January 26, 2022 Executive Compensation ESG & Human Capital Management Articles

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The Strategic Human Capital Management Opportunity for Boards Going Beyond the Surface

Human capital management (HCM) is now a front-and-center issue for boards. Long-term success increasingly depends on attracting, retaining and engaging talented people, and senior executives and boards recognize the importance of well-designed human capital strategies and processes.

Many boards have expanded committee charters to include oversight of HCM issues and receive regular reports on initiatives and accomplishments related to diversity and inclusion, culture, leadership development and succession planning, among other topics.

As boards gain experience in this arena, the real opportunity lies in going beyond a cursory “check the box” review. Deeper conversations should tie HCM topics to business strategies, allow boards to understand the company’s critical opportunities and challenges, and open the door for collective brainstorming to tackle some of the most challenging talent issues.

More robust conversations with management about HCM are needed as the board purview expands. The intent is to ensure the board has adequate oversight into risks and strategic opportunities. The best companies engage their boards for input without the board crossing the line into running the business. The questions below offer a starting point to delve into collaborative discussions.

Three questions to deepen the conversation around HCM

Talent Retention Strategy

1. What is your company’s strategy for attracting and retaining talent in a competitive market? Where does the company stand relative to the market with its total rewards, culture and purpose investments? 

Some discussions focus on labor markets, progress against a commitment to $15/hour minimum pay for frontline associates, and additional pay for associates at critical facilities. Companies also review competitive compensation approaches for salaried workers, including long-term incentive eligibility for select colleagues at lower levels of the organization or employee share purchase programs. Dialogue also continues on flexible work models and ongoing assessments of the “new normal” for return to the office. 

Companies have found innovative ways to retain their broader workforce. For example, one firm recently began offering tuition for employees upfront, recognizing that this investment is less costly than turnover and provides a competitive advantage for attracting and retaining frontline employees and helping them gain the skills to be successful. 

Boards can also understand if and how their companies take a comprehensive approach to employee benefits. Benefits might focus on financial wellness (financial coaching, digital investment platforms with preferred rates, student loan repayment), physical health (competitive health insurance, on-site vaccination clinics) and mental wellbeing (an additional personal holiday, free counseling sessions).  

Building Strategic Capabilities

2. What is your company doing to build capabilities critical to its strategy?  

Some board meetings include discussions of programs to build digital and advanced analytics skillsets that will facilitate and accelerate their strategies. These efforts include programs to enhance the employment brand and compensation structures to attract talent and build new data/digital skillsets across the organization.

Others focus on attracting and retaining talent for key geographies to meet growth goals. Discussions also explore key partnerships with colleges and other organizations that can provide pathways to targeted career paths.

Within succession planning conversations, boards can explore the talent below C-level replacements to plan for developing skills that will be critical for the future.  

DEI Advancing Strategy

3. How does the work on diversity, equity and inclusion (DEI) advance your company’s business strategy — and what progress has your company made? 

Some companies tie clear DEI goals to advancing growth and innovation across their ecosystem, recognizing that DEI efforts have a material impact on their stakeholders as they seek to compete for talent, enhance market share and lead with a broader purpose. The conversations go beyond representation to look deeply into inclusion, engagement and equitable opportunities for all colleagues.

Boards also learn about the company’s partnerships with customers, suppliers and communities to provide opportunities, products and services that reflect a more diverse employee and customer base. 

Similar to the financial capital allocation that a board makes, a board and its committees should ensure that they have visibility into talent as a strategic business driver. The board should also have insight into any business risks that can arise from talent and corporate culture. Management teams can talk with their boards about their progress and explore barriers together. Boards that effectively govern the human capital processes, without overstepping, have engaged in more vibrant dialogue and have unlocked greater awareness and better insights that can help them tackle today’s critical talent challenges.

View the full article as it was originally published.

Blair Jones

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