Accounting for people

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People are our most important asset” Right! So why don’t we “account” for them like we do for cash? … and the same for other key assets, too, like customers and products? The closest we get to any of these is to occasionally recognise some pseudo-financial value, as in capital assets, but we need to know what is happening to these critical resources in their own terms.

UK Business Secretary Sajid Javid just got in hot water for lamenting that, on a balance sheet “each and every one of the company’s employees are listed as ‘liabilities’” while “the ‘assets’ column includes everything from money in the bank to stock in the warehouse”. Unfortunately, that is just not true – they aren’t.

But he was right to urge business to truly recognise people as assets. How to do that? – pretty easy. We have a stock of people right now, and we have ‘flows’ of people in (hiring) and out (lost or fired). So we can produce a “People Assets” statement at any point in time (how many, of what different types) and a “People Flow Statement” for any period – again, split by type, seniority, or any other important category. (See http://sdl.re/IntegratedReporting, at about minute-25).

Such reports are also easily extended to deal with key ‘qualities’ of people, such as experience. Cash reporting, of course, does not need to worry about either different types or qualities of cash, but we need both when thinking about people, customers, physical assets, or products.

This is not just useful for telling investors about the health of the business – it should be routinely reported, assessed and responded to internally by management. Informal straw-polls with senior managers suggest that, while some get regular reports on their human resources, none get a proper people-asset report such as this.

 

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