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Skandia Puts Employee Worth on Paper

February 4, 2001
Related Topics: HR Services and Administration, Workforce Planning, Featured Article
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In 1994, Skandia Group Worldwide decided to publish a supplement to its annual financial report focusing on its nonfinancial assets. The Intellectual Capital Supplement is now issued twice yearly, putting Skandia at the forefront of the trendtoward valuing a company's human capital.

    "In the old days, a country's GDP was created largely by agriculture and manufacturing companies. Their assets are accounted for in the traditional financial 
report, whereas employees, customer relationships, and product innovation isn't accounted for," says Jan Hoffmeister, vice president of intellectual capital management for Skandia. "Yet all of these information technology companies are creating a large part of countries' GDP now."

    Because Skandia is in the business of financial services, the company felt it important to provide its own investors with as much information about the company as possible. "Everything we do has to do with knowledge," saysHoffmeister.

    "People save up for their long-term retirement through Skandia and we need from other companies the same information we provide about ourselves, in order to invest money properly. We have more than a hundred billion dollars under management and have a keen interest in supporting initiatives to help companies report what creates value in the market."

    Skandia tracks and compiles data about 40 different factors thataffect its intellectual capital before writing an assessment of them in the annual-report supplement. Those factors include things such as leadership, compensation, development, corporate culture, retention rates, satisfaction rates, and innovation. "We ask our stakeholders what is important to them in order for them to make their investment decisions. And we dialogue with our other stakeholders, like employees and customers,"saysHoffmeister.

    In its half-yearly report, Skandia breaks down human capital into five major components: competence, relationships, values, culture, and leadership. Some of these categories relate only to the individual, others to the entire organization.

    Readers of the intellectual capital report are looking for indicators that reveal Skandia's potential for creating value in the future, says Hoffmeister. A trend of increasing employee satisfaction, comparatively low turnover, and product innovation, for example, would indicate a company moving in the right direction.

    "A reader might look to see how successful sales from products created in the last 18 months were. Do we create new products on an ongoing basis? Are we keeping up and being innovative? This is the kind of thing our supplemental report provides to the public," he says.

    What it doesn't provide, however, is an accounting of the return on investment Skandia gets for every dollar it invests in its people, or a dollar value on its human capital. "It's impossible to do that. You can account for the cost of expenses foremployees and the total compensation package, but personally I don't think you can account for ROI," he says. "We're not there yet."

Workforce,February 2001, Vol 80, No 2, p. 34  SubscribeNow!

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