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Chapter 01: Introduction
Human capital reporting (HCR) has received considerable academic and practitioner attention
across the globe recently. There has been an increasing consciousness that workforces are
considered not only as a vital resource for a business but also a key basis of competitive
advantage in todays changing business environment. As a result, substantial investments
towards upgrading stocks of Human Capital are evident among firms that believe human
resources are their most valuable assets. Studies argue that skilled employees, employees
knowledge and spirit, leadership quality, etc. facilitate the improvement of company
performance (Stewart, 1994; Bozzolan et al., 2003; Bontis, 2003). Similarly, Bontis et al.
(2001) opined that Human Capital representing the collective knowledge stock of an
organization provides a sound base for enjoying competitive advantages over others.
Nevertheless, Human Capital information has traditionally only been reported internally by
organizations. This is because there have been no disclosure related standards by which such
information might be reported in their annual reports. In todays knowledge based economy,
researchers endeavor to identify means of viewing corporate performance more
comprehensively, including establishing a common framework for describing and representing
intangibles in a reliable manner (Brooking, 1996; Low et al., 1999; Stewart,1994; Petrash,
1996). Many companies in the Bangladesh and developed countries are presenting the
information relating human capital in the annual report as a part of narrative reporting.
Abeysekera and Guthrie (2004) argue that the need for firms to be able to effectively manage,
measure, and report on intangible assets has been reinforced with the development of a number
of measurement instruments. Prior research studies (Buckowitz and Petrash, 1997; Flamholtz
and Main, 1999; Stittle, 2004; Creelman, 2006) evidence that different firms such as the
Skandia Group, the Canadian Imperial Bank of Commerce, Hughes Space and
Communications, Dow Chemicals, Buckman Laboratories International, and Chartered
Institute of Personnel and Development(CIPD) have incorporated the measurement of Human
Capital (among other intellectual capital (IC) measurements) into their both types of internal
and external reports and strategic management issues in the past decades.
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1.1 Origin of the report
The report was originated to make a study on Human capital reporting practices by listed
companies in Bangladesh as a part of the fulfillment of internship program required for the
completion of the Master of Business Administration (MBA) program of the Department ofAccounting & Information Systems of the Faculty of Business Studies of University of Dhaka.
This internship report was prepared under the supervision of Sadia Afroze, Associate Professor,
Department of Accounting & Information Systems, Faculty of Business Studies, University of
Dhaka.
1.2 Scope of the study
This paper has tried to present the picture and extent of human capital reporting practices of
listed Bangladeshi companies. To present this picture, studied on the annual report of differentcompanies in different industries in 2011and in annual report only the human capital related
disclosures were the scope of study.
1.3 Objective of the study
The purpose of this paper is to examine the extent of human capital reporting practices by listed
companies in Bangladesh. In this paper other objectives to examine the extent of human capital
reporting practices are as follows:
To examine the extent of industry wise human capital reporting practices. To examine the major location in the annual report for disclosure of human resources by
different companies.
To examine how many words the companies using to disclose the human capital relatedinformation and industry wise condition.
Actually, throughout the study this paper will try give a brief description of the human capital
reporting extent by the listed companies in Bangladesh.
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1.4 Methodology of the study
The main objective of the study is to find out the extent of human capital reporting by the listed
Bangladeshi companies. To fulfill the objective of the study Guthrie framework for the
disclosure of human capital related information in the annual report has been used. The reason
behind the using of Guthrie framework is that it is well accepted to the researchers and very
much relevant to this study though there is no generally accepted framework in this case.
Because of the nature of the study it is a descriptive research. Secondary sources of data have
been used for the study. The detailed methodology for the fulfillment of the objectives is as
follows:
1.4.1 Collection of data
The data collected for the purpose of the study involves the examination of annual reports of
different companies of different industries in 2011. For the purpose of the collection of data has
the official website of different companies and the annual report have been used. Using a check
list prepared under the framework of Guthrie for human capital reporting, the relevant
information regarding human capital disclosure of different companies has been collected.
1.4.2 Presentation of data
After collecting the data using the check list, the information and extent of human capital
reporting of different companies by sector or industry wise has been presented. To represent the
information sector wise, different tables and charts for making information easily
understandable to the readers have been used.
Three-point scale of disclosure
To present the collected information regarding the human capital reporting and to analyze the quality of
disclosure, the three point scale has been used. The scale is as follows (Norhayati Mat Husin et el
,2009):
0 Information not disclosed.
1 Obscure i.e. the disclosed information was discussed in limited reference or whilstdiscussing other topics.
2 Descriptive i.e. the disclosed item was discussed (not with other topics) using sentences.
3 Quantitative/monetary/visual image and descriptive i.e. the disclosure item is clearlydefined using sentences and supported with either quantitative/monetary or visual images.
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1.4.3 Ranking of Sectors
In case of ranking the different sectors Geometric Mean (GM) has been used because the GM
gives good answer in case of percentage. Firstly, GM has been calculated by sector wise then
ranked the different sectors on the basis of the higher GM. Throughout this rank we will be able
to know about the high performing sectors for human capital disclosure practices.
1.4.4 Sample size
In this paper, 123 listed companies of Dhaka stock exchange have been selected. In case of
selection of companies of different industries judgment has been used and tried to select the
large and small companies on the basis of market capitalization to show actual picture and
extent of human capital reporting practices in Bangladesh. It has been believed that, because of
the way of sample selection the possibility sampling error will minimize. The list of selected
sample companies in different industries has been presented in the Appendix 01.
The summary of the sample table is as follows:
Sl. Industry Total company Sampled company Percentage of total
company
1 Bank 30 16 53
2 Non Bank Financial
Institutions(NBFI)
22 12 55
3 Engineering 21 11 52
4 Food & Allied 14 7 50
5 Fuel & Power 12 7 58
6 Jute 2 2 100
7 Textile 25 13 52
8 Pharmaceutical &Chemical
17 11 65
9 Service 4 4 100
10 Tannery 4 4 100
11 Ceramic 4 4 100
12 Cement 6 4 67
13 IT 6 4 6714 Insurance 43 16 37
15 Telecom 2 2 100
16 Travel & Leisure 2 2 100
17 Miscellaneous 8 4 50
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1.4.5 Content analysis
For coding HC disclosures, the content analysis of annual reports method has been used. In this
paper Guthrie framework of human capital disclosure for content analysis has been used.
Guthrie framework for human capital disclosure is as follows:
No. HC Contents Illustration1 Employee training It includes e.g. training policies, description of programs,
time, number of employees trained per period, and trainingresults.
2 Education Educational background of employees3 Lists of training and
employees participationDetailed lists of training and participants of the employeesfor the respective training.
4 Number of employees Employee count of a company5 Employee
compensation plan andbenefits
Types of employee compensation plan and benefits used bythe company.
6 Employee Motivation Information on companys policies to motivate employeesand evidence on the implementation of those policies. Thisincludes reward (internal) and incentive scheme e.g.employee explicit recognition.
7 Employee involvementin the communityactivities
Employee social competence that can be reflected by their
involvement with community or their contribution to the
environment8 Establishment of own
training instituteDisclosure of establishment of own training institution forthe employees.
9 Employee attitudestowards company
Information on employees attitudes towards their workingenvironment. Relevant disclosures could be employeecommitment to the organization.
10 Employees safety andhealth
Companies activities for securing the health and safety of theemployees.
11 Entrepreneurial spirit It refers to companies effort in developing employeesentrepreneurial skills
12 Rate of staff turnover Rate of employee turnover by different years.13 Employees opportunity
for job rotationDetails of employees opportunities for job rotation and jobrotation policies.
14 Employee skill and
competence
Knowledge, skills, experiences and competences of
employees for the job.15 HC statistics (i.e. interms of profitabilityper employee, sales peremployee
Information regarding the profitability per employee, salesper employee.
16 Career developmentand opportunities
Companies policy for the career development opportunitiesfor the employees.
17 Employee equality Information on equal treatment of employees irrespective ofsocial and cultural differences. Relevant information
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includes policy on employee equality and evidence ofenforcement.
18 Employee value Information related to the employee value to the companies.19 Employees recruitment
policiesCompanies policy for the recruitment of a employees.
20 Employee leadership Information regarding to the employee leadership.
1.4.6 Word Count
To find out words used by the different companies in different sectors the general word count
procedure has been followed. In case of counting the words the preposition and articles have
been omitted. Other approaches such as line count, sentences count and proportion of pages are
also widely adopted in different studies (Guthrie and Parker, 1989; Trotman and Bradley, 1981;
Hackston and Milne, 1996; Abeysekera and Guthrie, 2005). However, the use of words and/or
sentences seems to be preferred by most researchers. This study considers word count as the
unit of analysis.
