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A New Rule: Measure What Matters

When asked what sets their organization apart, senior leaders have a well-worn trope that goes something like this: “Our people are our most important asset.” It’s a common refrain; a nod to the talented employees who drive their organization forward every day.

So if this is true, then why do so few organizations actually report on how they support, develop, and retain their most important “asset”? The truth is they don’t have to and so they choose not to disclose.

New Rule on Human Capital Reporting

This will change shortly since the Securities and Exchange Commission (SEC) just voted to approve new workforce disclosure rules for publicly-traded companies. When the new rule takes effect 30 days after it appears in the Federal Register, publicly-traded companies will have to disclose materially relevant human capital metrics including providing commentary on talent acquisition, development, and retention initiatives, in addition to standard financial and operating data.

Why the shift?

The rule highlights “the importance of human capital management in assessing the potential value and performance of a company over the long term.”  To paraphrase David Vance, executive director for the Center for Talent Reporting, the SEC acknowledges that  human capital is now the primary driver of value.

Why should we pay attention?

Senior leaders and HR executives should pay attention for two reasons. First, there may be a direct impact on talent acquisition. Imagine a talented candidate who must choose between two organizations: one company discloses clear metrics and in-depth commentary on their talent initiatives, resources, and budget while the other does not. All things equal, it’s more likely the candidate will select the organization with greater transparency and disclosure. Second, consider investors seeking to allocate their scarce dollars. Which companies are investors more likely to invest in? Moreover, if a company fails to disclose material workforce issues such as a toxic culture or high turnover, it could be subject to SEC fines or investor lawsuits. In short, companies that invest in talent development and adopt more rigorous and enhanced human capital reporting will attract more /better talent, capital, and resources, resulting in a competitive advantage, compared to those companies that do not.

Next Steps  

Every senior leader and HR executive, regardless if they work for a publicly-traded company or not, should be thinking about how their systems, policies, and initiatives are supporting their employee base and driving the organization forward. At the same time, they should think about the human capital metrics that matter most to their organization. The SEC does not prescribe specific metrics so a good starting point is the International Standards Organization (ISO) Guidelines for Human Capital Management, which outlines 59 different metrics.

Now is the time for senior leadership to seek out skilled partners to help them invest in, design, deliver, and measure the right people development, leadership, and culture initiatives. At Nebo, we have over 15 years of experience partnering with our clients. We work with our clients not only to deliver leadership initiatives, but also to align them with their business strategy, and measure outcomes. Please contact us if you’d like to discuss how we can best partner with your organization.

The truth is that people are not the most important “asset” since they are always up for hire. Rather, it’s the combination of people (team), how well they work together and are rewarded (culture), and what the organization chooses to build or prioritize (strategy) that sets organizations apart and leads to long-term success. This is what the SEC recognizes with the new rule.

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