1、AUGUST 2020 Human Capital as an Asset: An Accounting Framework to Reset the Value of Talent in the New World of Work In collaboration with Willis Towers Watson PAGE 2HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK The COVID-19 pandemic has accelerated a shift to new ways

2、 of working, prompting companies to reimagine how, where and by whom work gets done. This shift was already under way with the technological changes of the Fourth Industrial Revolution. As companies look to reset for the new world of work that emerges from the pandemic, they would benefit from an ap

3、proach that values talent as a key asset that contributes to an organizations sustained value creation. This calls for the development of a new human capital accounting framework, which would enable a companys board and management to track how their investment in people is augmenting the firms human

4、 capital, and support the delivery of better outcomes for the business, the workforce and the wider community. This report, a collaboration between Willis Towers Watson and the World Economic Forum, seeks to provide such a framework. It is an important component of the Forums HR 4.0 initiative, an a

5、pproach to shaping people strategies in the Great Reset to collectively build a more fair, sustainable and resilient future. HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK PAGE 3 Introduction 01. PAGE. 4 Human capital metrics the current state of play 02. PAGE. 6 Conten

6、ts Human capital decisions in practice 04. PAGE. 18 Guiding principles to shift how human capital is valued 03. PAGE. 12 A framework for human capital accounting 05. PAGE. 23 Incorporating the framework into business decision-making 06. PAGE. 29 Contributors 07. PAGE. 33 Endnotes 08. PAGE. 34 HUMAN

7、CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK PAGE 4 The coronavirus pandemic is a defining moment for leaders as they reset the workforce, restore stability and strive to achieve growth in a sustainable manner that benefits all stakeholders. Actions to protect, preserve and

8、 sustain human capital value will be important for an organizations reputation and ability to chart a resilient path forward. The crisis, with its highly disruptive effects on people and work, also presents an opportunity to take bold measures to shape a workforce ready to deliver value to the organ

9、ization, and to economy and society at large, as it navigates new realities. At this pivotal moment, organizations should seek to work towards a more holistic approach to valuing the workforce and the return on human capital investment. INTRODUCTION PAGE 5HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRA

10、MEWORK FOR THE NEW WORLD OF WORK Workforce principles The following principles were developed jointly by Willis Towers Watson and the World Economic Forum earlier in the COVID-19 crisis to help organizations shape a responsible initial course of action in managing their workforces in changed circums

11、tances. They can also help guide employers to plan and implement an ethical and sustainable reset of their people strategies as they emerge into the “new normal”. See this crisis as a defining leadership moment and continue delivering the best possible outcomes for all stakeholders. Effective leader

12、s ensure the organization stays true to its purpose, values and culture. They are transparent, empathetic and create trust, and their behaviour helps calm and support employees who may feel stressed and anxious. Adopt an agile and continuous learning mindset. The uncharted waters of this crisis dema

13、nd agility and innovation to ensure responses are being recalibrated to a changing set of circumstances. Understand the perspectives of all stakeholders (e.g. employees, shareholders, customers, suppliers, unions, healthcare providers, community) and engage them in decision-making. Maintain awarenes

14、s of the shifting needs and priorities of all stakeholders and the evolving state of competitive and innovative practices. Focus on the intersection of employee and company well-being. Cost pressures place significant stress on leaders to meet the needs of shareholders at a time when the well-being

15、of employees, particularly the most vulnerable, is being seriously threatened. But the risks to and benefits of employee well-being and company well-being are highly aligned. Make decisions and take actions that consider medium-term needs and longer-term business objectives. Organizations should avo

16、id engaging in short- term actions that may compromise the longer-term sustainability of the business. INTRODUCTION Having a robust framework for measuring and accounting for human capital would support a principled approach to workforce management (see box: Workforce principles). Such a framework w

17、ould enable a company to monitor and assess the return on its investments in its employees in the same way as it measures returns on financial and intellectual capital; however, given the intangible nature of strong corporate culture, stakeholder leadership and employee well-being, companies have st

