting on gender and ethnic diversity.
The value of supplementary reporting with financial statements to describe key information on risks and opportunities facing the business.

Integrated reporting is an initiative designed to help organisations to report on the mix of tangible and intangible assets for their stakeholders. The International <IR> Framework advocates a “process that results in communication, most visibly a periodic integrated report, to assess an organisation’s ability to create value. An integrated report is a concise communication about how an organisation’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation, preservation or erosion of value over the short, medium and long term”. Human capital is one of six main capitals that make up the value of the firm in the integrated report. The other five capitals are financial, manufactured, intellectual, social and relationship, and natural. There's more information on the Integrated Reporting website.

More work needs to be done to improve the quality of human capital disclosures. The report Hidden talent 2: has workforce reporting by the FTSE100 improved? found that gaps in the types of data being reported, and considerable variation in the quality of workforce-related disclosures and reporting in FTSE 100 annual report.

Internal reporting

Internal reporting is often more prevalent than external reporting because it’s not scrutinised by the public, is used more regularly and more detail is required. Internal reporting is used to evaluate HR’s effectiveness and shape the HR strategy.

Generally any human capital data reported internally should:

Be reliable and open to scrutiny.
Be accompanied by adequate explanation.
Be presented in a manner that is easily understandable for the audience.
Be related to business needs.
Enable managers to identify appropriate actions that will improve business performance.

There’s more in our research report Human capital metrics and analytics: assessing the evidence for the value and impact of people data.

Investor perspectives on workforce reporting

Our research The intangible workforce: investor perspectives on workforce data found that investors are interested in these key workforce dimensions:

Management quality: the quality of senior leadership, their ability to manage complexity and deliver results is the key human capital measure of interest to investors.
Diversity of senior teams: the gender and ethnic diversity of senior teams is an indicator of whether the organisation believes in the value of inclusion and diversity.
Employee satisfaction: online platforms such as Glassdoor where past and current employees can review their employer offer useful insights beyond basic engagement measures.

Overall, investors are interested in better workforce reporting from organisations to make better investment decisions. To be valuable, reports must be transparent, with a clear and objective narrative that describes significant risks and opportunities related to the workforce.