By the outcome of the word counting procedure we will be able to learn about the how
different companies giving importance on the human capital disclosure.
1.5 Limitation of the study
This study has gone through sampling basis, so the sampling itself has a risk to represent fair
information and researcher has taken Guthrie framework only for the content analysis.
Furthermore, companies listed on the Chittagong Stock Exchange or indeed some unlisted
firms in Bangladesh, e.g. Unilever Bangladesh, might report HC items, but have been omitted
from the study. The study was limited only to the investigation of companies annual reports.
Sample firms might report HC-related information using other disclosures means such as the
print and broadcast media, brochures, and newsletters. Finally, the findings of the study must
be interpreted within the sample size.
1.6 Further scope of research
This study has tried to find out the extent of the human capital reporting practices of different
listed Bangladeshi companies. Obviously there is a further research scope on this topics. This
paper just has tried to examine the extent of human resources reporting practices after finding
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out that researcher may link it to the stock prices of the high performing companies. Researcher
may go for comparative analysis of different years. The study has provided an insight into HC
reporting practices across a range of business sectors in a developing country i.e. Bangladesh. It
should catalyze further research that seeks to compare and contrast these results with the
business sectors of other developing or developed countries. Future research endeavor can also
be directed at exploring why companies pursue HC reporting in Bangladesh, possibly using
case or field study research designs.
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Chapter 02: Literature Review
2.1 Human capital reporting
Human capital reporting has been largely a matter of voluntary initiative. It has been a cyclical
and fashion driven issue with very little required by the companys legislation to be reported in
the companys annual report.
Our present reporting framework does not make any provision regarding the reporting of
human capital as a part of financial reporting and even the provisions for the operating and
financial review did not guarantee that information about employee relations would feature in a
companys narrative qualitative report. Indeed this fact has been the subject of negative
criticism by a number of commentators who argue that employee matters could not be
considered as immaterial to an understanding of the companys position and future prospects.
2.2 Definition of human capital
While various terminology in relation to Human Capital have been used in the literature, for
example, human assets (Likert, 1967), human resources (Brummet et al., 1968; Heckmian
and Jones, 1967), cultural capital (Thompson, 1998), worth of employees (Roslender and
Dyson, 1992), and Human Capital (Liebowitz and Wright,1999).
Now one of the first issues of controversy in human capital reporting is the definition of human
capital. The lack of a settled definition perhaps contributes to the failure to develop this aspect
of corporate disclosure.
Wells (1999) adopts and refines an OECD definition and provides the following definition of
human capital: the knowledge, skills, competencies and other attributes embodied in
individuals or groups of individuals acquired during their life and used to produce goods,
services or ideas in market circumstances.
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Abeysekera and Guthrie (2004) define HC as:
Combination of factors possessed by individuals and the collective workforce of a firm which
also encompass knowledge, skills and technical ability; personal traits such as intelligence,
energy, attitude, reliability, commitment; ability to learn, including aptitude, imagination and
creativity; desire to share information, participate in a team and focus on the goals of the
organization.
In the 2003 Accounting for People Consultation Paper human capital was defined as the
relevant knowledge, skills, experience and learning capacity of the people available to the
organization.
Stiles and Kulvisaechana(2003) argue that human capital is broader than human resources.
Human capital emphasizes collective knowledge but also the individuals must commit or
engage with the organization if effective utilization of human capital is to happen. Thus, from
their perspective, a company requires social capital and organizational (structural) capital as
well as human capital. These three forms contribute to intellectual capital.
For human capital to be of practical value it requires a commitment to use it in such a way that
enhances the companys reputation and ultimately that benefits the company in the long term.
A company also needs to have a clear human capital management policy in operation in order
to benefit from that human capital. Reporting on human capital is a necessary aspect of human
capital management since the process of collecting and presenting information enables
managers to assess the contribution of their employees and others to the companys success.
2.3 Origin of the term human capital
A. W. Lewis is said to have begun the field of Economic Development and consequently the
idea of human capital when he wrote in 1954 the "Economic Development with Unlimited
Supplies of Labor." The term "human capital" was not used due to its negative undertones until
it was first discussed by Arthur Cecil Pigou "There is such a thing as investment in humancapital as well as investment in material capital. So soon as this is recognized, the distinction
between economy in consumption and economy in investment becomes blurred. For, up to a
point, consumption is investment in personal productive capacity. This is especially important
in connection with children: to reduce unduly expenditure on their consumption may greatly
lower their efficiency in after-life. Even for adults, after we have descended a certain distance
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along the scale of wealth, so that we are beyond the region of luxuries and "unnecessary"
comforts, a check to personal consumption is also a check to investment.
The use of the term in the modern neoclassical economic literature dates back to Miners article
"Investment in Human Capital and Personal Income Distribution" in The Journal of PoliticalEconomy in 1958. Then T.W. Schultz who is also contributed to the development of the subject
matter. The best-known application of the idea of "human capital" in economics is that of
Mincer and Gary Beckerof the "Chicago School" of economics. Becker's book entitledHuman
Capital, published in 1964, became a standard reference for many years. In this view, human
capital is similar to "physical means of production", e.g., factories and machines: one can invest
in human capital (via education, training, medical treatment) and one's outputs depend partly on
the rate of return on the human capital one owns. Thus, human capital is a means of production,
into which additional investment yields additional output. Human capital is substitutable, but
not transferable like land, labor, or fixed capital.
2.4 Main approaches to reporting on human capital
Clear cut demarcations between different approaches cannot be done, since most approaches
tend to be overlapping. Nevertheless, even a primitive division of main approaches, as provided
in the table does provide an indication of the gradual shift of orient:
Approach Calculating costs ofpersonnel policies
Human capitalaccounting
human capitalmanagement
Strategicmanagement
Period oforigin
mid 1960s early 1960s late 1970s early 1990s
Characteristic Financial utility ofpersonnel selection
Financial value ofenterprises human
capital
Learning anddissemination of
knowledge asinternal
managementstrategy
The combination offinancial indicators,
human capital,internal
business processes,customer relationsandinnovation
Methodsapplied
Utility analysis - human resource
accounting,- human resourcecosting and
accounting
- the learning
organisation,- knowledgemanagement
the balanced
scorecard
http://en.wikipedia.org/wiki/Neoclassical_economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Gary_Beckerhttp://en.wikipedia.org/wiki/Chicago_school_(economics)http://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Rate_of_return_on_investmenthttp://en.wikipedia.org/wiki/Means_of_productionhttp://en.wikipedia.org/wiki/Means_of_productionhttp://en.wikipedia.org/wiki/Rate_of_return_on_investmenthttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Chicago_school_(economics)http://en.wikipedia.org/wiki/Gary_Beckerhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Neoclassical_economics -
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ReportingFramework
Cost and benefit
calculations
Financial statements non-financial
statements (ifany)
Generic
performancemeasurements
2.5 The potential benefits of human capital reporting
Several studies show a positive link between human capital, competitiveness and performance
and shareholder value. For example, the Chartered Institute of Personnel Development research
suggests that the quality of people management is a better predictor of performance than
business strategy, research and development or quality management. Successful firms are more
likely to focus on employee measurement recognizing that workers feelings about their jobs
and companies impact on their performance and the companies performance.
As there is a significant amount of evidence to suggest a link between human capital and a
companys financial performance this gives rise to an argument for reporting on human capital
management practices. For example, according to the Accounting for People Report:
For most organizations the link between HCM policies and practices and performance is
sufficiently central to be a material factor whose disclosure might reasonably be expected to
influence assessments of their value and effective stewardship by management. In such cases
disclosure increases the value of financial reports and will be important for the effective
operation of capital markets . . . More generally, people are looking for reports that
demonstrate to other stakeholders (such as customers, suppliers, employees and regulators)
that the organization is focusing on all the drivers of value.
The report of the Taskforce suggests that there are a number of benefits in reporting on human
capital. Reporting on human capital management helps employees and prospective employees
to understand their contribution to overall performance and how they are valued. This improves
the organizations ability to attract, motivate and retain the people they need.
High quality reporting on human capital management will, according to the Taskforce, assist
investors seeking long-term performance.
Other benefits considered to result from external reporting on human capital management
include demonstration of commitment to diversity and inclusiveness, health and safety and
respect for employees, achievement of buy-in and support from senior level; improvement of
stakeholder confidence; provision of internal benchmarks on which to improve year
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to year; facilitation of prioritizing of resources and efforts to improve performance. Human
capital reporting can also improve communications for a company, especially in situations in
which there is uncertainty about a companys performance or about its future performance. The
companys expressed attitude towards its employee contribution and how it values its
employees may provide others with a deeper insight into the character of the company.