18、ruggled to quantify the contribution of their human capital assets. HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK PAGE 6 Human capital metrics the current state of play HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK PAGE 7 Four major group

19、s are driving these efforts: Regulatory bodies. An August 2019 proposal by the US Securities and Exchange Commission (SEC) would expand reporting requirements to include a broad set of measures including training hours, worker productivity and turnover. The International Financial Reporting Standard

20、s (IFRS) and US Financial Accounting Standards Board (FASB) both have requirements in place for reporting employee-employer transaction information related to employee benefits, retirement plans and compensation. International organizations. In late 2018 the International Organization for Standardiz

21、ation (ISO) specified 23 core metrics including costs and worker productivity; health and well-being; and leadership trust for organizations to track and report. Earlier this year a task force organized by the International Business Council (IBC) of the World Economic Forum released a consultation d

22、raft proposing a set of common environmental, social and governance (ESG) disclosures and metrics4. The disclosures are organized into four pillars aligned with the UN Sustainable Development Goals (SDGs): principles of governance, planet, people and prosperity. The people pillar includes metrics co

23、vering three key themes: dignity and equality; health and well-being; and skills for the future. Investor communities. For example, the Human Capital Management Coalition (HCMC), representing 26 institutional investors, has been instrumental in petitioning the SEC to move in the direction of requiri

24、ng human capital metric reporting. Policy-makers The US Congress is examining the topic of human capital reporting. In addition, the EUs non-financial disclosure requirements are designed to promote greater transparency in organizational efforts related to social responsibility and the treatment of

25、employees as well as board of director diversity. HUMAN CAPITAL METRICS - THE CURRENT STATE OF PLAY Human capital can be a companys greatest asset; it can make or break the business strategy and is a key differentiator. A companys intangible assets, including human capital and culture, are now estim

26、ated to comprise on average 52% of a companys market value1. Chairs or chief executive officers often cite “people” or “talent” as a top priority; however, even if companies now typically recognize the importance of people, the frameworks needed for human capital management have been lagging. The hu

27、man capital agenda needs to be part of board-level decision- making, integrating human capital metrics with financial and operational measurements2. From the shareholders perspective, organizations should have similar levels of emphasis and transparency regarding investment in, and returns from, hum

28、an capital. Efforts to introduce robust measures of human capital into financial reporting have accelerated in recent years as there is clear and growing market interest in understanding how companies manage and measure human capital to uphold the principles of stakeholder capitalism3. Such work to

29、date, however, often lacks specificity, context and comparability. PAGE 8HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK Organizations are under pressure to pivot to sustainable business models, follow SDG goals and provide higher levels of transparency such as through E

30、SG reporting. This report focuses on the people pillar as described in the IBC ESG paper, looking at how to value the skills and performance of the workforce and support investment in human capital. The humanitarian, economic and health impacts that characterize the COVID-19 pandemic make such effor

31、ts even more critical. HUMAN CAPITAL ASSETSHUMAN CAPITAL METRICS - THE CURRENT STATE OF PLAY HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK PAGE 9 The workforce implications of the pandemic highlight the need for better human capital accounting Widespread job losses: co

32、uld things have been different? The pandemic has had a devastating effect on the global workforce. The International Labour Organization reports that in June 2020, 93% of the worlds workers were living in countries with workplace closure measures in place. Although restrictions are easing, work has

33、been heavily disrupted. In addition, the sharp economic downturns that have resulted from the crisis have dealt a severe blow to incomes and jobs. The International Monetary Fund projects that more than 95% of countries will see per- capita incomes fall in 20205. The International Labour Organizatio

34、n also estimates that hours worked globally declined 14% in the second quarter of 2020 compared with the final quarter of 2019, equivalent to 400 million full-time jobs6. In the US, the unemployment rate jumped from 3.5% in February to 14.7% in April before falling to 10.2% in July7. More than sixte

