Many company boards are no longer focusing only on CEOs and other top executives. They’re also playing a bigger role in identifying and encouraging lower-level talent as a broader long-term strategy for success.
Paula Loop, CPA, the leader of PwC’s Governance Insights Center, said investors have started pushing in the last 24 to 36 months for directors to pay closer attention to overall talent. For decades, Loop said, most companies’ biggest asset was real estate — brick-and-mortar buildings. “Now the biggest asset most companies have is their people, their talent,” she added.
A shortage of skilled labour means directors must make sure a system is in place to hire talented workers and support up-and-coming talent within the company, according to PwC’s 22nd Annual Global CEO Survey. The survey included responses from nearly 1,400 CEOs globally in late 2018.
In the US, finance decision-makers have listed availability of skilled personnel as their organisation’s top challenge for ten consecutive quarters. In the PwC survey, 34% of CEOs say the availability of workers with “key skills” is a top concern.
“Everything they’re doing, they need to look at through a talent lens,” Loop said of directors and executives.
Manjit Biant, ACMA, CGMA, agreed. He is a UK-based finance function trainer and university lecturer who works globally. “For the longer-term survival of an organisation, they need to find and retain talented people,” he said.
A key aspect of talent development is embracing diversity. As boards become more diverse, Loop said, new conversations are driving the approach to talent.
Eighty-five per cent of directors say their company is at least good at developing and retaining talent, according to PwC’s 2019 Annual Corporate Directors Survey. But only 16% gave a score of “excellent” when it comes to recruiting a diverse workforce. And more than 80% said they should do more to promote gender and racial diversity within the company.
Female directors give their companies lower scores than male directors when it comes to talent management in the corporate director survey.
Seventy-eight per cent of female directors said their companies at least do a good job of developing and retaining talent, compared with 88% of male directors, according to PwC. Meanwhile, 47% of female directors gave high marks for recruiting diverse talent, compared with 67% of male directors.
Those differences in thinking can empower boards to make better business decisions. “That’s why you want diversity in the boardroom,” Loop said.
Biant points to the original Star Trek TV series and its diverse cast of characters that was ahead of its time in the 1960s. “Each diversity brought to the table a different flavour and perspective, which made the whole team succeed,” he said.
Here are some ways boards can play a bigger role in managing a company’s talent:
Directors can hold top executives, who bear much of the weight when it comes to managing talent, accountable for creating and maintaining a diverse workforce. They can ask executives to create specific talent-management and diversity goals. Such goals, including retention targets, can become part of their compensation plan, PwC said in a different 2019 report on governance.
Identify strong talent
Basic systems such as employee evaluations and employee-of-the-month nominations go a long way if they are done effectively.
Beyond that, directors can help identify workers who can move up the ranks, and when they will be ready to take on additional responsibilities. Some companies do better than others at recognising up-and-coming talent, “but I would say more companies fall short”, Biant said.
Mentors can have a big impact when it comes to helping talented workers step up.
“The best thing boards can do is to empower people [and] provide the opportunities for those willing to step up,” Biant said. “Learning and development and growth [have] to be owned by the individuals, but having mentors and an environment to allow people to succeed is a good recipe for success.”
Understand the culture
Directors can visit work sites, have dinner with middle managers, or identify a different group of employees each month to attend a luncheon. “It is very important for boards to get a finger on the pulse of the company’s culture,” Loop said.
Interacting with middle managers can be a good way for directors to ultimately better understand compensation rates and address issues such as diversity and gender equity.
Directors can use data to identify strengths or weaknesses within the company that might be affecting the talent pipeline. That data includes turnover and departure rates, exit interviews, and whistle-blower complaints, PwC said
Bring HR to the table
The human resources function can play a bigger role in overall strategy, and the chief HR officer should be part of the C-suite, PwC said in its governance survey. Directors can ask the CHRO to present an annual “talent review”.
Directors should also work with HR officers, “really thinking about what kind of talent they want to select at the screening process”, Biant said.
— Sarah Nagem is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Neil Amato, an FM magazine senior editor, at Neil.Amato@aicpa-cima.com.