Indeed, external reporting of human capital may improve accounting standards and company
valuation and thereby make possible better decision-making by senior managers, investors,
analysts and other organizational stakeholders.
In short, the main reasons for companies introducing human capital reports are to attract
investors; to establish an internal information system on human resource issues; to pursue a
cost-benefit analysis of investments in human resources; and to improve human resource
management. They also seek to build the companys image and indicate their social
responsibility and ethical values to the outside world in order to attract and retain customers
and qualified employees.
2.6 Limitation of human capital reporting
Despite the potential benefits of human capital reporting it is easy to idealize and overstate
them. Currently, the return side of human capital is not easily measured and so companies are
left with benchmarking which is not an exact science and tends to concentrate on the
investments and processes and indirect measures rather than on the direct gains arising from
human capital.
A number of obstacles stand in the way of effective human capital reporting. First, the
information may be commercially sensitive because it could reveal a competitive advantage.
Other sensitivities include the potential reaction of employees and trade unions to information
disseminated in the reports. Secondly, the costs involved in human capital reporting may
outweigh the benefits and thereby reduce the incentive to engage in this reporting process.
Thirdly, lack of guidance, for example with regard to measures and comparators make the task
of human capital reporting more difficult, in particular in transnational or group companies
where there may be different human resources demands and priorities. Fourthly, human capital
reports rarely provide a full picture of the human capital dimensions in the company.
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This lack of completeness makes human capital reports difficult to use in terms of evaluating
the companys performance. Fifthly, human capital reporting tends to have a low status with
little support from senior management.
The lack of meaningful measures to communicate the value of a companys human capital in
the marketplace is clearly an obstacle to effective reporting. Even though the Centre for
Excellence in Management and Leadership Report offered some possible measures that may be
helpful, including morale, motivation, investment, long-term development, external perception,
it recognized that the problem with this menu approach is that it does not allow for
comparability either at a sector or economy level.
These obstacles might create the impression that a meaningful practice of human capital
reporting cannot be achieved.
Summary of Barriers on HCR Accounting barriers:
No requirement under Generally Accepted Accounting Practices (GAAP) No official standard or framework Human capital is not included in the valuation of a business
Other barriers: HR data often collected for administrative and labor compliance rather than
evaluation purposes Disclosure can be competitively sensitive Resistance to change Human capital reporting it is easy to idealize and overstate them.
2.7 Human capital reporting framework
Four fundamental principles for the human capital measurement and reporting
4 Principles
Human capital should be viewed as a bridging concept linking business strategy andHR practices.
It is a precarious assetthe potential mobility of individual employees could and canundermine an organization's ability to deliver.
It is a paradoxical asset the qualities that individuals bring, notably flexibility,mobility and personal commitment, the very same factors that create competitive value,
are some of the most difficult to measure.
Human capital measurement is context-dependent.
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2.7.1 Chartered Institute of Personnel and Development (CIPD) guideline for the human
capital measurement and reporting
The purpose of this Guide is to help organizations move forward with their internal HC
measurement and reporting, by providing practical information and setting out a clear process
to follow. This process has five key stages, and each section of the Guide will cover each of
these stages in turn.
Step 1Setting human capital management in context
This section defines what HC is and its links to the business strategy, and provides an overview
of the frameworks and models necessary HCM and measurement.
The most commonly used models and frameworks for HCM are:
1. The human resource benchmarking model2. The balanced scorecard3. The Human Capital Monitor4. The Human Capital Index5. The engagement model6. The organizational performance model.
Checklist Define human capital management in the organization. Articulate a human capital strategy to support your business objectives. Produce a human capital plan. Select a human capital management and measurement work to demonstrate the links
between people and performance
Step 2Getting started: gathering and collating the data
Gathering and collating human capital data requires an understanding of type, analysis and use.
Once the relevant data have been identified, you can build a measurement platform and start to
interpret the information, then you'll be ready to demonstrate the connection between human
capital management practices and business objectives and performance. This step Includes:
1. Gather the right facts2. Assess the data sources and information systems3. Identify and collect the relevant data
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4. Build the human capital measurement databaseStep 3Measuring human capital: tools and methodologies
This section presents the spectrum of measurement techniques for HC, introduces statistical
methodologies which can be deployed to leverage the measurement platform, shows how to
communicate results internally and select key metrics to guide human capital decisions.
Checklist
Identify the measurement technique to apply to the human capital analysis. Formulate and test hypotheses by establishing causality Interpret the analysis and communicate the results Monitor and report the key metrics
Step 4Reporting the data: from internal to external reporting
This section is related to the reporting guideline for external reporting requirements. What kind
of information investors are expecting, and propose a framework for external reporting are the
key consideration of this steps.
What kind of Information are Investors Expecting?
The profile of the workforce and its diversity Senior executive remuneration The quality of leadership and management strength Evidence of a coherent, robust people strategy which is mapped to the stated business
strategy for the next three years Evidence that current people management practices are affecting organizational and
business performance Current and forecasted returns on people investments The valuation of current human capital assets and future investments
Step 5Developing a route map to human capital reporting
This final step covers developing your own route map, identifying who in your organization
should be involved, determining stakeholders expectations, and embarking on the human
capital measurement journey.
Checklists
Identify who should be involved in the human capital team. Review your current position in the capital management Journey and plan what isrequired for you to move to the next stage. Review the Guide, take each step, and tick off all the checklist's items. Embark on the journey to HC measurement and reporting
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2.7.2 Seven Steps to Making HR a Strategic Asset
This guideline has been given by Kaplan and David P. Norton through the article Having
Trouble with Your Strategy? Then Map It on Harvard Business Review. The brief discussion
on this guideline is as follows:
Step 1: Clearly Define Business Strategy
Our focus on implementation assumes that a consensus strategy exists and that it can be clearly
described and communicated to the entire organization.
Step 2: Build a Business Case for Why and How HR Matters for Strategy Implementation
HR will only become a strategic asset when both line managers and HR professionals assume a
shared responsibility for implementing strategy. For this to happen, both parties need to have a
common understanding that HRs strategic value is linked to the extent to which it directly
contributes to better strategy execution.
Step 3: Build a Strategy Map Describing the Causal Flow of Strategy Implementation
A strategy map takes what tends to be an externally focused vision in Step 1 and links it to an
internal roadmap that show(s) how an organization plans to convert various assets into desired
outcomes. It is an essential part of managing HR as a strategic asset because it provides the
basis of aligning the HR Architecture with the firms strategic drivers. It provides the
organizational logic that transforms HR from a transaction and operationally oriented function
to an organizational asset with strategic impact.
Step 4. Link HR Architecture to Strategy Map
This may be the most important step in transforming HR to a strategic asset. The term HR
Deliverable is just a short-hand term for the outcomes of the HR Architecture that directly drive
successful strategy implementation. The question is where in the HR Architecture to locate the
HR Deliverables? Should we focus on employee performance and behaviors, or the drivers of
those behaviors? We believe those HR Deliverables should focus on employee performance
behaviors because they most directly influence the strategic goals of line managers.
Step 5: Design HR System in Alignment with HR Deliverables
The strategic behaviors in the Organization (HR Deliverables) are driven by competencies,
motivation, work structure, strategic focus, etc. Therefore, the HR system (recruiting, selection,
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compensation, rewards, career development, etc,) must be focused on those behavioral drivers.
The result is an HR system that is both externally aligned with the requirements of the strategy
map, and internally aligned among the various elements of the system.
Step 6: Design HR Strategic Measurement System (The HR Scorecard)
Steps 1-5 lay the foundation for managing HR as a strategic asset. Next the organization will
need a measurement system that will not only guide that management process, but also validate
HRs contribution to firm performance. We use the term HR Scorecard because it is designed
to extend the concepts of the Balanced Scorecard to an organizational asset, in this case the HR
Architecture. In other words, based on Steps 1-4 above, there is a very clear logic that links the
strategic results for the HR Architecture with the ultimate financial success of the organization.
Step 7: Implement Management by Measurement
Managing HR as a strategic asset will be a significant change initiative for most organizations.
It will require a new perspective on HR, as well as acceptance this new role, by both line
managers and HR professionals. Senior line managers need to understand that if the
organization is going to reap the benefits making people our most important asset,
implementation of the HR Scorecard needs to be approached as a major change initiative.
