Why More Businesses Are Disclosing Workforce Data to Investors
This article was updated on Aug. 29, 2018.
An increasing number of business are are disclosing workforce data to investors, such as employee engagement and turnover, often in response to requests from investment groups for increased transparency. According to CFO.com, two groups of institutional investors — Principles for Responsible Investment (PRI) and the Human Capital Management Coalition (HCMC) — are requesting that businesses give them a more public disclosure of workforce data and a better window into where investments in training and employee development really go.
Finding New Metrics for Management Success
One of the reasons why some investor groups are requesting this data from companies is that they want more insights into how well-managed the organizations are, and they believe that better metrics on training, turnover and employee engagement can be a strong indicator of the health of the business. This is intended to protect the interests of shareholders and encourage stronger corporate performance, while also generating more transparency to compare the well being of employees at various businesses.
Context Matters
Although the investor groups have generally had a supportive reception from the businesses they're engaging with, there are a few notes of caution regarding workforce data disclosure. When dealing with workforce data, context matters — data about an organizations's overall workforce is not as important as data about the most critical talent. It's understandable that turnover will be higher among lower-level employees, but a business that has higher turnover among higher-level technical staff or upper management may not be appropriately focused on its most critical talent.
For example, according to CFO.com, "if you lose 20% of management in a year, that's way too high. Losing 20% of your call-center workers is OK. It's also fine if 20% of a retailer's customer-facing staff is lost. But it's disastrous if a professional services firm has 20% turnover among customer-facing professionals." It's important to make sure that your workforce data disclosures are accounting for the complexity and larger context of "which" employees are turning over at higher rates, and how that represents a fuller picture of the health of the business.
Creating Recognized Standards Across Industries
Even if these early attempts at classifying and disclosing workforce data to investors are incomplete or inexact, businesses would be well-advised to think about new ways to compile and analyze their workforce data, not only for the benefit of investors but for the organization's own internal use. Especially as more employers embrace the gig economy and move toward a disaggregated workforce, it's possible that labor market regulators will want to have a closer look at how employees get classified and treated.
The rise of disclosing workforce data to investors is still in a relatively early stage. Finance leaders may wish to consider this, given their investor base and their investor communication strategy.
