Brookfield Asset Management, a global asset manager with a focus on real estate, infrastructure, renewable power and private equity, measured the value of its human capital in order to increase the effectiveness in how the firm organizes, develops and deploys its employee base. The research found that the value of the human capital in the asset management business represents almost 60 per cent of its market capitalization, reinforcing the importance of human capital as a competitive advantage. Further to this, the company found that the value of its approximately 1,700 asset management employees was approximately twice the value of their cost.
By undertaking the study, Brookfield has evaluated how to strengthen the links between departments and focus on retaining talent. However, Brookfield’s CFO, Brian Lawson, has a longer-term perspective when talking about the project: “The reality is that the ongoing discussion will be most important. A deeper understanding of the value of our human capital and the way each team impacts value creation will drive our success.”
In another project, The Co-operators Group asked its finance team to look into the company’s approach to mental health in the workplace. According to the Canadian Mental Health Association, one in five Canadians live with a mental illness, which affects their lives, their families and wider society. Forty-nine per cent of those affected will not seek professional help. In the workplace, their productivity levels can decrease by 47% compared to a healthy baseline.
Taking the results of the study, the finance team used a business case to recommend and implement substantial improvements to mental health benefits for employees. The financial analysis forecasted an increased return on the investment they are putting into their workforce.
“As finance professionals, we know that we need to measure outputs and outcomes in order to improve the management of our business,” said Karen Higgins, CFO, The Co-operators Group. “Mental health is no different.”
Measuring the value of workforces is increasing in importance to organizations as they seek to support and retain good staff. Human capital valuation is also becoming significant when faced with technological change and competition between firms trying to attract a skilled workforce.
The initiatives by Brookfield and The Co-operators Group are part of a project undertaken by a group of Canadian CFOs who are members of the Canadian Chapter of the A4S CFO Leadership Network. The project involved implementing the guidance from the A4S Essential Guide to Social and Human Capital Accounting into their own organizations and to share their experience.
“Traditional ways of capturing, tracking and reporting business performance focus mainly on financial and operational measures. They don’t allow organizations to proactively manage the social and human capital opportunities and risks they may be facing,” said Joy Thomas, CEO, CPA Canada. “This is because these factors are inherently more difficult to track consistently and may, in fact, be controversial to assess in financial terms.”
Jessica Fries, Executive Chair of A4S, said, “If people really are an organization’s most important asset, then putting numbers on the figures that matter and using those numbers to inform investment is key. We encourage other organizations to download the research and corresponding guidance to determine how they can take similar actions.”