Ultimately the success of this initiative will turn on whether the people in the organization who
are charged with implementing the firms strategy, understand the logic of the strategys
execution, and their role in that logic.
2.7.3 Other models on human capital are as follows
Investment in people model by UK researchers. Guideline for Intellectual Capital StatementsA Key to Knowledge Management by
Danish researchers.
Guidelines for the Management and Disclosure of Information on Intangiblesotherwise known as the MERITUM model by Spain researchers.
2.8 Guideline for effective reporting on human capital
Information should be neutral, free from bias, dealing with good and bad aspects Content must be relevant, reliable consistent and complete
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Use comparatives / historic data and basic accounting concepts such as matching andthe consistency concepts
Measurements disclose source, assumptions and benchmark data Should be audited
2.9 International practices on reporting of human capital: A case of Kelly Group
Kelly Group is in the business of providing people management solutions that add value to
every link in the human capital management chain.
While the group already offers the full spectrum of staffing services ranging from permanent
and temporary staffing, vendor management and managed services to learner ships deploymentand payroll and compliance services it is always re-inventing itself to meet the needs of the
changing world of work.
Through the provision of new and innovative solutions, developed as a result of over 40 years'
experience of managing divergent and multiple workforces within many different
environments, the group seeks to help clients improve productivity and reduce costs.
With a nationwide network of more than 75 offices and a database of hundreds of thousands ofcandidates, the Kelly Group is South Africas leading service provider in the employment
industry.
2.9.1 People Value Statements: delivering on the brands promise
Kelly Group in the annual report presented People value statement to measure the
effectiveness, attitude and efficiencies of its people so that stakeholders can see the value of
their people as a sustainable business asset. In the people value statement they described the
following issues:
o Staff complemento Staff turnovero Length of service (retention of corporate memory)o Absenteeismo Demographics
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age / generational aspects / gendero Employment equityo Intellectual capital data baseo Skills development / leadership development initiativeso Employee assistance programs / wellness initiativeso
Employee relationship index critical improvement issues, loyalty analysis and commitment index
2.9.2 Customer Satisfaction Index (CSI)
In the customer satisfaction index Kelly group presented the survey result of different years
customers satisfaction that is measured independently. This represent the brand promising to
the customers.
2.9.3 Employee Loyalty Analysis
In case of employee loyalty analysis Kelley group analyzed their customer loyalty by the
independent surveyor firm. Through the graph they showed their truly loyal customers and
other types of customer.
2.9.4 Calculating the value of your human capital
The Kelly Group has devised a simple formula to value its people:
(current monthly salary / 1 000) x (average training days per year of service)x (average cost
to company per training day) x ((100age)/age)
According to this formula the intellectual capital within the group is approximately R2.08
billion (2008); R1.73 billion (2007)
2.10 International Accounting Standard(IAS) 38
2.10.1 Objective of IAS 38
The objective of IAS 38 is to prescribe the accounting treatment for intangible assets. The
principal issues are the timing of recognition of assets, the determination of their carrying
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amounts, the amortization charges to be recognized and specific disclosures about intangible
assets.
2.10.2 Definition of Intangible Asset
An intangible asset is an identifiable non-monetary asset without physical substance Theasset must be:
(a) controlled by the entity as a result of events in the past, and
(b) something from which the entity expects future economic benefits to flow.
2.10.3 Three criterias for Intangible asset are
1. Identifiability2. Control3. Future economic benefit
An asset will be indefinable when
a) sold, transferred, licensed, rented, exchanged either individually or together with arelated contract
b) arises from contractual or legal right2.11 Bangladesh and HC research: a brief overview
While predominantly an agriculturally driven economy, the manufacturing and services sectors
contribute increasingly to the growth rate of gross domestic product in Bangladesh. At the same
time, the countrys economic growth is accelerating via the continued increase in exports and
the inflow of remittances in recent years (Ahmad and Khanal, 2007). In the past years, the
economy of Bangladesh was particularly dependent on the export of ready-made garments and
other knitwear industries; since the mid-1990s, more than 70 per cent of Bangladeshs exports
were ready-made garments and leathers products in where most of these products are matured
products with relatively low value-added. The availability of abundant cheap labor provides
Bangladeshi firms with a competitive advantage compared with other Asian countries such as
Malaysia, Vietnam, China, and India. However, except in the garments sector, which requires
less mechanical and management skills, the country experiences the deficiency of skilled
manpower both in technical and management areas. As a result, different institutions have been
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set up to develop skilled manpower for the sake of filling the gap in the skilled industrial and
other sectors workforce (Ahmed and Kabir, 1995). On the other hand, IC/HC results in the
creation of high value-added in production. Thus, it can provide Bangladeshi firms a
competitive advantage to be successful in the knowledge-based global economy.
In Bangladesh, while there are a number of empirical studies of the issues of corporate social
responsibility (CSR) reporting, together with a few others on IC reporting practices (Belal,
1997; Imam, 2000; Khan et al., 2009; Ali et al., 2008), practically, no research has yet been
carried out to observe the status of HC reporting under the framework of IC in different
business sector. A study conducted by Ali et al. (2008) on IC reporting practices of selected
firms in Bangladesh using content analysis revealed that companies report very few IC items,
including information on HC. Khan and Ali (2010)s study on Bangladeshi commercial banks
IC disclosures report the similar findings. A much older study conducted by Bala and Habib
(1988) found that separate financial reporting to employees is not mandatory in Bangladesh and
thereby organizations disclosed only mandatory types of employee-related information, such as
employee salaries and remuneration, provident fund, gratuity fund, welfare fund, festival
bonuses, and other cash incentives based on employees annual performance, in accordance with
the provision of Bangladesh Accounting Standard-19 employees benefits and the first
schedule of The Income Tax Ordinance (1984) (Bala and Habib, 1988). Hossain et al. (2004)
also report that their sample of companies made few disclosures on HC information. However,
their study fails to investigate human resources disclosures under the framework of IC or lacks
of applying content-based analysis.
Overall, these studies fail to address the wide range of HC reporting-related items. For
example, while Hossain et al. (2004) consider 12 items to examine HC information, Ali et al.
(2008) and Khan and Ali (2010) focus on only six items. The present paper thus differs from
these studies in that it delineates a broader scope of HC information. Specifically, the study
addresses additional HC information such as rate of staff turnover, employees involvement in
the community activities, employees value, the establishment of own training provision,
employee health and safety, opportunities for job rotation, employee leadership, and HC
statistics. Similar to the literature and Bangladesh-related social reporting studies, as a whole,
reflecting on these elements in this study, it is taken as an imperative to outline the complete
human resources information for a firm (Khan et al., 2009; Khan, 2010).
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2.12 Geometric Mean(GM)
In mathematics, the geometric mean is a type ofmean oraverage, which indicates the central
tendency or typical value of a set of numbers.
The Geometric Mean is useful in finding the average change of percentages, ratios, indexes, or
growth rates over time. It has a wide application in business and economics because we are
often interested in finding the percentage changes in sales, salaries, or economic figures, such
as the GDP, which compound or build on each other. The geometric mean will always be less
than or equal to the arithmetic mean. The geometric mean of a set of n positive numbers is
defined as the n to root of the product of n values.
Formula
if the numbers are , the geometric mean satisfies
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Chapter 03: Findings and Analysis
3.1 State of Human Capital Reporting
Human Capital(HC) related items reported by the sample of listed companies in Bangladesh are
shown in Table 1. The result indicates that the disclosure practices of listed companies in
Bangladesh in relation to HC items are not as low as projected in relation to the total list of
items. Majority of the sample firms reported more information on such items as details of
employee training, numbers of employees, education of top employees, employee
compensation plan and benefits, employee skill and competence and employee recruitment
policies. Accordingly, it becomes evident that leading Bangladeshi firms devote a significant
amount of resource into training their personnel to be familiar with work-related skills.
Throughout the study it has been found that total 83 sampled companies irrespective of industry
reported the number of employees, so it is evident that it is the most common component for
reporting on human resources. Moreover, employee leadership, employees opportunities for job
rotation, entrepreneurial spirit and HC related statistics are very much infrequent items or
component for reporting on human resources in the annual report by the listed companies in
Bangladesh, because only two or three companies reported this items in the annual report. The
majority of the high quality reporting e.g. scored 3 was educational qualification of the top
level employees. Most of the companies have given the details educational background of the
top level employees e.g. board of directors or executive employees. In case of employee
training most of the sampled companies disclosed this component and some companies
disclosed the detailed list of the training with the participants list. But the concerning fact is
that majority of the sampled companies are disclosing obscurely e.g. scored 1. For example, in
case of employee training 38 companies(62% out of total frequency) disclosed the items
obscurely or with other topics, 11 companies(18%) disclosed separately and only 12companies(20%) disclosed quantitatively or with visual evidence. So frequency of reporting is
not much lower but the quality of the reporting is not up to the mark.
