Human Capital Management Institute (HCMI) developed three unique statements collectively known as Human Capital Financial Statements (HCF$™), for organizations to disclose human capital information:
- Human Capital Impact Statement – The human capital peer or supplement to the income statement, measuring quarterly or annual impact of human capital on financial performance.
- Human Capital Asset Statement – Like a balance sheet, this statement clearly and concretely quantifies the total value of the workforce. It breaks down differential value contributions by job category and can drill down into critical job roles at a micro level.
- Human Capital Flow Statement – Similar to a cash flow statement, this schedule traces the flow of human capital across multiple dimensions by period such as a quarter or year, showing where and how human capital is allocated and used in an organization.
Need answers to these questions? Then HCF$ is the solution.
- How do you quantify the impact human capital has on financial performance?
- How do human capital metrics integrate with commonly accepted financial metrics?
- How do you measure total workforce costs to drive workforce effectiveness and efficiency?
- How do you quantify value creation in the organization across the talent management life cycle?
- What is the impact of training on profit, productivity and total human capital value?
- What is the differential human capital value creation of different job roles?
- How do you measure workforce flow, changes, and growth like a cash flow statement?
Human Capital Impact Statement Summary
The Human Capital Impact Statement quantifies the workforce impact on financial results. Using the Human Capital Impact Statement, organizations can build and show a business case and quantify the impact of HR, as well as assess historical and projected future impacts of workforce decisions and changes upon the organization’s financial results.
The Human Capital Impact Statement assumes that the workforce creates value greater than its collective total cost. Employees and workers provide a value beyond what they are paid in wages and benefits. All organizations trade compensation, benefits and rewards in exchange for human capital performance and outputs regardless of profit motive. The costs of human capital are part of the investment the company makes in its business. In for-profit organizations, this number can be quantified on an aggregate basis as the Return on Human Capital Investment and Human Capital ROI Ratio; formulas linked to net operating revenue, total operating expenses, total cost of the workforce and net operating profit financial measures (a portion of the Human Capital Asset Statement is shown below).
The entire Human Capital Impact Statement contains three distinct sections, including:
- Workforce Productivity Impact – Calculations in this section compare current and prior period value of productivity (see formula on page 9).
- Total Cost of Workforce (TCOW) – This section calculates detailed workforce costs by cost element or subcomponent. (see HCMI white paper, “Managing an Organization’s Biggest Cost: The Workforce”, 2010)
- Talent Management Impact– Productivity and value creation are broken down in this section by talent management lifecycle subcomponent, showing HR where in the lifecycle workforce value is created.
Human Capital Asset Statement Summary
The Human Capital Asset Statement is a powerful tool to quantify total human capital value and the total human capital value added over and above Total Cost of Workforce (TCOW). The Human Capital Asset Statement reflects and values human capital as an asset, or as value producing, not just as a cost. Analyzing the fluctuation of human capital by period can provide workforce insights to drive business strategy and bottom line impact. At its most basic level, the Human Capital Asset Statement shows a reasonable and calculable total value for the workforce, and how much that value contribution is changing over time (a portion of the Human Capital Asset Statement is shown below).
Human Capital Asset Statement – Human Capital Headcount Deployed
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