35、en million people were unemployed that month. The rise in unemployment was considerably lower in the EU: the EU unemployment rate was 7.1% in June 2020, up only modestly from 6.5% in February. But this was only because governments provided extensive incentives for companies to retain workers. As of

36、June, such employment subsidy programmes covered 45 million jobs, or one-third of the workforce, in Germany, France, Britain, Italy and Spain8. While no sector or industry was left untouched by COVID-19, some have been hit harder than others. In retail, the crisis accelerated the shift to online sho

37、pping and triggered mass lay-offs and bankruptcies9. Following an 80% drop in airline passenger traffic, airlines took various measures to address the crisis, including reduced working hours, unpaid leave, pay cuts, furloughs, temporary and permanent lay-offs along with new hiring freezes. The aeros

38、pace sector resorted to similar measures. Earnings for the tourism and hospitality sector decreased dramatically: In April, the industry was losing more than $534 million in earnings and 12,000 jobs per day, on average10. Even the impact on the healthcare and pharmaceutical sector is mixed. With ele

39、ctive surgeries on hold, hospitals are facing falling revenue and rising costs, and medical device manufacturers are seeing declining demand for their products used in non- essential medical procedures11. Revenue opportunities from the approval of new pharmaceutical products to fight COVID-19 are di

40、fficult to estimate. HUMAN CAPITAL METRICS - THE CURRENT STATE OF PLAY HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK PAGE 10 HUMAN CAPITAL METRICS - THE CURRENT STATE OF PLAY Perhaps the technology sector alone is somewhat better positioned to meet the challenges of CO

41、VID-19 due in large part to its well-established policies for remote working and the rising demand for digital collaboration tools and technology to support remote working12. Would companies have behaved differently, and would job losses have been lower, with better human capital accounting? It seem

42、s likely. It is significant that in the EU, with sufficient incentives in place, companies have typically preferred to hold on to their employees. But such government-backed employment protection schemes risk market distortion; if sustained, they will hamper the reallocation and reskilling of labour

43、 from sectors that are likely to continue to struggle to sectors with better long-term prospects as the economic recovery progresses. They hamper financial incentives for companies to recalibrate for the new reality. And finally, they are also expensive for the taxpayer. It would be preferable if th

44、e correct incentives were incorporated directly into companies own decision-making through improved human capital accounting. Companies would then better appreciate the value of their workforce and would be less inclined to cyclically “hire and fire”. Indeed, many companies are already implementing

45、their own measures to hold on to people, including furloughs as an alternative to redundancies. Based on a review by Willis Towers Watson in May 2020 of 230 companies globally that announced a furloughing of employees, most (85%) did not set a defined time period for the furlough and a majority stat

46、ed that furloughed employees would return to work as soon as conditions permit. Approximately 15% specified a furlough duration, typically from one to three months. Furloughs also create financial difficulties for employees, of course, as well as emotional distress; however, a number of companies ar

47、e aiming to reduce the impact of furloughs by shortening workweeks or requiring employees to take a certain number of unpaid days within a specified time period13. Based on a review of publicly available announcements, 474 companies reported pay cuts as of 8 May 2020, up from 392 as of 29 April. Out

48、 of these, specific reductions were implemented for 463 chief executive officers, 417 chief executive officer direct reports, 325 senior managers and 125 among the broad employee population14. Such C-suite-focused pay cuts are significant as they show a principled approach to workforce management in

49、 which the value of the entire workforce is appreciated and senior executives share the burden of pay cuts in order to protect the broader workforce. HUMAN CAPITAL AS AN ASSET: AN ACCOUNTING FRAMEWORK FOR THE NEW WORLD OF WORK PAGE 11 HUMAN CAPITAL METRICS - THE CURRENT STATE OF PLAY A basis for work redesign Some companies are also taking action to redesign work. Before the pandemic, technology was already disrupting the world of work, redefining how, where and by whom work is done. The cost pressures, changing business models and workforce disruptions of