These board-level solutions are crucial in the battle for talent
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As the world continues to deal with the COVID-19 pandemic and the simultaneous economic evolution taking place, the dynamic labor market presents a wide array of risks and opportunities for any corporation. Many companies are accelerating the sophistication of their workforce strategies in order to survive the Great Resignation.
This effort includes increased commitment to culture, equity, inclusion, social responsibility, and employee empowerment.
“When you get these areas wrong, you have higher attrition and your employee value proposition in the marketplace suffers, so it's harder to attract talent,” Lisa Lewin, CEO of General Assembly, the workforce training company owned by The Adecco Group, told Fortune. “When you get these things right…you can have a more dynamic, skilled workforce.”
This opportunity for competitive advantage, but also risk mitigation, has had HR leaders in contact with their boards of directors more often, multiple board leaders and executives told Fortune.
“HR has tended to interact with the board related to CEO and executive compensation more than anything else,” Amee Desjourdy, CHRO of Brightcove, said. “But most boards hadn't really even gotten into sort of this whole broader talent category of conversation until very recently.”
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“When we talked about HR issues in the boardroom, it used to be succession planning and compensation,” Dianne Hessan, board member at Brightcove and Panera Bread, and chair at C Space, a market research company where she is the former CEO and founder, told Fortune. “Now, we talk a lot about culture. We talk a lot about people, and about our talent as a very critical source of competitive advantage.”
These conversations have led to increased scrutiny over people metrics and other data that can inform board leaders about the company’s performance in the talent space.
“The best boards pay attention to broad talent development and workforce development, and are looking for evidence from management teams of programs that can demonstrate real value in terms of creating the kind of agile, resilient workforce that you need to succeed in this incredibly competitive global environment,” Bill McNabb, former CEO of Vanguard and board member at IBM, Axiom, and UnitedHealthcareGroup, told Fortune. “So you see more metrics around culture and talent, you see much more attention being paid farther down into the organization.”
Better talent discipline across the organization
As with any organizational change, success starts at the top. Board leaders need to adjust to a new set of priorities and also think about adding new leaders with more tangible talent strategy experience.
“It starts with the composition of your board,” Hessan explained. “You can't have a board that's not diverse telling management that they need to meet DEI goals. You can't have a leadership team that's not diverse, telling a recruiting team to find some people who don't look like us."
After that, the CEO needs to work more closely with their CHRO. Lisa Baird, global human resource officer practice leader at Heidrick & Struggles, told Fortune that “high-performing organizations” have the CEO, CFO, and CHRO “joined at the hip in all aspects of leading and driving the company.”
“The trend has been towards the CEO-CHRO relationship tightening, through the last two years especially, as you can't get the work of the company done without people,” Baird added.
Ultimately, the CHRO and other HR leaders are meeting with their boards more often, many have said.
“The ability to respond to the changing conditions was critical to competitiveness and profitability,” Baird observed. “The CHRO was being called on to participate with the board much more frequently.”
The scope of these conversations has also changed compared to previous board-CHRO interactions.
“In the last couple years, the discussions have expanded dramatically to things like DEIB (diversity, equity, inclusion, belonging),” Desjourdy said. “I think the COVID effect and what's happening with the workforce and what that's going to look like, both in the immediate and [long run]... they are major strategic discussions. Now we're diving into not just succession planning at the top level, but a little more about workforce planning and what's happening generally.”
While incorporating HR leaders into board meetings more often is a good way to get scrubbed in on the strategy, the board has the responsibility of holding all leaders accountable for their people, the same way they are held accountable for profit & loss.
“They should be asking all the people-related questions of every leader, and if the leader needs to bring in their HR head to answer it, what does that say about the leader?” Debbie Lovich, managing director and senior partner at Boston Consulting Group, told Fortune. "This is an every-leader issue."
In many ways, the talent strategy evolution mirrors the digital revolution and transformation issues that corporate leaders grappled with over the past two decades.
“This happened with technology years ago,” Lovich explained, when companies' digital and IT strategies were contained to a tech leader and the board wasn't as involved. “Now, technology is core to the agenda, it's part of your strategy, and I think the past year really is bringing people to the forefront.”