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The summary of the result has been listed below:
HC Items 0 1 2 3 Frequency
of disclosed
Employee training 62 38 11 12 61
Education 52 33 22 16 71Lists of training and employees
participation99 7 8 9 24
Number of employees 40 20 56 7 83
Employee compensation plan and benefits 54 38 27 4 69
Employee Motivation 65 38 17 3 58
Employee involvement in the communityactivities
113 7 1 2 10
Establishment of own training institute 105 10 6 2 18
Employee attitudes towards company 99 19 4 1 24
Employees safety and health 88 25 9 1 35
Entrepreneurial spirit 120 3 0 0 3
Rate of staff turnover 117 5 1 0 6Employee skill and competence 58 50 12 3 65
HC statistics (i.e. in terms of profitability
per employee, sales per employee
120 0 0 3 3
Career development and opportunities 84 33 5 1 39
Employee equality 96 24 3 2 29
Employee value 81 41 1 0 42
Employees recruitment policies 64 41 16 2 59
Employee leadership 121 1 1 0 2
Employees opportunity for job rotation 121 2 0 0 2
Table 1: Summary of the result on human capital reporting
3.2 Sector wise disclosure of human capital items
To understand the state of human capital disclosure by the listed companies in Bangladesh
clearly sector wise reporting condition has been designed. In case of sector wise disclosure
quality of reporting has been presented on the three point score e.g. 0,1,2,3 and percentage of
disclosed( on the basis of total sampled companies related to the sector) to examine the
popularity of component for reporting among the sampled companies.
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Bank(n=16)
In case of banking sector the disclosure on human capital is much better. Majority of the bank
reported the employee benefit and compensation plan, employee motivation, employee
training, lists of training and employee participation, number of employees, employee
recruitment polices components. The top disclosed items are the employee benefit &
compensation plan and employee motivation related information, so it is inferred that majority
of the bank gives the attractive benefit & compensation to the employee and reports it to the
annual report accordingly. Specially Prime bank, Eastern bank ltd and Dhaka bank disclosed
the extensive information regarding the human resources.
Eastern bank ltd in the annual report disclosed People first, that is the motto of EBL. We are
the investor in people. Our people resourcing policy is, we look for the best fit. We do not offer
them a job rather we shape their career
Eastern bank reported the human resources in separate Human resource statement. Islami bank
analyzed their manpower age wise and other related information in detailed. Only Dhaka bank
and Trust bank addressed the employee leadership component out of 123 sampled companies.
Employees opportunity for job rotation and rate of employee turnover were not reported by the
any bank out of the sampled banks.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 2 4 4 6 14 88
Education 3 4 4 5 13 81
Lists of training and employeesparticipation
4 2 2 8 12 75
Number of employees 2 3 9 2 14 88
Employee compensation plan and benefits 1 4 10 1 15 94
Employee Motivation 1 9 5 1 15 94
Employee involvement in the communityactivities
13 3 0 0 3 19
Establishment of own training institute 6 5 3 2 10 63
Employee attitudes towards company 12 3 1 0 4 25
Employees safety and health 8 6 2 0 8 50
Entrepreneurial spirit 14 2 0 0 2 13
Rate of staff turnover 16 0 0 0 0 0
Employee skill and competence 5 7 4 0 11 69
HC statistics (i.e. in terms of profitability
per employee, sales per employee
13 0 0 3 3 19
Career development and opportunities 7 6 3 0 9 56
Employee equality 10 5 0 1 6 38
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Employee value 8 8 0 0 8 50
Employees recruitment policies 4 3 8 1 12 75
Employee leadership 14 1 1 0 2 13
Employees opportunity for job rotation 16 0 0 0 0 0
GM 32
Table 2: Summary of disclosure on human capital by banking sector
Pharmaceuticals & Chemical(n=11)
In Pharmaceuticals & Chemical companies reported the number of employees, employee
training, employee skill and competency and employee safety and health most but the
concerning fact is that the quality of the reporting on human resource is not up to the mark. For
example, in case of disclosure of employee skill and competence out of 11 companies 10
companies reported this component but 1 company(10% out of total sampled companies)
reported high quality or detailed information e.g. scaled 3. List of training and employees
participation, employee involvement in the community, entrepreneurial spirit, HC related
statistics, employee leadership and employee opportunity for job rotation, total 6 items, were
not reported by any companies.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 2 6 2 1 9 82
Education 4 4 1 2 7 64
Lists of training and employees participation 11 0 0 0 0 0
Number of employees 3 3 5 0 8 73
Employee compensation plan and benefits 5 4 2 0 6 55
Employee Motivation 9 2 0 0 2 18
Employee involvement in the community
activities
11 0 0 0 0 0
Establishment of own training institute 9 0 2 0 2 18
Employee attitudes towards company 8 3 0 0 3 27
Employees safety and health 6 3 1 1 5 45
Entrepreneurial spirit 11 0 0 0 0 0
Rate of staff turnover 11 0 0 0 0 0
Employee skill and competence 1 6 3 1 10 91
HC statistics (i.e. in terms of profitability per
employee, sales per employee
11 0 0 0 0 0
Career development and opportunities 10 1 0 0 1 9
Employee equality 9 2 0 0 2 18
Employee value 9 2 0 0 2 18
Employees recruitment policies 7 3 1 0 4 36
Employee leadership 11 0 0 0 0 0
Employees opportunity for job rotation 11 0 0 0 0 0
GM 10
Table 3: Summary of disclosure on human capital by pharmaceuticals sector
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Engineering(n=11)
In the Engineering sector, employee training, education, number of employees, employee skill
and employee recruitment policy were the frequent disclosure items for reporting on human
resources. Moreover, employee involvement in the community activities, HC statistics,
entrepreneurial spirit were not disclosed in the annual report by any sampled companies. Aftab
auto, Golden sons did not disclose any items relating to the human capital reporting. To
comment on the quality of reporting none of the companys disclosure for any items or
components were high quality disclosure e.g. scaled 3. So the quality of the human capital
reporting in this sector was not up to mark though they are reporting some items obscurely. The
detailed summary is as follows:
HC Items 0 1 2 3 Frequency ofdisclosed
Percentage ofdisclosed
Employee training 6 5 0 0 5 45
Education 5 4 2 0 6 55
Lists of training and employees participation 10 1 0 0 1 9
Number of employees 4 2 5 0 7 64
Employee compensation plan and benefits 7 3 1 0 4 36
Employee Motivation 7 3 1 0 4 36
Employee involvement in the community
activities
11 0 0 0 0 0
Establishment of own training institute 10 1 0 0 1 9
Employee attitudes towards company 7 4 0 0 4 36
Employees safety and health 10 1 0 0 1 9
Entrepreneurial spirit 11 0 0 0 0 0
Rate of staff turnover 10 1 0 0 1 9
Employee skill and competence 5 6 0 0 6 55
HC statistics (i.e. in terms of profitability peremployee, sales per employee
11 0 0 0 0 0
Career development and opportunities 9 2 0 0 2 18
Employee equality 9 2 0 0 2 18
Employee value 8 3 0 0 3 27
Employees recruitment policies 6 5 0 0 5 45
Employee leadership 11 0 0 0 0 0
Employees opportunity for job rotation 11 0 0 0 0 0
GM 11
Table 4: Summary of disclosure on human capital by engineering sector
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Non Bank Financial Institution(NBFI)[n=12]
In case of NBFI 12 out 12 companies disclosed the employee training, education, number of
employees, employee compensation plan and benefits and employee skill and competence
items. On the other hand employee leadership, entrepreneurial spirit and HC statistics were not
disclosed by any other companies. In case of quality of disclosure, the quality is not bad it is
much better because many companies disclosed the high quality reporting scaled on three.
