By Bill Swan, Principal Consultant
Does your company claim its people as its greatest asset? Many companies do. At present, investors often find the information provided about workforces, which are used to value companies, to be inadequate. Valuations usually hinge on market capitalization, financial performance, growth prospects, various ratios compared to competitors, intellectual property, and branding. However, concerning people, companies are only obligated to furnish employee numbers and are not required to provide information about how they manage their people. Many investors find this inadequate, especially in an age where the talent of people propels innovations in products and services.
How companies manage their talent matters. Consequently, the Securities and Exchange Commission (SEC), the regulatory body for publicly traded companies in the US, is pushing for increased disclosure from companies regarding their workforces. Earlier this year, the SEC published a draft proposal, and in September, the SEC’s Investor Advisory Committee (IAC) voted unanimously to recommend that the Commission publish such a rule.
The recommendation is for companies to provide the following:
- The number of people broken down by full-time, part-time, or contingent workers
- Turnover or comparable workforce stability metrics.
- The total cost of the workforce, broken down into major components
- Workforce demographic data sufficient to allow investors to understand the company’s efforts to access and develop new sources of talent and to evaluate the effectiveness of these efforts
- A narrative provided speaking to “how the firm’s labor practices, compensation incentives, and staffing fit within the broader firm strategy”
Such information will provide better insights into how the company allocates resources and contributes to its growth. Presently, investor inquiries into employee data are part of due diligence, but since there is no standard disclosure, the results differ. A new ruling would establish standards.
Every employer, regardless of size, should understand that effective workforce management is of great importance. The better the management of employees, the higher the performance of the company. The numbers and narrative related to employees help provide the story. A company should be able to provide sound reasoning for employee management decisions. Disclosure of the decisions and the numbers will provide the story investors seek.
If your company could use assistance in workforce planning, FIT HR can help. We have consultants who have worked for publicly traded and smaller private enterprises. We can assist with your planning, reasoning, and decision-making. Contact us anytime.