New executive roles
The strongest HR teams are adding talent and leadership around diversity, analytics, technology, recruiting, and more while making a philosophical shift as well to focus on optimizing the employee experience.
“We're way behind on employee journeys and employee-centric thinking and co-creating,” Lovich said. She has been encouraged however, by examples like that of a company that put a product leader in charge of its future-of-work strategy. “A lot of tech companies are very good at doing it for their customers, but not good at doing it for their employees. That same mindset needs to be there.”
The HR leaders themselves also need a new set of skills to succeed.
“I think that those who are most successful absolutely have to have a level of business acumen that maybe wasn't as necessary before” Desjourdy said.
“To be able to pivot from being chief health and chief wellness officer, when there's a new wave of the virus, and then the chief regulatory officer, to understand vaccine mandates and how that impacts their workforce, to chief strategic talent officer when your organization is facing talent shortages… the ability to be quite agile across all dimensions of HR is becoming a premium as well as the ability to grow and adapt in the role as conditions will inevitably shift,” Baird said.
Companies are hiring diversity leaders, HR technology experts, recruitment marketers, chief purpose officers, and more in order to support the CHRO in being more strategic.
“We've seen adding new approaches to talent management, better integrating recruiting, onboarding, development, executive development and diversity, equity inclusion into a more unified function,” Baird said.
The HR function is also attracting new people, which many believe is a good thing.
“The notion of people growing up in HR forever is something I worry about,” Lovich said. “I think a minority of companies have increasingly been rotating their best talent in and out of HR at the top.”
Having new leaders tackling new, major challenges can also help companies build a diverse executive bench, as these people with diverse skillsets have the opportunity to gain more exposure to the organization’s top leadership. This can include a head of diversity or someone in charge of the remote employee experience, for example.
“Good CHROs are always thinking about the development and succession of their own people, and so part of that is giving them board exposure,” Baird said. “They will look for reasons to bring the head of talent management or the head of recruiting, or head of diversity, equity inclusion to a board meeting when that's a topic of the day.”
Driving the analytics capabilities of the company forward is also a major task CHROs are facing—one that boards can support by meaningfully engaging in a conversation about the resources and headcount necessary to stand up stronger people analytics.
“Having a very current picture of engagement in a very sophisticated way based on the tools that are now available in the moment point of view of where employees are and a number of dimensions, combined with transparency, I would say is, is the main way [to develop analytical capabilities],” Baird said.
These metrics not only inform company leadership, but can also be tied to value creation in financial markets.
“On the different boards I'm on, we're seeing a lot of attention being paid to metrics,” McNabb said. “Engagement to me would be the key one, but you also look at composition of the workforce.”
Board talent committee
Though many companies are putting new attention on workforce strategies, laggards remain, in part because of boards and CEOs that haven’t fully acknowledged how much they need to change. Lovich noted across her client work that while many CEOs are now on board, “the majority are not and they just sort of push it on their CHRO.”
It speaks to the way some of the “old school” mentality creeps in when it comes to HR, a function formerly known as “personnel” or “administration” that had been fighting for decades for increased respect.
“I think there's a lack of real understanding of how critical people are,” Desjourdy said. “Boards are getting more involved because you can't avoid it given the things that have happened these last two years.”
One idea, espoused by many including Wharton management guru Adam Grant, is for boards to add a committee focused on talent and culture, the same way they have one for compensation, governance, and audit.
“Boards are becoming much more conversant in this and you see it in talent and compensation committees, that there's much more probing going on around this as opposed to just focus on executives.” McNabb said.
While some may feel that leaning into people strategy may be “crossing the line into management” for board members, the importance of a sound, comprehensive people strategy at this point is far too significant to treat as an operational matter outside of their purview.
“As a director, I can't possibly know what our management team knows about the individuals [on their teams]," McNabb said. "What I want to see though, is evidence that they’re paying enough attention to talent, and that we're able to compete with our critical competitors from a talent perspective. Because if we can't, we're going to struggle.”