Specially Uttara finance and Prime finance reported the human resources in the annual report
with separate human resource statement. Prime finances reporting quality was nice because
most of the disclosure component graded on scale 03. None of the company found which did
not disclosed any components. Every companies disclosed minimum 7 components out of 20
components. So the overall performance of NBFI for human resource reporting was
satisfactory.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 0 7 1 4 12 100
Education 0 2 7 3 12 100
Lists of training and employees
participation
9 0 0 3 3 25
Number of employees 0 2 7 3 12 100
Employee compensation plan and benefits 0 3 7 2 12 100
Employee Motivation 6 3 3 0 6 50
Employee involvement in the community
activities
10 0 1 1 2 17
Establishment of own training institute 10 2 0 0 2 17
Employee attitudes towards company 6 4 1 1 6 50
Employees safety and health 5 5 2 0 7 58
Entrepreneurial spirit 12 0 0 0 0 0
Rate of staff turnover 9 2 1 0 3 25
Employee skill and competence 0 9 1 2 12 100
HC statistics (i.e. in terms of profitability
per employee, sales per employee
12 0 0 0 0 0
Career development and opportunities 6 3 2 1 6 50
Employee equality 5 4 2 1 7 58
Employee value 4 7 1 0 8 67
Employees recruitment policies 1 7 3 1 11 92
Employee leadership 12 0 0 0 0 0
Employees opportunity for job rotation 10 2 0 0 2 17
GM 28
Table 5: Summary of disclosure on human capital by NBFI sector
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Fuel & Power(n=7)
Employee training, number of employees, educational background of top level executives,
employee recruitment policies, employee motivation were the highly frequent disclosed items
out of 20 items. Out of 7 sampled companies Borkatullah power company did not disclose any
items regarding human capital. Summit power and Mobile Jamuna Ltd reported more items of
HC but the quality of reporting were not high. None of the companies disclosed the employee
spirit, employee leadership, HC statistics, rate of staff turnover, employee opportunity for job
rotation related information.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 1 3 2 1 6 35
Education 1 6 0 0 6 35
Lists of training and employees participation 4 0 3 0 3 18
Number of employees 1 1 5 0 6 35
Employee compensation plan and benefits 3 3 0 1 4 24
Employee Motivation 4 2 0 1 3 18
Employee involvement in the community
activities
6 1 0 0 1 6
Establishment of own training institute 6 1 0 0 1 6
Employee attitudes towards company 5 0 2 0 2 12
Employees safety and health 5 2 0 0 2 12
Entrepreneurial spirit 7 0 0 0 0 0
Rate of staff turnover 7 0 0 0 0 0
Employee skill and competence 5 2 0 0 2 12
HC statistics (i.e. in terms of profitability peremployee, sales per employee
7 0 0 0 0 0
Career development and opportunities 6 1 0 0 1 6
Employee equality 7 0 0 0 0 0
Employee value 6 1 0 0 1 6
Employees recruitment policies 4 3 0 0 3 18
Employee leadership 7 0 0 0 0 0
Employees opportunity for job rotation 7 0 0 0 0 0
GM 6
Table 6: Summary of disclosure on human capital by Fuel & Power sector
Food & Allied(n=7)
Educational background of employees, employee skill and competences, number of employees
were the frequently disclosed HC items. Other hand lists of employee training, employee
involvement in the community, employee leadership, employee opportunity for job rotation
were not disclosed by any other sampled companies. Apex foods and Fu-Wang foods did not
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disclose anything about HC. But the other companies reporting were not quality full. Any
companies disclosure quality for any components of HC scored high quality e.g. scored on 3.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 6 1 0 0 1 14
Education 2 3 2 0 5 71
Lists of training and employees
participation
7 0 0 0 0 0
Number of employees 2 1 4 0 5 71
Employee compensation plan and benefits 5 2 0 0 2 29
Employee Motivation 5 2 0 0 2 29
Employee involvement in the community
activities
7 0 0 0 0 0
Establishment of own training institute 7 0 0 0 0 0
Employee attitudes towards company 6 1 0 0 1 14
Employees safety and health 5 2 0 0 2 29
Entrepreneurial spirit 7 0 0 0 0 0
Rate of staff turnover 6 1 0 0 1 14Employee skill and competence 2 5 0 0 5 71
HC statistics (i.e. in terms of profitabilityper employee, sales per employee
7 0 0 0 0 0
Career development and opportunities 3 4 0 0 4 57
Employee equality 6 1 0 0 1 14
Employee value 5 2 0 0 2 29
Employees recruitment policies 3 4 0 0 4 57
Employee leadership 7 0 0 0 0 0
Employees opportunity for job rotation 7 0 0 0 0 0
GM 9
Table 7: Summary of disclosure on human capital by Food sector
Jute(n=2)
In the Jute sector out of 2 companies every companies has been selected. Only Sonali Ash ltd
disclosed 1 items i.e. number of employees in the notes to the financial statements. So the
disclosure quality of this sector is not good at all.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 2 0 0 0 0 0
Education 2 0 0 0 0 0
Lists of training and employees participation 2 0 0 0 0 0
Number of employees 1 0 1 0 1 50
Employee compensation plan and benefits 2 0 0 0 0 0
Employee Motivation 2 0 0 0 0 0
Employee involvement in the communityactivities
2 0 0 0 0 0
Establishment of own training institute 2 0 0 0 0 0
Employee attitudes towards company 2 0 0 0 0 0
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Employees safety and health 2 0 0 0 0 0
Entrepreneurial spirit 2 0 0 0 0 0
Rate of staff turnover 2 0 0 0 0 0
Employee skill and competence 2 0 0 0 0 0
HC statistics (i.e. in terms of profitability peremployee, sales per employee
2 0 0 0 0 0
Career development and opportunities 2 0 0 0 0 0
Employee equality 2 0 0 0 0 0
Employee value 2 0 0 0 0 0
Employees recruitment policies 2 0 0 0 0 0
Employee leadership 2 0 0 0 0 0
Employees opportunity for job rotation 2 0 0 0 0 0
GM 1
Table 8: Summary of disclosure on human capital by Jute sector
Textile(n=13)
Employee compensation plan, employee motivation, employee safety and health were the
frequently disclosed items. On the other hand employee leadership, employee opportunity for
job rotation, HC statistics, rate of staff turnover did not disclosed by any other companies.
CMC Kamal textile, Envoy textile, All tex, Mallek textile did not disclose any thing regarding
HC. None of the companies quality of reporting were high. Generation next textile, Mithun
textile and Bex tex disclose the employee safety and health issue separately.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 10 2 1 0 3 23Education 9 1 3 0 4 31
Lists of training and employees participation 12 0 1 0 1 8
Number of employees 8 5 0 0 5 38
Employee compensation plan and benefits 8 2 3 0 5 38
Employee Motivation 9 2 2 0 4 31
Employee involvement in the community
activities
13 0 0 0 0 0
Establishment of own training institute 12 0 1 0 1 8
Employee attitudes towards company 13 0 0 0 0 0
Employees safety and health 8 2 3 0 5 38
Entrepreneurial spirit 12 1 0 0 1 8
Rate of staff turnover 13 0 0 0 0 0
Employee skill and competence 10 0 3 0 3 23
HC statistics (i.e. in terms of profitability peremployee, sales per employee
13 0 0 0 0 0
Career development and opportunities 9 4 0 0 4 31
Employee equality 9 4 0 0 4 31
Employee value 9 4 0 0 4 31
Employees recruitment policies 9 0 4 0 4 31
Employee leadership 13 0 0 0 0 0
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Employees opportunity for job rotation 13 0 0 0 0 0
GM 9
Table 9: Summary of disclosure on human capital by Textile sector
Service(n=4)
Out of four service companies all companies have been selected in this study. Somorita hospital
ltd did not disclose any thing about HC. Other companies reported average 4 or 5 items but
none of the items were graded high quality. Employee benefit plan, employee motivation,
educational background, number of employees were the frequently disclosed items.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage of
disclosed
Employee training 3 1 0 0 1 25
Education 2 1 1 0 2 50
Lists of training and employeesparticipation
4 0 0 0 0 0
Number of employees 2 0 2 0 2 50
Employee compensation plan and
benefits
2 2 0 0 2 50
Employee Motivation 2 2 0 0 2 50
Employee involvement in the communityactivities
3 1 0 0 1 25
Establishment of own training institute 4 0 0 0 0 0
Employee attitudes towards company 4 0 0 0 0 0
Employees safety and health 3 1 0 0 1 25
Entrepreneurial spirit 4 0 0 0 0 0
Rate of staff turnover 4 0 0 0 0 0
Employee skill and competence 3 1 0 0 1 25
HC statistics (i.e. in terms of profitability
per employee, sales per employee
4 0 0 0 0 0
Career development and opportunities 3 1 0 0 1 25
Employee equality 4 0 0 0 0 0
Employee value 3 1 0 0 1 25
Employees recruitment policies 2 2 0 0 2 50
Employee leadership 4 0 0 0 0 0
Employees opportunity for job rotation 4 0 0 0 0 0
GM 7
Table 10:Summary of disclosure on human capital by service sector
Tannery(n=4)
Every companies in this sector has been selected to examine the disclosure of HC. Educational
background, number of employees were the high frequent items for the reporting of HC. Out of
four legacy footwear and Samata footwear did not disclose any thing about HC. Apex footwear
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and Bata shoe companies disclosed some of the components but any component graded as high
quality.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 3 1 0 0 1 25
Education 2 1 1 0 2 50
Lists of training and employees participation 4 0 0 0 0 0
Number of employees 2 0 2 0 2 50
Employee compensation plan and benefits 3 1 0 0 1 25
Employee Motivation 3 1 0 0 1 25
Employee involvement in the community
activities
3 1 0 0 1 25
Establishment of own training institute 4 0 0 0 0 0
Employee attitudes towards company 4 0 0 0 0 0
Employees safety and health 4 0 0 0 0 0
Entrepreneurial spirit 4 0 0 0 0 0
Rate of staff turnover 4 0 0 0 0 0
Employee skill and competence 4 0 0 0 0 0
HC statistics (i.e. in terms of profitability per
employee, sales per employee
4 0 0 0 0 0
Career development and opportunities 3 1 0 0 1 25
Employee equality 4 0 0 0 0 0
Employee value 3 1 0 0 1 25
Employees recruitment policies 3 1 0 0 1 25
Employee leadership 4 0 0 0 0 0
Employees opportunity for job rotation 4 0 0 0 0 0
GM 5
Table 11:Summary of disclosure on human capital by Tannery sector
Ceramic(n=4)
Every companies in this industry has been selected for the study . Employee compensation plan
& benefit, employee motivation were the high frequent items for reporting of HC. Every
companies in the ceramic sectors disclosed the on an average 5 items but the quality of
reporting average. RAK ceramic disclosed the HC related information in the separate statement
named as Investment in Intangible.
