Last year I was involved in resurrecting the UK Government’s 2003-05 Accounting for People
taskforce project. Not for or on behalf of the Government, but for and on behalf of those in business and predominantly HR who saw the new Cam-Clegg consultation on narrative reporting as a chance to finally – finally – put the value of people – human capital - front and centre. To make it both something boards take more seriously, and to create the mechanism whereby knowledge about those assets is communicated between business and the City.
When we set up the project, the idea was to follow a similar route: form taskforce, deliberate, submit proposals and hope things would change. But the big difference from the previous incarnation was a deliberate inclusion of financial analysts alongside predominantly HR, analysts who for the most part couldn’t tell you – and previously couldn’t care less – what HCM let alone AfP was about. In 2005, a round of golf with the CEO, a look at the books (financial performance), a bit of star gazing and that’s all they needed. But times had changed. Now they wanted at least to listen. Which they did.
But then when it was their turn to talk, we were in for a big surprise: the City tells business what to report and for the most part what to focus on. If they don’t ask the CEO (or CFO) to focus on the long term wellbeing of their employees, they don’t. If they don’t want to know about the intellectual capital tied up in the business, businesses don’t make it their business to know. They do as they’re told, and they’re not being told to care about people. The reason why the first AfP failed and why any subsequent ‘consultation’ would fail too is not because business leaders and HR don’t want to change – most of the more enlightened among them ‘get it’ – but until the financial world ‘gets it’ too – and I mean ‘gets it’ for their own benefit, nothing will change.
That wasn’t all.
As one analyst said:
“These guys (analysts) live in a different world. They don’t care one jot about a business or the people in it. They only care about what the numbers say. Put a CEO in front of them who starts whining about the long-term value of this soft stuff, and they’ll be replaced after a collective run on their share price.”
To which another added:
“Yes, but you’re assuming that this knowledge will help analysts see the longer term. But the entire system is built on computers crammed on top of market servers programmed to react to – in nano seconds - and make money out of - short term fluctuations. Settling the share price down is going to cost them money. “
And then we got the final kick in the teeth to our plans:
“And you don’t think it’s in the interest of CEO’s to stabilise the share price either do you? These guys have a 2 yr shelf life. And mostly get paid in stock options. It’s not in their interests either to calm things down. And in case you’re thinking ok, government can regulate this, remember where most politicians end their careers.”
This was, to be fair, a bit of a shock. Not that the ‘system’ was so, well, corrupt for want of a better word, but that it was the analysts who hold such sway over what a business does or does not report about itself to the world. Here we were thinking they just needed a little education.
And yet, as disillusioning as it appeared at the time, they were there. They were happy to unveil the system for us, to show us why it works the way it does, and happy to see how unhappy – even horrified - we were to see the extent of the mountain we had to climb. And yet, as I said, they were there.
And they weren’t alone in thinking that there had to be a better way to report this stuff and get value – for both sides – from it. The more we look, the more ethical and HCM-savvy fund managers there are out there now, and they’re making better and more profitable long term investments (which in turn is attracting the attention of their rivals). We have credit rating agencies, devastated in reputation taking talent management seriously (even if, yes, it probably is initially a marketing gimmick). We have business leaders like the CEO of Ulilever
actively pushing away short-term investors. We have the geek-squad in 2.0 companies like Google and even Apple saying no to the City and yes to a more real world valuation of talent. We have networks like this one and this one
that are doing the work of researching and creating movements among the next generation of business leaders and financial analysts that are as sceptical about the system as it is as they are willing to stand up and say enough is enough, there has to be a better way. We have Human Capital Handbooks
that invite both sides to talk about what’s wrong as well as what’s right here – with a view to changing it.
After all, pretty much everyone is agreed that the system is broken: now the challenge is to fix it. Even if that takes a long time. And a few rewritten text books.
At which point I’ll put the kettle on and ask what you all think?