May 26, 2016

Companies fail to disclose key employee metrics

It’s all about metrics these days. However, a lot of businesses are failing to disclose really important workforce related information in their annual reports. A new report by the CIPD found almost a third of the largest companies are withholding key information.

What is that key information? According to the report, ‘Reporting Human Capital: Illustrating your company’s true value’, 30% of FTSE 100 companies are not disclosing metrics such as health and safety incidents, data breaches, skills challenges and employee turnover.

That’s not all either. Three FTSE companies had employees go on strike in 2015, as reported in the media, but only two of them referred to those strikes in their annual reports. Furthermore, four organisations that had employees involved in insider trading (again these cases were reported in the media) also made no mention of it in their annual reports.

Why are these omissions a problem? Annual reports are supposed to give an accurate, honest and informative account of an organisation’s performance, activities, business relationships and culture. Other organisations, investors, employees and potential employees may look to this data to find out information so that they can make informed decisions. If people are not given the ‘complete picture’ and are thereby not receiving a true account of aspects such as organisational performance or employer-employee relationships, then is the annual report fulfilling the role it is supposed to fill? Are people being misled? Are they being given insufficient information? Are such reports credible and worth creating and reading?

By withholding relevant information and not communicating everything that should be communicated, there is a risk that that those who rely on annual report are not getting what they need in order to make informed decisions.

It’s not all bad news though. The CIPD’s report, which looked at the quality and extent of human capital reporting carried out by organisations in the period between 2013 and 2015, shows that both the quality and quantity of reporting has increased. The biggest increase was that of the reporting of human rights issues – up by a whopping 127%. There was also a 22% increase in the reporting of ethics in this period, while diversity reporting grew by 39% since 2012.

Organisations in the property markets have made the biggest leaps forward, reporting a 41% rise in human capital reporting since 2012.

The financial sector has also improved its record on transparency. These improvements have largely been driven by the recent financial crisis, ongoing revelations of banking irregularities and the PPI scandals.

However, organisations have downscaled the amount of space they accord to workforce welfare. Two in five (40%) companies said they have scaled back the amount that they report on in the past two years.

According to Peter Cheese, chief executive at the CIPD, employers need to ensure their human capital reporting is worthwhile. He said it is “Vital in building trust, in understanding the real drivers of productivity, in understanding critical risks and in helping to create better work and working environments for all.