THE PRINCIPLES OF HUMAN CAPITAL MANAGEMENT

Human Capital Management (HCM) relates to the management of the recruitment, retention, training and development of employees. It views employees as a business asset rather than just a cost. HCM is a key source of competitive advantage and ultimately, profitability.



Any business needs to ensure that its workforce has the right mix of people, with appropriate skills and experience, allowing the business to compete effectively.

The Accounting for People Task Force was set up in the UK to look at ways in which organisations can measure the quality and effectiveness of their human capital management. The Task Force recommended that reports on HCM should:

1. Have a strategic focus. They should communicate clearly, fairly and unambiguously the Board's current
    understanding of the links between the HCM policies and practices, its business strategy and its
    performance. They should include information on:

• the size and composition of the workforce;
• the retention and motivation of employees;
• the skills and competences required for success and the training to achieve these;
• remuneration and fair employment practices; and
• leadership and succession planning.

2. Be balanced and objective, following a process that is susceptible to review by auditors.

3. Provide information in a form that enables comparisons over time.