Author: Nicolai Dyroff

Help or bondage?

To counter a reservation of many potential users. ISO 30414 - Guidelines for internal and external human capital reporting - is "only" a guideline, the application of which is voluntary and has the character of a recommendation, which areas of human resources work are measured and which derivations can be expected for future actions in this area. It was important for the authors of the guideline to show the interactions of different personnel areas and make recommendations on how the value contribution of people can be made visible and sustainably ensured through their work.

ISO 30414 is the first globally standardized HR reporting system.

Only applicable for companies?

This guideline should not only apply to companies, but to all forms of organization, whether in the private sector, government or non-profit sector. In order not to limit itself to just one form of organization, such as a company, the author has chosen the umbrella term organization. It is up to the users to collect additional key figures; the present work shows minimum standards that are equally applicable to all sizes and forms of organization. Explicit reference is made to smaller and larger organizations. 

Applicable for internal and external stakeholders?

The target group of the guideline can be managers and decision-makers for personnel within an organization, its co-determination bodies and ultimately also the employees, as well as external stakeholders such as investors, analysts and applicants. Reporting obligations, which are prescribed by laws or regulations, remain unaffected.

Relevance for the user?

The users within an organization should get a quick overview of which areas of their personnel are already sustainably and competitively positioned and provide insight where there is still development potential in the deployment of people within organizations. An active risk management covers the human resources area and should provide information where risks are located in relation to the personnel. Concrete examples of personnel risks are part of of the guidelines. External users are very interested in understanding the value contribution of people beyond all financial ratios and to relate it to other comparable forms of organization. This applies not only to loans whose hedging depends on the future work performance of employees. In insolvency proceedings, conclusions can also be made as to whether the continued operation of a company makes sense if the company has personnel that can contribute to the reversal of a failed economic situation. Human resources managers in the area of company acquisitions - mergers & acquisitions - have been working for some time with key figures that focus on the future work of people in organizations.

How was the guideline developed?

This guideline was developed with representatives from 20 countries. The consensus among the participants was quickly reached that only those key figures should be included in this guideline that are easy to collect, uniformly presentable and sustainable for the business success of an organization. Although in the end 58 individual values were created in 11 different application areas, the working group was always concerned to find a balance between effort and benefit for the users. More values always works, less makes no sense. In the creation of this guideline, the business model approach was consistently followed and not the protection of minorities. For this purpose, there are already relevant protective laws for employees in almost all countries of the world.

What are the details?

What are the details?

This document contains guidelines on the following core areas of the HCR:

For reasons of copyright protection, only rudimentary details are given on the individual areas.

- Compliance and Ethics

o What is the compliance with existing laws and what are the disputes about this

- Costs

o Direct and indirect personnel costs

o Total personnel costs, divided into direct employees and other employees of an organization

o Recruitment and fluctuation costs

- Diversity

o Age

o Gender

o Disability

- Leadership

o Leadership behavior

o Organizational structure

- Organizational culture

o Cultural aspects

o Retention rate

- Well-being, Occupational Health and Safety

o Accidents

o Illness rates

o Absence-related costs

- Productivity

o Sales and profit per employee

o Key figures for non-profit enterprises

- Recruitment, Mobility and Turn-over

o Key figures on applicants and open positions

Formulas for the individual indicators

Uniform formulas are prescribed for all indicators to enable comparability of results and are often in proportion to the size of the organization.

How often and where should the figures be collected?

An annual rhythm is recommended. The significance of the results increases if the results are available for several years and trends are apparent. It is advisable to measure individual areas of an organization according to task areas and regional criteria in order to make differences within the organization visible. An average temperature in Europe, say 17 degrees, does not say anything either.

Comments on individual areas:

The following is a statement on the individual fields of action:

Compliance and Ethics

Compliance with existing laws and internal regulations says a lot about an organization's dispute culture. Is it possible to reach an internal agreement or do disputes have to be settled publicly before the courts? Applicants who can only assess a company through official announcements and feedback from individuals can gain an insight into how disputes are handled in a company.

Costs

This area has triggered most of the discussions whether it makes sense to report total personnel costs and to focus conclusions about non-permanent employees. The proponents of showing the different cost blocks were concerned that the key knowledge that is not secured by permanent employment contracts with the company should be made visible. When questioning the relationship between permanent and temporary employees, the question arises whether the group of non-permanently employed employees (temporary workers, self-employed and temporary helpers) has critical know-how in terms of quality and quantity. It is not the intention to criticize temporary work per se, only if this group is treated much worse than the permanent staff, it is to be feared that their employment is not sufficiently secured, because the individual temporary workers can always reorientate themselves when the economy changes and better working conditions attract elsewhere. In many companies, only the personnel costs of permanent employees are recorded, all other employment relationships are often only shown as material costs and elude a risk assessment as to whether sufficient specific key knowledge is available in an organization. When granting loans, investors are guided among others by this circumstance.

Variety & Diversity

Diversity is not up to show whether an organization is "colorful", diversity shows whether all available talents, different perspectives, a mixture of old and young are represented in an organization. In times of dwindling skilled workers, it is becoming increasingly urgent to maintain access to all groups of people. A conscious or unconscious neglect of a group of people can lead to a shortage of manpower. Many companies complain that although having full order books, they feel the lack the people to work.

