The Securities and Exchange Commission (SEC) recently introduced new disclosure requirements designed to provide stakeholders insight into human capital. The new requirements went into effect on November 9 and require public companies to disclose the number of employees and a description of human capital resources, along with any human capital measures or objectives—from the operating model to talent planning, learning and innovation, employee experience, and work environment.
Episode 266: Making Sense of Human Capital ISO Standards with Zahid Mubarik (@ZahidMubarik)
HR leaders are struggling to make sense of the new requirements, especially since the SEC has not included a definition of “human capital” or a list of required measures to disclose. In 2019, the International Organization for Standardization (ISO) published ISO 30414, human resource management guidelines for internal and external human capital reporting, the first International Standard that allows organizations to get a clear view of the actual contribution of human capital. It provides guidelines on core HR areas such as organizational culture, recruitment and turnover, productivity, health and safety, and leadership.
To help us make sense of Human Capital ISO standards, I spoke to Zahid Mubarik, Chief Consultant and CEO of HR Metrics. Zahid is an expert on the human capital metrics that will now be part of quarterly SEC reporting.
I asked Zahid about the driving force behind the ISO changes and why it’s happening now. “In the larger context, the biggest challenge we face globally is income instability. If your people management is not in order, many aspects of the business will not work.” Without sustained performance, the organization cannot maintain stability and continuity. “The reporting on what we call intangibles, the human capital factors, is becoming more and more important to the overall organization not just in terms of headcount, but in how the company can move forward.”
Zahid is also a member of an ISO committee that sets HR standards and guidelines. This is a group of people who have come together to determine what the standard should be. “The committee decides which standards are in review, then there is a process for proposal submission…at every stage, there is an element of participation and it must be approved by the majority. These standards are meant for the global workforce, not just one country.”
“The strength of the ISO process is the consensus of the majority for the global workforce.” – Zahid Mubarik
HR metrics introduce an element of quantification into a historically stories-based department of human resources. “The new metrics requirements are designed to take into account the needs of all stakeholders, not just those we have to convince to buy into our HR programs.”
Stakeholders are anyone who has an interest in the organization – the community, the regulators, anyone who cares about the employment offered by the company, anyone working for the company, company leadership, and shareholders. “The standards offer a new element of data for shareholder aspirations, but also provide information about the company to employees within the company,” said Zahid.
Human capital can be such a grey area, and there has been a lot of pushback against human capital standards. Zahid said that “If the organization understands that it’s important to be transparent for more reasons than minimum disclosure requirements, then from the perspective of the employee it inspires confidence in leadership and how the company is allocating resources to career development and coordinated training, hiring and other HR efforts.” When we share more and we’re more upfront with people, we’re more profitable in our business.
“From a very basic point of view, we are gathering essential information that shouldn’t be scary; it’s a health check for the company that helps it determine where and on what to focus for the future.”
With the new standards and SEC regulations, the spotlight will shine even brighter on HR and our ability to perform in the areas of employee development, safety, engagement, attraction, and retention. While the SEC has not clearly defined human capital, the ISO has given us guidelines on these core HR metrics. I’m so pleased to have had the opportunity to speak with Zahid Mubarik to help us make sense of the new human capital standards.
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