With 2020 continuing to challenge everything we knew as ‘normal’ in the business world, the tumult has highlighted the importance of people practices in organizations. Most businesses, whether public or privately owned in the US, are governed or advised by a Board of Directors (BOD). Usually, the main focuses of a BOD are business strategy, financial performance, corporate governance and compliance, and growth through organic or M&A means.
When it comes to people issues, it is common for BODs to manage CEO performance and succession, govern executive compensation programs, and oversee stock and ownership guidelines and other proxy-related matters typically through a compensation or an HR committee. More and more BODs, however, are now taking interest in other people-related programs and metrics; but these are often presented as time permits, or on an ad hoc basis when questions arise and are most likely not a part of the BOD’s core responsibilities.
So, time for change? Many of these programs and initiatives, normally in the ‘other’ category, are the subject of a heightened awareness today due to a trifecta of external forces: the COVID-19 pandemic, racial injustices, and the upcoming US presidential election. As BODs adjust, here are areas they should consider as part of their new normal oversight purview.
In the coming weeks, we will dig deeper into each of these areas, and welcome your feedback:
1. Executive leadership assessments: how do employees feel about the leadership direction of the company?
BODs sometimes carry out quick assessments if they are concerned about the CEO or senior leadership, or if it is part of a standard procedure dictated by their oversight guidelines.
Our recommendation is to implement a regular process of assessing the engagement level of the workforce to the executive team, with discussion and action plans where appropriate.
Recent examples of what happened with the leadership teams at McDonalds and Boeing highlight the need for a regular assessment. We will discuss approaches and tools in more detail.
2. Healthy workplace assessments: How do employees feel about the organization’s culture and values, their superiors, and their development?
BODs will often ask if companies have done engagement surveys and may take some time to review and probe into results, but typically they consider this area to be outside their purview and will defer to management for actions.
We recommend the implementation of a regular process of assessing workforce engagement and overall health. Many companies carry out engagement surveys, and some even have quantitative measures as part of the leadership’s short and longer term goals. Even fewer have the results tied to their compensation.
We feel that gaining a deep understanding of leadership’s ability or inability to create an environment where discretionary effort is on display should be on the BOD agenda as a leading indicator of company prosperity. The research is overwhelming that engagement levels, when properly measured, have a direct correlation to organizational success in the form of safety, productivity, retention, customer relations, profitability and shareholder return.
3. D&I: what does success look like and how are executives being held to account?
Research across the globe continues to demonstrate that increasing both cognitive and demographic diversity has a positive impact on organizational performance. A BOD wishing to enhance internal engagement across disparate groups, to truly take advantage of the organization’s full brain power, and to avoid scrutiny and strife resulting from homogeneity, should require a strategy, measurements and tracking of progress.
Too often, initiatives in this key area are abandoned when other ‘more important’ or conflicting goals arise. We recommend that BODs adopt this area as part of their formal remit and hold executives to account.
For public companies, we see that proxy advisory firms have put external pressure on BODs to include diversity in board seats, with continued indications that there will be more pressure at the executive level, and rightfully so.
In addition, we will discuss further the need for BODs to engage and review successes and challenges at front line and middle ranks in the organization, as these provide the pipelines for future senior leaders.
4. Leadership pipelines: how is the organization developing people leaders for the future?
This is another area of HR where BODs typically steer clear unless a question is raised, a turnover issue is discovered, or a recent success has taken place that the executives want to highlight. And at the front line, we suggest this examination would be extremely rare.
And yet, the frontline leaders are the pool for all other future leadership roles; they manage 85%+ of the people, and they direct the hands-on activities every day that deliver the service or product.
We recommend that the BOD make time to review what selection processes are used for leadership hiring or promotion, what expectations are set and training required for anyone moving into a leadership role, how the leadership development operates is tracked, and how the health of the succession pipeline is measured.
Specifically with selection and development, a BOD should now be requiring that emotional intelligence components be incorporated, as this will be at the forefront of the burgeoning duty of care standards of the new normal.
Employees are asking and will keep asking: “Do they care about me?”. And for skills development, remote workforce leadership begin to integrate into development programs in a big way, as will protocols for healthy workforce management.
Adding all of these to a human capital competitive advantage checklist will be in the best interest of BODs in 2020 and beyond.
5. Ways of working: how are organizations adapting to virtual working concepts?
Companies are learning as they go in the new normal. Even BODs are being forced to engage one another virtually. But where accessibility is less of an issue, a lack of rich human interaction in face-to-face settings is upon us, and is likely here to stay as virtual work and meetings become the default setting.
How will BODs and management teams adapt? We recommend that BODs encourage their executives to have initiatives based on current research to maximize effective one-to-one and group interaction, maintain or speed up the flow of information, and curb psychological hurdles.
We will dive into each of these five focus areas further in coming weeks, and look forward to your comments to help shape the discussion. BODs are on notice, and as society is adapting to the challenges of our times, so should the BOD.
We often say that for an initiative to have the attention of executives, they need to be held to account. From our perspective, BODs should keep these hot topics at front of their minds as they attempt to navigate the new normal.
Chuck Heaton, SPHR, SHRM-SCP is an HRD Thought Leader, Sr. Human Resources Consultant for Talent IQ and a former global HR Executive with over 30 years of experience leading HR Teams in multi-national companies.
Chuck Kemper is a Sr. Human Resources Consultant and a former global HR Executive with over 25 years of experience leading HR Teams in multi-national companies.
Jason Anderson is a Sr. Human Resources Consultant and a former global HR Executive with deep domain experience in compensation, accounting, finance and spent the last 10 years leading HR Teams in multi-national companies.
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