Other than being intensely involved in talent management at the C-suite level, boards have long been content to leave the rest of the responsibility for talent management up to their managers. For many companies, corporate culture only comes into play when there is a crisis after an investigation reveals that culture is part of the problem. In reality, corporate strategy and its execution, along with culture, all play an important role in talent management.
In light of this, some corporations are trying to be proactive and assess the health of their corporate culture before a crisis hits. To be agile, innovative and productive, boards and managers will need to prioritize the proper time and resources in human capital development throughout the organization.
Where Are the Problems with Corporate Culture?
It's been customarily accepted in the corporate world that corporate culture starts at the top and works its way down and around the rest of the company. Recently, more board directors are starting to point to middle management as the place to focus more intently on corporate culture. PwC's Annual Directors' Survey indicates that about 59% of board directors agree with the new perspective, as opposed to 45% of directors in 2018. Overall, about 29% of board directors agree that there's been a lack of oversight of corporate culture, compared with only 18% in 2018. In addition, more board directors believe that the lack of communication and transparency from management has led to problems with culture. About 29% of board directors agree that there is a lack of board oversight on culture, compared with only 18% who felt the same way the year before. One of the new problems with corporate culture is that boards need to help create an environment that encourages training and upskilling.
What Steps Are Board Directors Taking to Address Corporate Culture?
According to PwC's Annual Directors' Survey, boards are willing to take several steps to enhance their corporate culture in the interest of improving talent management. About 60% of board directors think that it's important to enhance employee development and training programs. Around 43% of boards would like to improve issues around whistleblowing policies. Related to increased board-level reporting, about 32% of board directors would like to see an increase in it. Just over a third of board directors would like to see companies do a broad-based employee cultural assessment.
The labor market is changing as well. It's becoming tighter and more skilled, and that is causing more competition for employee talent across the board.
Overall, companies give themselves fairly high scores in the category of managing talent. About 91% of board directors feel that their companies do a good job of providing competitive pay and benefits and 85% state that they do a good job of developing and retaining talent. Diversity has been a hot topic at the board level and many boards also think that companies are struggling with diversity in the workforce. Less than a fifth of board directors give their own companies an excellent score for their efforts in recruiting a diverse workforce. With these numbers, it's no surprise that about 83% of board directors believed that their companies should be doing more to promote gender and racial diversity within the workplace.
Strategy and Execution Important at All Levels of Talent Base
One of the primary roles for boards is to manage talent for the C-suite, including hiring and firing and evaluating the performance of top executives. Boards utilize their succession planning committees to ensure that they always have a strong pipeline of talent coming in to help them execute the corporate strategy without gaps or lags. Board directors and senior managers have long accepted that it's management's role to oversee & train the overall workforce.
Most board directors understand that their strategy is only as good as their ability to execute it. In today's corporate world, board directors also understand that strong execution requires talent at all levels of the organization. A recent survey indicates that CEOs believe one of the top-three threats to business in 2019 is the low availability of key skills. In addition, BlackRock encourages companies to invest more in human capital by employing a more diversified workforce and to offer upskilling opportunities for their employees to succeed in the work environment, which is becoming exceedingly automated work environments. Human capital is also becoming increasingly important for companies because they have to keep reinventing themselves to contend with disruption and technological advancements.
New Board Strategies for Talent Management
Some boards may opt to move the issue of talent management up on their priority list. Either the full board will then take responsibility for it or they will delegate it to a committee so that it will be addressed and monitored throughout the year. Once they've assigned responsibility for it, they can incorporate talent management into their strategy discussions. The issue of talent management is also something to add to the agendas for nominating and governance committees or succession planning committees so that the board can begin to recruit board directors who have experience with talent management and who can assess existing capabilities.
Boards can also request regular updates from the Chief Human Resources officer so they're knowledgeable about the status of talent management, including metrics such as skills, capabilities, workforce demographics, health and safety, incentives and compensation. The Human Capital Management Coalition is pushing for required disclosures on these metrics. Boards need data, first-hand information and accountability to ensure that their talent management efforts align with their corporate strategy.
Building Talent for Tomorrow
Considering the swift pace of enterprise and the equally fast pace of technology, as well as having greater demands from investors, it's time for boards to pay greater attention to overseeing talent management. That's not to say that board directors should interfere with management's responsibilities or micromanage them, but to ensure that the company takes an approach to talent management that supports the company's long-term goals. Boards that take an interest in talent management at all levels will solidify their talent base now and for the future.