Much has been written about HR having a seat at the table. We have seen articles in Harvard Business Review with titles such as It’s Time to Blow Up HR and Build Something New (July-August 2015). In more recent times, there has been published research that links culture and good people practices with business outcomes and performance (and share price). The debate has shifted and the opportunity for HR to effectively partner with CEOs and Executives to achieve business outcomes through their people is probably never greater.
At the Australian Institute of Company Directors Essential Director Update: 17, culture was front and centre on the agenda following sensational news headlines including companies such as CPA, CBA, QBE and Seven Network.
The credibility of leaders was at its lowest level in the seventeen years of the study
Graham Bradley introduced the topic of “Trust and business legitimacy” referencing the 2017 Edelman Trust Barometer that found:
Globally, trust in institutions – business, government, media and NGOs – is in crisis. The survey also found that the credibility of leaders was at its lowest level in the seventeen years of the study – CEO credibility fell to an all-time low of 37% globally but was far lower in Australia at 26%.
Graham suggested that boards should ask the following about corporate culture:
• Is culture a regular topic on board and committee agenda?
• Do directors interact broadly across the organisation?
• Does the board get input from customer, suppliers, partner, regulators and internal auditors?
• Are key indicators reported and monitored?
• Do company values match the experience of customers, employees, partners, communities?
The regulatory response to these failings in leadership and culture focus has been to introduce “culture audits”. ASIC has indicated it will include culture into risk based surveillance reviews. Previously Directors opposed moves by regulators to be involved in culture, but now list it as one of their top priorities for 2018, making it a priority for CEOs and HR.
The Managing Culture – A good practice guide that key industry bodies, the Institute for Internal Auditors, The Ethics Centre, Governance Institute of Australia and Chartered Accountants Australia New Zealand, issued in December 2017, states that Boards see their roles very much in “defining and setting the desired culture”. It further outlines that forging a culture that is aligned with business strategy is the role of management, with the Board having oversight of implementation, but not responsibility for it.
Most Boards have held their first Board meetings of the year. If culture is a priority for regulators and Boards, it is going to be on your CEO’s agenda, if it isn’t already. Boards are going to want more than a once a year report on the latest culture inventory or employee engagement survey. They are going to demand broader and more regular measures. They will also be more involved than they ever have before.
Boards will look to monitor culture more broadly. They will also want to see regular reporting of culture indicators including:
• Whistleblowing reports
• Customer feedback
• Absenteeism, particularly unplanned
• Code of conduct warnings
• Regretted staff turnover
• Exit interviews
• HR case management (grievances, complaints, harassment) statistics
• Responses to audit issues
• Engagement surveys
What is the link between staff engagement, customer satisfaction and business performance?
So what should HR be doing and thinking about to be responding to this unprecedented focus from Boards? Should we just be compiling a quarterly report with the metrics or looking to demonstrate the insights obtained from doing a thorough analysis of the data? Does an increase in unplanned absenteeism lead to higher turnover and lower engagement (intrinsically we know it does, but we need to prove it with data)? Are there any trends in increased internal job applications and transfers? Is there a link between what this data says and employee engagement (by line manager)? Look at demographics – does this data say anything? Is there a link between customer satisfaction and employee engagement by location? What does this say? Link this with the performance of the business. What is the link between staff engagement, customer satisfaction and business performance?
What the insights from this data provides is the opportunity for targeted interventions – this means no more “broad brush” HR programs that struggle to provide a return on investment. By being armed with a “heatmap” that shows different areas of the business and their performance against key metrics, showing a correlation between the data and the performance of the business is what will further improve relevance and impact of HR in the business.
This will shift the focus from “lag” indicators such as turnover, to lead indicators, such as employee retention. This provides management with the insights to have a different conversation with Boards. It will give Boards further insights into company culture and more importantly, that management are getting ahead of the game and proactively managing culture and engagement (which is an outcome of culture).
In our next Blog, we will go through some more detail on HR Analytics and how to get started in this area. In the meantime, if you are looking for more information on metrics and analytics, please refer to deliberatedge.com and our Workforce Analytics Fundamentals Course here.
The opportunity for HR to take a lead role in shaping, reinforcing and changing culture is in front of us. Let’s seize the opportunity.