New Standards for Measuring Company Investment in Employees


The Society for Human Resource Management is coming up with a new standard for measuring the way companies invest in their workforces.

The idea is to develop specific criteria that are measurable and concrete that will enable companies to show the investments they are making in their employees. Under the plan, currently in draft form, six areas would be measured – spending on human capital, ability to retain talent, leadership depth, leadership quality, employee engagement, and human capital discussion and analysis.

The standards of measurement will give companies a way to evaluate concretely and talk about what they are spending on human capital so that investors and analysts can see which companies invest in their people and which companies do not.

Some analysts like the idea because it will help them see more plainly which companies are developing their employees. But the idea does have its critics. Some say that gathering the information for the specifics needed would take a lot of time and really not be of much help to investors anyway. The figures by themselves really wouldn’t mean much without a lot of context and explanation. Moreover, because the data would be specific to a certain industry, it would be easy to misread it, others contend.

Some argue that making such information public would put companies at a disadvantage with their competitors. But others argue that such information is already being disseminated haphazardly by employees through social media.

Using these standards would enable a company to put the information together in a coherent and compelling way, rather than have it spread in bits and pieces online.

And it would help to put some valid numbers to the value of human capital in companies, something which is totally left out of the investment equation currently. Not many companies now provide any information about what they invest in human resources, in planning, in training and development, and other similar areas. They only provide leadership succession plans, according to Laurie Bassie, a human resources consultant.

The money that companies do spend on things such as training and development is added to other categories on financial statements, so if a company is investing more in training and development, it simply shows up as higher expenses on the financial statements, Bassi says.

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