Topics:   Board Composition,Corporate Governance,Strategy

Topics:   Board Composition,Corporate Governance,Strategy

April 5, 2022

Ensuring a Strong Talent Plan: Looking Beyond the C-Suite

April 5, 2022

Historically, when it comes to talent, boards have focused most of their attention on C-suite succession and compensation. Most boards fail to implement comprehensive controls related to talent as a whole—a key aspect of organizational risk.

When the entire talent pipeline is poorly understood, talent drain presents a challenge for business continuity. Savvy boards are now turning their focus to a much more robust understanding and review of talent, which is vital given the need to attract and retain the right talent throughout the pipeline in order to deliver against strategic objectives and maintain a strong market brand.

As employees continue to rethink the work experiences they wish to have, companies and boards must ensure that their cultures are conducive to “talent stickiness” and that talent plans incorporate needed redundancy. While the design and execution of any business’ talent strategy lie with the management team, the board’s unique accountability lies in ensuring the plans are robust, are relevant, and will keep pace with the evolving strategic needs of the company.

Why does a robust board view of the talent pipeline matter?

Without the right people with the right skills and engagement at all levels of the organization, a business will fail to deliver against its strategic objectives. As the workforce changes—baby boomers retiring and millennials shifting to companies where they feel a greater alignment to purpose—organizations run the risk of losing critical skills and knowledge, impacting their capacity to execute against business objectives.

Likewise, as organizations stretch to meet growth objectives, talent requirements shift and the board must review the plans to secure necessary capabilities. Additionally, the ability to attract, develop, and retain talent is a core strategic competency, and yet, it is often a struggle for organizations.

Boards must ensure the right enterprise plan is in place, as well as metrics that can prove the plan is working.

What should the board consider?

The board should review the human capital strategy at the beginning of each year, with a quarterly review of key metrics to ensure that progress against the plan is occurring. The board should also see employee engagement scores to understand the employee experience, a bellwether for organizational and talent health.

Furthermore, there are several other things the board can do to ensure that a robust talent pipeline is in place.

First, in discussing any strategic objective, the board should ask the following questions:

  • Do we have the requisite skills to deliver on the objective?
  • If new product development is a key to success, do we have the talent to develop and deliver the product suite?
  • If new markets are key, is there a clear view of the talent demographics in those markets and the competition for that talent, along with a recruiting plan that seems achievable?
  • If inorganic growth is important, has talent due diligence been factored into the acquisition plan?

For many organizations, the answers to these questions are not clear, meaning the board needs to work with management to ensure strong workforce plans.

Second, the board should understand and have a way to view potential reputational risks, which may affect employee engagement. Financial missteps, ethical breaches, or legal problems will impact a company’s performance. Uber Technologies is a case in point. Between 2017 and 2018, Uber faced damage to its reputation when it received nearly 6,000 allegations of sexual assault from passengers and drivers. Uber shelled out more than $20 million in settlements, fired company leadership, and saw high-level resignations and the removal of its CEO, not to mention receiving user backlash by passengers switching to Lyft. Uber has been in damage control mode ever since, hiring new leadership and implementing new salary structures, and overhauling the performance review process.

The bottom line is boards need to have a view into the cultural experiences of the organizations they serve, and a clear understanding of the approaches to inclusion and diversity practices.

The board should also understand current social trends that can impact the organization’s culture. The last two to three years have witnessed a sea change in what is required to prove to a workforce that an organization is worthy of employees’ commitment. Proactively understanding the organizational forces that impact employee experience and engagement is as critical as understanding those that impact talent acquisition and retention.

Third, the board should regularly review the talent pipeline as a whole. The way to ensure strong C-suite succession candidates is to have the right plans in place for early and consistent talent identification, development strategies, and analytics about where unconscious bias may impact retention and the degree to which important roles are internally filled.

The pandemic has resulted in numerous talent impacts. For example, a far greater percentage of women than of men reported that they were considering leaving the workforce in 2020, which will have a long-term impact on employee diversity. Employees are also suffering from burnout and are choosing to find alternatives to the standard work-life balance, at least for now. These issues impact the health of the talent pipeline, and a strong organizational plan to remedy these effects should be in place.

Which metrics matter?

Much can be measured, but what should the board review?

Classic reporting remains important: turnover and retention rates of important talent pools, employee satisfaction rates, internal fill rates for key leadership roles, and the availability of ready-now successors are a good sampling. On top of these, more strategic metrics the board should review include revenue per employee, return on investment on workforce expenditures, the financial value of top-performer turnover, and functional performance as reported in the annual report to assess leadership and talent strength in a division.

The board should align with the organization’s leadership on the right measures to track and view these measures regularly to ensure visibility.

What matters most is that talent planning and transparency should be robust and full boards, rather than a single committee, should consider owning it. At a minimum, a twice-yearly review of key drivers and metrics should occur. Given that talent is a key lever for company success and a differentiator for competitiveness in the marketplace, this critical area of organizational health demands ongoing board attention.

Deborah Brecher is the president and managing director of Tandem Group.


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