CIPD

1. CIPD September 2015 Edward Houghton Championing better work and working lives

2. Our purpose Championing better work and working lives... ...by improving practices in people and organisation development... ...for the benefit of individuals, businesses, economies and society.

3. Who we are • The professional body for HR and people development • Voice of a worldwide community of more than 135,000 members • Setting the benchmark for excellence in people and organisation development for more than 100 years • Experts on the rapidly changing world of work • Career partner of choice for our members • Setting professional standards • Driving the HR and L&D professions forward • Independent and not for profit, with a highly respected Royal Charter.

4. The CIPD around the world European Association for People Management (EAPM) World Federation of People Management Associations (WFPMA) CIPD Middle East CIPD Asia International Federation of Training and Development Organisations (IFTDO) Australian HR Institute (AHRI)

5. Our strategic priorities 1 Extending our impact and voice 2 Broadening our reach, relevance and value 3 Developing progression paths, career development and recognition 4 Building relationships and support to organisations 5 Strengthening community and connections 6 Prioritising and growing our international presence

6. Setting the agenda

7. People are an organisation’s most important asset… www.valuingyourtalent.co.uk …but we struggle to articulate and measure the ways in which we can increase that value. So we’re working together to define a common language and set of metrics.

8. Valuing your Talent Managing the value of your talent: a new framework for human capital measurement

9. Key reasons why human capital is important to business Top down information on people Drives the decision making process Quantify business benefits of better people management Valuation of HR’s role in the business Nuanced approach to people and performance management Input in to business strategy and direction 9

10. It’s the business model, stupid! The structural capitals ‘On day one of economics A-level, you learn that there are three factors of production: land, labour and capital. Why is it we don’t measure labour? There is a much greater willingness in the UK, a kind of encouragement even, to talk about what the business model is, what the risks to it are, and so on. It feels to me that you’ve got to talk about the value of your people when you talk about that.’ Stephen Haddrill, CEO, The Financial Reporting Council ‘The really smart analysts spent 10 minutes talking about our business results and 40–50 minutes talking about people.’ Doug Baillie, Unilever

11. Three factors of production:

12. Understanding the Value Creation Process:

13. Valuing your Talent to date cipd.co.uk/valuingyourtalent 13

14. Objectives • To provide the means to better understand how developing and managing people drives value. • To define a common language of human capital measurement and to promote agreement in how such measures are used. • To develop framework against which executives, employees, the investment community and other stakeholders can assess how businesses are developing their people to drive sustained and higher levels of performance.

15. Research methodology 3 Focus groups Literature review of 100 articles 80+ Semi-structured interviews www.valuingyourtalent.co.uk #VyT 15

16. Findings Organisations face 5 challenges moving forward: • Materiality: People are material – but how material? • Transparency: greater understanding of performance to illustrate people’s role in value creation • Language: Common language for HR and Finance • Visibility: Line-of-sight to the value people create is needed – greater awareness of the impact of culture on value. • Interpretation: Combination of “hard and soft” illustrates value drivers - Leadership craft is how organizations use insight to achieve sustainable business performance. www.valuingyourtalent.co.uk #VyT 16

17. Organisations face 4 challenges moving forward www.valuingyourtalent.co.uk #VyT 17

18. The Return on Insight (ROI)

19. The Valuing your Talent Framework www.valuingyourtalent.co.uk #VyT 19

20. Indicative algorithms www.valuingyourtalent.co.uk #VyT 20

21. Case study: Unilever Some organizations are able to predict their talent capability over the short and long term, and begin to forecast impacts on the bottom line: “We have spent an enormous amount of time examining whether we have the talent engine to sustain an 80 billion euro revenue business. There is a significant amount of talent analytics done around the kinds of people we have, the quality, quantity, where the gaps are, how we’re going to close the gap, etc. We track and see how we are doing across all of these areas. We examine the skills, talent and culture to see if we have what it takes to be the 80 billion euro business we want to be. This is one of the essential roles HR plays in the business by ensuring any gaps in the skills, talent or culture across the business that might harm our 80 billion euro aspirations are covered. It’s all about three years from now; five years from now. We are future-proofing the business.” Leena Nair, Unilever #VyT August 2014 21

22. Conclusion: • Getting the measurement plane in the air • The business of HR is business • The human capital architectures of value • Increasing integration

23. Thanks for listening Edward Houghton Research Advisor, Human Capital and Metrics, CIPD e.houghton@cipd.co.uk @EhoughtonCIPD #Valuingyourtalent