EXCLUSIVE: Intangible assets are key to demonstrating return-on-investment

Alex Tullett

Employee Benefits Connect 2019: The way organisations measure return-on-investment (ROI) for employee benefits should take into consideration intangible assets, such as branding, employee goodwill, customer relationships, intellectual property and knowledge sharing, according to Alex Tullett (pictured), director of decision science and consulting at outsourcing and professional services firm Capita HR Solutions.

Addressing delegates at Employee Benefits Connect 2019 on Wednesday 27 February, as part of the performance conference stream, Tullett explored high-level benefits strategy, detailing how changes to the industry landscape over the past decade mean that employers need to value and measure their propositions in more innovative ways.

Tullett explains: “The importance and the value that [employers] place on [their] employees and the way in which they judge [the] firm on its treatment of people will become as important as a 10% employer contribution to a pension plan going forward. In order for this to have relevance to the board room, we need to measure some particularly difficult things.

“If we think about things like employee goodwill, that isn’t in the balance sheet, but it’s as important as the goodwill [of a] customer to the business.”

One approach Tullet recommends for measuring intangible assets is an income method; this involves estimating the future economic benefits of the factor being valued. For example, whether an uptake in employee engagement could lead to greater innovation, in turn impacting positively on business outcomes.

“We like to think that employee benefits make the difference in a business. But can [employers] provide that tangible link to business value?” Tullet asks.

With this in mind, Tullett advocates that employee benefits have moved from being outside the total reward net, to now being more closely linked to pay, compensation and wider reward; he believes this previously observed distance was, in part, due to the difficulty of ascertaining a causal, financial or measurable impact from benefits on the business.

Benefits have undoubtedly changed over the years, and during his session, Tullett outlined some of the key differences. This includes the move from defined benefit (DB) to defined contribution (DC) pensions, flexible benefits becoming cheaper and more expected, wellbeing, and notably financial wellbeing, rising in popularity, while governance and regulation has become more vigorous, alongside a changing savings culture.

Tullett concludes: “Cash is not always the answer. How you access it, budget with it, have a relationship with it is a material part of financial wellbeing. It directly impacts on mental and physical health. So, I believe it is time for [compensation], for reward and benefits to make friends, to become in equal status department within firms.”