HR professionals at quoted companies must rise to meet the challenge of the impending Operating and Financial Review (OFR).
This is the warning from business advisers, Watson Wyatt.
The OFR is a new Companies Act requirement for companies to produce a forward-looking analysis of their business, including information about people management.
The regulations are expected to apply for accounting periods beginning on or after 1 April this year.
Steven Dicker, partner at Watson Wyatt commented:
“HR leaders need to give the OFR priority attention. Even though most HR teams have recently been putting more focus on HR metrics, the inclusion of people KPIs in the OFR means that many will need to step up a gear. Rather than transactional data about workforce numbers, staff turnover or training days, companies – or rather their shareholders and stockmarket analysts – will require robust KPIs that really link people management with business value.”
Dicker warns that the requirements are far more than just ‘collecting data’.
The OFR will expose for the first time qualitative factors including human capital management that may not previously have been at the disposal of stakeholders.
The DTI’s explanatory notes to the draft regulations add that directors will need to make judgements about what data and analysis, and the level of detail, to include regarding employees.
“A critical part of the process to selecting appropriate people KPIs is to start from the business goals and work back to the relevant people metrics,” said Steven Dicker.
“Such a process can result in a comprehensive scorecard of people KPIs, with information at different levels which is of relevance to different users – line managers, HR and the company board. While the top-level metrics may be the only ones suitable for inclusion within the OFR itself, they must be built on the firm foundations of lower level metrics that provide the underpinning evidence that the board is required to consider for the OFR.”
The draft regulations for OFRs are out for consultation until the end of this month.