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September 17, 2012

CGMA: senior executives fail to harness the human factor

Senior executives find it hard to manage human capital, a shortcoming that scuttles competitiveness and growth opportunities, a recent survey has revealed.

The report, Talent pipeline draining growth: Connecting human capital to the growth agenda, emphasises that an inadequate HR policy can result in businesses failing to achieve financial targets.

The survey was conducted by The Economist Intelligence Unit on behalf of the Chartered Global Management Accountant programme (CGMA), a joint venture between the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA).

CGMA’s research found that as many as 43% of the 313 senior executives who took part in the survey believed failure to achieve financial goals was due to inadequacy in human capital management.

This link between performance and HR management grows in the context of the financial services sector, the results suggest.

Some 58% of senior executives in this field said poor human capital management was behind failure to start major projects or accomplishment of company targets.

Despite the damage that poor talent management may pose, the survey shows a gap in firms’ intention to invest on human capital.

Spending cuts connected to the development of workforce skills, training and qualifications are on the agenda for 77% of the chief executives surveyed, despite this being against the recommendations of some 82% of human resources directors.

“Generally speaking, human resources and finance should partner in determining both the cost and value of human capital. In this way organisations can maximise the expertise and skills that the management accountant can bring to this area,” says Valerie Rainey, a chief financial officer who took part in the survey.

CGMA’s survey also found that chief executives are worried about the quality of data and analytics they receive on human capital, with as many as 88% not feeling confident about the metrics available in that area. 

“It is clear from our research that many companies are falling short of their potential because they lack thorough, relevant information about their people to support effective strategy, hiring and training decisions,” AICPA senior vice president Arleen Thomas commented.

The survey also underscores the difficulty in understanding the cost and value of losing and replacing talent within a corporate environment.

According to CGMA, 87% and 83% of chief executives and chief financial executives respectively said that the information is too difficult to obtain in this regard.

“It is vital that organisations embed a robust human capital strategy within the wider business plan and develop appropriate metrics and key performance indicators that are subject to the same level of scrutiny as financial data,” CIMA chief executive Charles Tilley said.

According to Tilley, professionals who train to become CGMAs are able to reconcile financial facts and non-financial information in an objective and independent way. 

Tilley added that CGMAs can help organisations create closer collaboration at the executive and operational levels and in particular between finance and human resources divisions.

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