Brian Lowenthal

As an advisor to HR executives, I think about the present VUCA world we must all learn to

operate within. I was curious if the past could give me insight on how I need to be today, to help ensure a better future. I went back 10 years to see what HR experts and advisors had been recommending for HR. I was not surprised at one recommendation that has continued to be suggested over this 10 year period .The recommendation was that for HR executives to be valuable contributors to their organizations success, they need to “be in the room where it happens”, and they have to bring data as their voice!

The currency for HR today is Data – driven with analytics to support Human Capital decisions.

This is so important for organizations today, that the SEC is now requiring companies to begin, as of October 1, 2020, reporting Human Capital metrics. The rationale for this decision and the current requirements can be found in an article by David Vance that appeared in Chief Learning Officer magazine, parts of which are reprinted here:

“The U.S. Securities and Exchange Commission just published its final rule on human capital reporting on Aug. 26.The rule mandates, for the first time, public reporting of human capital metrics by companies subject to SEC reporting requirements, which includes all U.S. companies issuing stocks, bonds or derivatives.

Today, companies have to report only one human capital metric: number of employees. The new rule will still require reporting the number of employees, but it also encourages companies to report the number of full-time, part-time and temporary employees as well as independent contractors and contingent workers if they are material to an understanding of the company’s business. “Material” means anything that an investor would want to know before buying or selling a stock, bond or derivative.

More important, the new rule mandates, for the first time, that a company provides, “to the extent such disclosure is material to an understanding of the registrant’s business taken as a whole, a description of a registrant’s human capital resources, including any human capital measures or objectives that the registrant focuses on in managing the business.” The SEC goes on to specifically call out the three areas of “attraction, development and retention of personnel as non-exclusive examples of subjects that may be material, depending on the registrant’s business and workforce.”

SEC Chair Jay Clayton commented in the public release, “I cannot remember engaging with a high-quality, lasting company that did not focus on attracting, developing and enhancing its people. To the extent those efforts have a material impact on their performance, I believe investors benefit from understanding the drivers of that performance.”

In other words, the SEC expects to see these three areas discussed and measures reported if they are material, and it is hard to imagine companies where they are not. Consequently, public companies will need to start disclosing and commenting on them beginning with results released in October, 2020.

And this is just the starting point. The rule calls for all material matters to be disclosed so each company will need to decide what other human capital matters might be considered material by an investor. Depending on a company’s particular situation, this might include total workforce cost or productivity, diversity (especially at the leadership level) and culture (revealed by employee engagement and leadership surveys). Discussion may also be required about the implementation of a new performance management system or a significant change in compensation and benefit philosophy.

Where can companies get guidance on specific metrics they might use to meet the new rule? We suggest starting with the 2018 recommendations by the International Organization for Standardization, which include 10 metrics for public reporting by all organizations and an additional 13 for reporting by large organizations. ISO also recommends 36 other metrics for internal reporting. These are organized by area or cluster. Here are the recommended metrics for the three SEC focus areas recommended for all organizations:

  • Attraction: Time to fill vacant position, time to fill critical vacant positions, percentage of
  • Positions filled internally, percentage of critical positions filled internally
  • Development: Development and training cost, percentage of employees who have completed
  • Training on compliance and ethics
  • Retention: Turnover rate

Publication of the final rule by the SEC ushers in a new era of transparency in human capital which will fundamentally change the way organizations operate. And these changes will go far beyond U.S. publicly traded companies. In five to 10 years, privately held companies, nonprofits and other types of organizations will be compelled (or shamed) into adopting the same level of transparency.”

In the future world of human capital transparency:

  1. What investor will buy stock in a company that .refuses to disclose material human capital information, which is already the primary driver of value in many companies?
  2. What employee will go to work for an organization that refuses to share its key human capital metrics when the only reason for refusal is because they are embarrassed to share?
  3. Why would anyone work for an organization where the culture is terrible, where they don’t invest in you, where turnover is high and where there are not enough employees to do the work?

The new world of human capital transparency is here.

Legislation should not be the primary reason to begin using data-driven analytics to support your Human Capital decisions. In my experience, organizations that use workforce analytics have the most engaged workforces, cultures of high character, high levels of customer retention, they outpace their competitors by a wide margin and they thrive in the VUCA world.

Every Human Resources organization must use analytics to ensure that they have a seat in the room where it happens AND that their voice is heard. HR practitioners will learn to ask not just how many, but — more importantly — ask why. You will uncover workforce insights; help ensure HR is strategically aligned to the business; and proactively create better business outcomes. You will cover the full critical thinking cycle from the what, to the so what, to the now what.

The now what is to focus your time and resources on these first 5 steps:

  1. Be sure you are clear on our organization’s strategy? What type of work needs to be done and how can you become more productive and competitive in accomplishing it?
  2. Determine how you put the right number of people in the right roles without simply reducing headcount to reduce costs?
  3. Determine if your employees fully engaged and inspired? What is expected from them and how can HR help them meet those expectations?
  4. Determine what must change? How can you share insights and innovations that allow your employees to be even more productive?
  5. Craft an HR Balanced Scorecard to begin to organize your data and monitor your performance. Develop a partnership with Finance and IT to ensure you have all the right inputs into the Scorecard.

For questions or guidance on how to get started, I can be reached at

Brian@LionValleySolutions.com or 216.533.7465