HC Items 0 1 2 3 Frequency ofdisclosed
Percentageof disclosed
Employee training 3 1 0 0 1 25
Education 2 1 0 1 2 50
Lists of training and employees participation 4 0 0 0 0 0
Number of employees 2 0 2 0 2 50
Employee compensation plan and benefits 1 3 0 0 3 75
Employee Motivation 1 3 0 0 3 75
Employee involvement in the community 1 0 0 0 0 0
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activities
Establishment of own training institute 4 0 0 0 0 0
Employee attitudes towards company 4 0 0 0 0 0
Employees safety and health 3 1 0 0 1 25
Entrepreneurial spirit 4 0 0 0 0 0
Rate of staff turnover 4 0 0 0 0 0
Employee skill and competence 3 1 0 0 1 25
HC statistics (i.e. in terms of profitability per
employee, sales per employee
4 0 0 0 0 0
Career development and opportunities 3 1 0 0 1 25
Employee equality 4 0 0 0 0 0
Employee value 2 2 0 0 2 50
Employees recruitment policies 2 2 0 0 2 50
Employee leadership 4 0 0 0 0 0
Employees opportunity for job rotation 4 0 0 0 0 0
GM 6
Table 12:Summary of disclosure on human capital by Ceramic sector
Cement(n=4)
Out of the 6 companies, 4 companies have been selected for the study and all the sampled
companies reported on an average 4 items. But the quality of the reporting was not up to the
mark. Out of four companies Laferge surma ltd reported highest 7 items and reported in the
directors report. Employee compensation plan & Benefits, employee motivation were the
frequently disclosed items.
HC Items 0 1 2 3 Frequency ofdisclosed Percentageof disclosed
Employee training 3 0 1 0 1 25
Education 2 1 0 1 2 50
Lists of training and employees participation 4 0 0 0 0 0
Number of employees 2 0 2 0 2 50
Employee compensation plan and benefits 1 3 0 0 3 75
Employee Motivation 1 3 0 0 3 75
Employee involvement in the community
activities
1 0 0 0 0 0
Establishment of own training institute 4 0 0 0 0 0
Employee attitudes towards company 4 0 0 0 0 0
Employees safety and health 3 1 0 0 1 25
Entrepreneurial spirit 4 0 0 0 0 0
Rate of staff turnover 4 0 0 0 0 0
Employee skill and competence 3 1 0 0 1 25
HC statistics (i.e. in terms of profitability peremployee, sales per employee
4 0 0 0 0 0
Career development and opportunities 3 1 0 0 1 25
Employee equality 4 0 0 0 0 0
Employee value 2 2 0 0 2 50
Employees recruitment policies 2 2 0 0 2 50
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Employee leadership 4 0 0 0 0 0
Employees opportunity for job rotation 4 0 0 0 0 0
GM 6
Table 13:Summary of disclosure on human capital by Cement sector
IT(n=4)
Out of 6 companies this study has collected information about disclosure of HC for 4
companies and it represent 67% of the population. Out of companies BD com online and Agni
systems ltd did not disclose anything about HC in their annual report. In this sectors Aamra
ltds reporting of HC was better but not the up to the mark. Only Aamra ltd disclosed 8
components out of 20 components of HC framework but none of components graded as high
quality reporting. In this sector employee educational background was the frequently disclosed
items.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 3 1 0 0 1 25
Education 2 1 1 0 2 50
Lists of training and employees participation 4 0 0 0 0 0
Number of employees 2 0 2 0 2 50
Employee compensation plan and benefits 3 1 0 0 1 25
Employee Motivation 3 1 0 0 1 25
Employee involvement in the communityactivities
3 1 0 0 1 25
Establishment of own training institute 4 0 0 0 0 0
Employee attitudes towards company 4 0 0 0 0 0
Employees safety and health 4 0 0 0 0 0
Entrepreneurial spirit 4 0 0 0 0 0
Rate of staff turnover 4 0 0 0 0 0
Employee skill and competence 4 1 0 0 1 25
HC statistics (i.e. in terms of profitability per
employee, sales per employee
4 0 0 0 0 0
Career development and opportunities 3 1 0 0 1 25
Employee equality 4 0 0 0 0 0
Employee value 3 1 0 0 1 25
Employees recruitment policies 3 1 0 0 1 25
Employee leadership 4 0 0 0 0 0
Employees opportunity for job rotation 4 0 0 0 0 0
GM 5
Table 14:Summary of disclosure on human capital by IT sector
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Insurance (n=16)
Out of 16 sampled companies People insurance, Agrani insurance, Meghna life insurance,
Dhaka insurance did not disclose anything about HC. Employee educational background,
number of employees, employee motivation, employee skill and competence were the
frequently disclosed items out of twenty items of HC framework. None of the companies
disclosed anything about employee involvement in the community, entrepreneurial spirit,
employee leadership, employee opportunity for job rotation. Prime insurance ltd disclosed high
quality HC reporting in the insurance sector. Prime insurance disclosed total 12 items
separately in the Human Resource Statement.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 11 5 0 0 5 31Education 9 4 2 1 7 44
Lists of training and employees
participation
14 2 0 0 2 13
Number of employees 7 3 5 1 9 56
Employee compensation plan and benefits 9 5 2 0 7 44
Employee Motivation 8 4 4 0 8 50
Employee involvement in the community
activities
16 0 0 0 0 0
Establishment of own training institute 15 1 0 0 1 6
Employee attitudes towards company 12 4 0 0 4 25
Employees safety and health 14 1 1 0 2 13
Entrepreneurial spirit 16 0 0 0 0 0
Rate of staff turnover 15 1 0 0 1 6
Employee skill and competence 8 7 1 0 8 50
HC statistics (i.e. in terms of profitabilityper employee, sales per employee
16 0 0 0 0 0
Career development and opportunities 11 5 0 0 5 31
Employee equality 13 2 1 0 3 19
Employee value 12 4 0 0 4 25
Employees recruitment policies 10 6 0 0 6 38
Employee leadership 16 0 0 0 0 0
Employees opportunity for job rotation 16 0 0 0 0 0
GM 11
Table 14:Summary of disclosure on human capital by insurance sector
Telecom(n=2)
Out of 2 telecom companies every companies have been selected. BD submarine cable ltd
disclosed only 3 components e.g. number of employee, employee skill & competence and
employee value in the Chairmans statement but the quality of disclosure was low. Grameen
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phone disclosed 6 items of the HC framework e.g. list of employee training, employee
motivation, employee skill & competence, career development opportunity, employee
recruitment policy, educational background of top level employees. In this industry employee
skill & competence was the frequently disclosed items as a disclosure of human capital.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 2 0 0 0 0 0
Education 1 0 0 1 1 50
Lists of training and employees participation 1 0 1 0 1 50
Number of employees 1 0 1 0 1 50
Employee compensation plan and benefits 2 0 0 0 0 0
Employee Motivation 1 1 0 0 1 50
Employee involvement in the community
activities
2 0 0 0 0 0
Establishment of own training institute 2 0 0 0 0 0
Employee attitudes towards company 2 0 0 0 0 0
Employees safety and health 2 0 0 0 0 0
Entrepreneurial spirit 2 0 0 0 0 0
Rate of staff turnover 2 0 0 0 0 0
Employee skill and competence 0 2 0 0 2 100
HC statistics (i.e. in terms of profitability per
employee, sales per employee
2 0 0 0 0 0
Career development and opportunities 1 1 0 0 1 50
Employee equality 0 0 0 0 0 0
Employee value 1 1 0 0 1 50
Employees recruitment policies 1 1 0 0 1 50
Employee leadership 2 0 0 0 0 0
Employees opportunity for job rotation 2 0 0 0 0 0
GM 5
Table 15:Summary of disclosure on human capital by Telecom sector
Travel & Leisure(n=2)
Out of 2 companies every companies have been selected in the study. United air disclosed 4
items in the annual report e.g. list of training, number of employee, employee compensation
