CIPD and Warwick University Business School have collaborated on new research exploring how investors make decisions using people data. Launched last month The intangible workforce: do investors see the potential of people data?
found there are many opportunities for HR in listed organisations to work better with investors to help demonstrate the value and contribution of the workforce. The research found that investors and analysts are interested in HR data that describes quality of management, cost of workforce, and cultural risk; information which HR analysts often collect and analyse. The information this data provides could help investors understand more long-term risks and opportunities to the business, and therefore inform better investment decision making.
As well as people data from HR departments, there are also more opportunities for senior HR leaders to demonstrate the value of HR insights to boards which may be looking to engage more effectively with their investors/shareholders. The research paper considers the potential value that HR leaders can bring to boards, particularly in organisations which may be facing workforce risks arising from Brexit, and changing working practices. Data and insights that describe the approach boards are taking to mitigate against business risks are considered to be of high value by investors.
Whilst the research is broadly positive about the potential value HR data can add, the paper highlights some of the biases which may impact investor decision making. Issues around herding (e.g. following the actions of other investors and maintaining the status quo) and bias towards financial information mean that there is more that needs to be done to illustrate the importance of non-financial information about the workforce. In addition to this there is also little research published which describes how investors make decisions using people data.
The research concludes by highlighting a number of ways in which HR leaders can help to drive better decision making by investors. These include the adoption of standard metrics, clearer narrative reporting of people insights, and better linking HR data to business and people strategy.
The new research is part of CIPD’s ongoing work to help boards and their external stakeholders to consider the workforce in their strategic decision making, and make more ethical and sustainable decisions. CIPD will continue with further research in 2018 exploring the value and potential of people data.