8 reasons why human capital reporting is not happening, plus 2 ways it could

Thursday, 16 December 2010 13:33

8 reasons why human capital reporting is not happening, plus 2 ways it could

Written by Stuart Shaw

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Company reports don’t report people. People like you and me. Employees. Staff. Workers. Labourers. Who we are. What we do. What we think. What we know. What we bring – and, as Drucker famously noted, take home at night. Human capital – a company’s greatest asset – and as such greatest liability, as we know full well post GFC – doesn’t get so much as a column inch between the financial tables.

Five Hundred Years of Bookkeeping: A Portrait of Luca Pacioli Companies report three things: past financial performance; as much green information as they can get in; and a word from the CEO.

But no people.

There are many reasons why people haven’t so far got a look in. Over the next 8 weeks, I’m going to tell you my 8 reasons. All are true in their own way. Some you might know. Some might surprise you. Others might just make you mad. And then I’m going to give 2 – to me – viable ways it could get around these reasons. All of these ideas will be posted on the HubCap forum where I invite you to tell me if I’m right or wrong. If I’ve missed some good ones, please let me know too. The more the merrier. All will go into a longer more detailed forthcoming Accounting for People 2.0 Manifesto.

Here’s reason 1 why human capital reporting has so far failed to materialise:

1 the power of the Big Four

The Big Four accountancy firms - Deloitte, PwC, KPMG, Ernst & Young don’t want reporting to change. They want to keep things as they are and do accounting in the same, give or take, balance sheet and P&L format since the Middle Ages and the Messari. They want reporting that says or gives no context to the real people whose voices and actions and creative music make the numbers, like notes on a score, come alive. It's not their forte to account for this stuff. And it’s not in their substantial lobbying interest either: If accounting for people usurped the pre-eminence of accounting by numbers...well, do the math.

Accountancy regulators don’t want to change either. Feeling lucky, they gambled on intangibles once, and got burnt. So even though, post Lehman, they’ve been charged by the G20 to up their game (due to report back June 2011), the only game (players, rules, language) in town is and will always be one based on math, despite recent non mandatory guidelines asking for greater context about the purely financial position of the company*.

Safer being the hunter than the hunted.

*See for example the recent International Accounting Standards Board (IASB) guidelines encouraging managers to add context to published financial information by offering a historical and prospective on the entity’s financial position.