Why ISO Standards
Over the last several years, ISO has issued 12 standards that address all areas of human capital to accomplish for people management what ISO has accomplished for quality, safety, and many other organizational goals: improved efficiencies, outcomes, and experiences. The new Annex SL management standards and Enterprise Engagement principles are now required in 60 ISO standards, including ISO 9001 quality management and ISO 45001 Occupational Health and Safety. ISO 10018 Quality People Management certification is for those organizations seeking to call out their commitment to all stakeholders.
ISO Annex SL and ISO 10018 and the growing library of ISO Human Resources standards enable organizations to profit from a formal process to engage people across the organization in the same way ISO 9001 provides a formal system for managing quality. The application of a formal process for engagement has the potential to yield many financial gains, not to mention enhanced customer and talent retention, higher quality and productivity, greater well-being and reduced litigation risk.
Whether with knowledge of ISO standards or not, investors have embraced the importance of engagement and the need for a formal process. CalPERS, the nation’s leading pension fund, submitted a concept paper last year with the Securities & Exchange Commission requesting that public companies be compelled to disclose their human capital investments and information on the engagement of employees and customers, learning and communication practices, incentives and more. See Q&A With CalPERS on its Strong Support for Human Capital.
The Human Capital Management coalition of 26 U.S. pension funds, with combined assets of $5.6 trillion, specifically asks public companies to disclose information on human capital investments, employee and customer turnover and much of the same information advocated by CalPERS, which is a member of this coalition. See $2.6 Trillion Investor Coalition Sees Link Between Human Capital Management and Shareholder Return.
Larry Fink of BlackRock Group, the world’s largest private investment firm, recently called upon public companies to make larger and more strategic investments in human capital and emphasized the need for far greater disclosure on actual practices and results. See Larry Fink CEO Letter.
Their interest is justified. In a study published in the Harvard Business Review in 2016, Alex Edmans, Professor at the London Business School, found that companies on the Great Places to Work™ list consistently outperformed the stock market indices over nearly three decades. Similarly, the Engaged Company Stock Index (ECSI), managed by analytics firm McBassi & Co., which uses 12 sources to identify companies with high levels of customer, employee and community engagement, has outperformed the S&P 500 by over 40 percentage points over the last nearly six years, with consistent performance from year to year. See 28 Years of Stock Market Data Shows a Link Between Employee Satisfaction and Long-Term Value.