Management

In many areas, the labor market has changed from a distribution of work by employers to a market determined by applicants. The behavior of superiors determines whether the talents that were once hired can be retained in the organization. Management behavior is clearly becoming a competitive criterion. An overall weak leadership behavior in an organization has a long-lasting effect and usually cannot be remedied by replacing individual managers. The training of managers is therefore of particular importance. Strong managers get around quickly with potential applicants and have a lasting influence on talent acquisition.

Organizational Culture

Today, work no longer primarily serves to secure livelihoods. Cultural aspects play an increasingly important role. A high level of identification with the personal work task leads to employee satisfaction. It is possible in standard employee surveys to determine the level of employee loyalty to their company. The retention rate is measured. Employers not only need to know why they are losing their employees; it is equally important to understand why employees stay in the organization. The knowledge of why employees remain loyal to their company should be used when selecting new employees. Cultural due diligence has become the accepted method of conducting company valuations in the context of mergers & acquisitions. The aim is to better understand how employees perceive their working environment and to be able to respond to expectations in a more targeted manner. Since the selection of new talent in small or medium-sized organizations is usually still carried out with a generation gap, older supervisors hire younger employees, there may be a lack of knowledge about what motivates a younger generation and what expectations they have of their work and their company.

Well-being, occupational health and safety

Well Being a vocabulary that has only recently become popular in companies, expressed how comfortable people feel with their work and whether the company takes their sensitivities into account. It’s not only the younger generation who is looking for a balance between work and private life. Work-life balance is actively addressed in many organizations. It is also important for employees and applicants in the manufacturing industry to understand whether the company is actively involved in accident prevention and health protection.

Key figures in this regard allow an objective comparison of individual companies in a sector. Fortunately, fatal accidents at work happen rarely, and active communication on the subject helps to make these incidents even rarer. Loss of working hours leads to loss of productivity. A more precise knowledge of these losses also serves a targeted prevention.

Productivity

This is a key performance indicator that turns people from cost factors into revenue and success factors. The authors of this guideline have deliberately agreed on a simple formula, since each industry measures key figures of economic or organizational success differently. Examples of profit and non-profit organizations are listed. When these formulas were created, there was a controversial discussion as to whether the reporting of these profit figures could trigger discussions among the workforce or represent competitive disadvantages. As companies have the possibility to explain the total cost structure, for example with necessary provisions, the concerns of some stakeholders were dispelled.

Recruitment, Mobility and Fluctuation

Every organization should know exactly how long it takes to fill vacancies, whether the hires meet initial expectations and whether the organization is able to retain the hired employees. Fluctuation, especially in the initial period after hiring, leads to considerable additional costs and damages the reputation of an organization. Especially medium and large organizations should know how the employee flows within their overall organization. Does an exchange of employees occur, are silos created and "maintained" over the years, or do people gain more insight into the organization when they gain additional qualifications by changing their positions and tasks? The insight into the attitude of the workforce towards changing tasks is important in order to keep up with changing requirements in a competitive environment. Statements about willingness and ability to change can be made. Every form of organization must know whether vacancies are filled internally or whether it is dependent on external candidates to cope with growth or fluctuation. It should be clear which profiles need to be hired, young people who are starting their working while undergoing training or experienced employees who cannot be recruited from the existing organization. Ultimately, it remains essential for work force planning to understand at all times where the people come from who are needed to fulfill the organizational tasks.

Skills and Performance Potential

"We train our staff", a sentence that sounds good at first. What is hidden behind the statement, how can it be measured? Every organization depends on the level of training and knowledge of its employees. Education and training must be measured. On the job, at work, most practical experience is certainly gained, but it does not replace structured learning with success controls. Organizations always need new skills and abilities that cannot be acquired through practical work. What is the right choice? Learning in face-to-face situation or via virtual class room trainings. Organizations are increasingly required to present evidence of training courses that have been conducted and to document the number of participants.

Succession planning

Small or medium-sized companies in particular are threatened in their continued existence if no active succession planning is carried out and possible successors for key positions are not identified in time. Loans become more expensive or will be rejected if the borrower cannot explicitly explain how (unexpectedly) vacant positions will be filled. A late initiated succession activity usually does not lead to a suitable candidate either. Succession planning for success-critical positions enables timely familiarization and qualification.

Availability of employees

The regular overview of how many employees with certain qualifications are employed in an organization is the basis of all work force planning. Key focus is on the future availability. Are there always enough employees with the required skill set available (even) after planned and unplanned departures? A lack as well as surplus of employees is equally undesirable. It becomes critical when a larger number of employees are not in a permanent employment relationship with the employer. Critical skills may not always be available without restrictions. Access to skills and knowledge of how to gain them is essential. In addition to access to knowledge and skills, the availability of those skills is also important, i.e. absences; planned and unplanned work disabilities must be recorded and taken into account for work force planning.

Conclusion

None of the metrics listed in ISO 30414 is groundbreakingly new. The advantage lies in the comparability of the key figures worldwide - the same is measured in the same way. Statements on concrete questions can often not be answered by a single key figure. A clever use of different figures allows a reliable forecast of future personnel behavior. If an user realizes that, for example, fluctuation is moving away from the tolerable level, he has now the opportunity to identify certain root causes and patterns that lead to fluctuation. He can intervene concretely to mitigate the fact that people leave an organization unintentionally. The percentage of fluctuation is only a description of the facts. If the user also considers the values of leadership, employee satisfaction with the organization, the workplace, the work-life balance and training, he may be able to identify the causes of increased fluctuation. While conducting interviews with employees who have decided to leave the organization, he can easily check the findings from the data against reality.