plan and employee motivation. Unique hotel and resort disclosed 2 items e.g. number of
employees and employee compensation plan for disclosure of HC in the annual report. Two
companies in this industry reported the HC related information in the notes to the financial
statement. Sixteen items of the HC framework were remain undisclosed by the two companies
in this industry.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 2 0 0 0 0 0
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Education 2 0 0 0 0 0
Lists of training and employees
participation
1 0 1 0 1 50
Number of employees 0 0 2 0 2 100
Employee compensation plan and
benefits
0 0 2 0 2 100
Employee Motivation 1 0 1 0 1 50
Employee involvement in the communityactivities
2 0 0 0 0 0
Establishment of own training institute 2 0 0 0 0 0
Employee attitudes towards company 2 0 0 0 0 0
Employees safety and health 2 0 0 0 0 0
Entrepreneurial spirit 2 0 0 0 0 0
Rate of staff turnover 2 0 0 0 0 0
Employee skill and competence 2 0 0 0 0 0
HC statistics (i.e. in terms of profitability
per employee, sales per employee
2 0 0 0 0 0
Career development and opportunities 2 0 0 0 0 0
Employee equality 2 0 0 0 0 0
Employee value 2 0 0 0 0 0
Employees recruitment policies 2 0 0 0 0 0
Employee leadership 2 0 0 0 0 0
Employees opportunity for job rotation 2 0 0 0 0 0
GM 2
Table 16:Summary of disclosure on human capital by travel & leisure sector
Miscellaneous(n=4)
In this type out of 8 companies 4 companies have been selected for the study. Beximco ltd did
not disclose any information regarding HC. Only Amramit ltd disclosed 7 items of HC
framework in the Directors report of the annual report. Out of 7 disclosed items 1 item scored
2 e.g. number of employee other items were graded as low quality reporting e.g. scored 1. G Q
ball pen ltd disclosed only 1 items e.g. number of employee graded as high quality e.g. scored 3
in the notes to the financial statements. Number of employee is the frequently disclosed items
in this industry. The overall disclosure practice of this industries was not up to the mark.
HC Items 0 1 2 3 Frequency of
disclosed
Percentage
of disclosed
Employee training 3 1 0 0 1 25
Education 3 0 0 1 1 25
Lists of training and employees participation 4 0 0 0 0 0
Number of employees 1 0 2 1 3 75
Employee compensation plan and benefits 2 2 0 0 2 50
Employee Motivation 2 0 1 1 2 50
Employee involvement in the communityactivities
4 0 0 0 0 0
Establishment of own training institute 4 0 0 0 0 0
Employee attitudes towards company 4 0 0 0 0 0
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Employees safety and health 4 0 0 0 0 0
Entrepreneurial spirit 4 0 0 0 0 0
Rate of staff turnover 4 0 0 0 0 0
Employee skill and competence 3 1 0 0 1 25
HC statistics (i.e. in terms of profitability peremployee, sales per employee
4 0 0 0 0 0
Career development and opportunities 3 1 0 0 1 25
Employee equality 4 0 0 0 0 0
Employee value 2 2 0 0 2 50
Employees recruitment policies 3 1 0 0 1 25
Employee leadership 4 0 0 0 0 0
Employees opportunity for job rotation 4 0 0 0 0 0
GM 5
Table 17:Summary of disclosure on human capital by Miscellaneous sector
3.3 Ranking of Sectors
In case of ranking of different sectors Geometric Mean(GM) has been used. On the basis of
outcome of the GM the position of different industries for the human capital reporting practices
have been determined. The summary of the outcome of the rank has been presented below:
Sectors GM Rank
Bank 32 1
Non Bank Financial Institutions(NBFI) 28 2
Engineering 11 3
Food & Allied 9 5
Fuel & Power 6 7
Jute 1 10
Textile 9 5Pharmaceutical & Chemical 10 4
Service 7 6
Tannery 5 8
Ceramic 6 7
Cement 6 7
IT 5 8
Insurance 11 3
Telecom 5 8
Travel & Leisure 2 9
Miscellaneous 5 8
Table 18: Summary of the ranking of different industries
Banking sector has been ranked number 1 i.e. highest ranking out of the overall sampled
industries for the better human capital reporting practices. Jute industries ranked number 10 i.e.
lowest ranking for the human capital reporting practices. Some industries got similar ranking
because of similar GM and it represents the similar HC reporting practices.
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3.5 Word Count
To examine the emphasis of HC to the companies word count procedure has been used. The
summary of the words classification and frequency of disclosure has been presented below.
Words classifications Frequency of disclosure
Less than 50 words 55
51-100 words 24
101-300 words 19
301-500 words 1
501-1000 words 13
1001-1500 words 4
1501-2000 words 7
More than 2000 words 0
Table 20: Summary of the words classification and frequency of the disclosure
From the above summary table it is clear that most of the companys disclosure on HC were
limited to less than 50 words. Only 7 companies spent between 1500 to 2000 words. It
represent that these 7 companies gives much emphasis on human capital reporting and consider
human capital as an important one.
3.5.1 Industry wise HC disclosure (word count)
In the banking sector 4 companies i.e. 25% out of total 16 sampled companies spent words
between 1501-2000 words and 3 companies i.e. 19% spent words between 1001-1500 and 7companies i.e. 44% spent words between 501-1000. Only 2 companies spent less than 300
words out of sampled companies. Prime bank, South East bank, Eastern bank and Dhaka bank
spent words between 1501- 2000 and put more emphasis for the reporting of HC in the annual
report.
In the NBFI sector 9 companies i.e. 75% out of 12 companies spent more than 500 words to
report HC related information and on the other hand 3 companies i.e. 25% spent less than 500
words to report HC items in the annual report.
Other than Insurance sector all sectors spent less than 301 words to report on HC related
information in the annual report. In the Insurance sector only Prime insurance spent 600 words
to report on HC.
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So the overall picture represent that the majority of the companies i.e. 98companies (80% out
of 123 companies) spent less than 301 words and only 25 companies i.e. 20% spent more than
300 words to report information on HC in the annual report.
Industries 0-50 51-100 101-
300
301-
500
501-
1000
1001-
1500
1501-
2000
More
than
2000
Total
Bank 1 1 7 3 4 16
Non Bank
Financial
Institutions(NBFI)
2 1 5 1 3 12
Engineering 9 2 11
Food & Allied 3 4 7Fuel & Power 1 3 3 7Jute 2 2Textile 10 3 13
Pharmaceutical &
Chemical
1 3 7 11
Service 2 1 1 4
Tannery 2 1 1 4
Ceramic 2 1 1 4
Cement 2 1 1 4
IT 2 1 1 4Insurance 12 3 1 16
Telecom 1 1 2
Travel & Leisure 2 2Miscellaneous 3 1 4Total 55 24 19 1 13 4 7 0 123
Table 21: Summary of Industry wise HC disclosure by word count
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4.2 Conclusion
Using the technique of content analysis, this study investigates the extent of HC reporting
practices by listed companies in Bangladesh. Overall the result shows that sample firms did
disclose HC items to at least a moderate level. More specifically, Bangladeshi firms disclose
more information on such items as employee training, number of employees, educational
background of top level employees, employee skill and competence, career development
opportunities that firms provide and employee recruitment policies these items being reported
by most of the sample companies, than other items. Whilst most firms reported on employee
benefit in details, the educational backgrounds of employees, employee compensation plans,
number of employees and the list of training programs took place and employees