At SSE, we take a very deliberate approach to employing people. I call it our ‘sustainable employment model.’ It means we directly employ the people we need, invest in developing and growing our own talent, look to recruit management positions from within; and ensure our employees have long term careers here.
Whilst we’ve long felt that creating sustainable employment was the right thing to do we’ve never measured the impact of this approach. That’s all changing from today , with SSE becoming the first UK company to measure the value of its ‘human capital’ and publish its findings.
So what is human capital? Well what it’s not is an asset that a company owns; rather it’s the people that SSE ‘borrows’ from society which allows our business to operate and grow.
So how do you measure human capital? Professional services firm PwC helped us create the methodology to value our human capital. It is an economic approach and uses the expected lifetime earnings of each SSE employee, depending on skills and qualifications, and adjusts for such factors as expected length of time an employee is expected to stay with SSE and for company-level risk.
And what did we learn? We now know that value attributed to the human capital employed by SSE on 1 April 2014 was £3.4bn, making it one of SSE’s biggest ‘assets’.
Although the scale of the value attributed to human capital is interesting, it is far more important to understand how we can most effectively manage and grow that value over time.
For example since 2007 we have recruited more than 800 apprentices and invested more than £60m in advancing their skills and knowledge. Knowing that these investments are delivering a good return is crucial to the future success of the business.
We discovered that for every £1 we invest in our apprenticeship programme, £4.29 of economic value is created and shared between wider society, the employer and the individuals. For Technical Staff Trainees (TSTs), there is a return of £7.65 shared between these three groups for every £1 we invest.
I am clear that SSE has a responsibility to invest in its employees. This research demonstrates that this responsibility is even greater than we had realised because it is not just the company that benefits from that investment, society does through increased tax payments and the individual does through increased earnings.
Being the first UK company to report on human capital means we can’t compare these numbers with our peers, but we hope that others will start to report on this also, so we can learn from them.
We know the report will make others sit up and pay attention. PwC, who helped us with the numbers, described the research as a ‘paradigm shift’ in company reporting and corporate thinking.
What does the report tell me? It tells me investing in people, training them for sustainable jobs, retaining them in the business and giving them the opportunity to be promoted all makes good economic sense, and creates value for SSE, the employee and wider society.
Now we have the numbers to prove it.