In the aftermath of the Covid-19 pandemic, talent management is gradually gaining traction on corporate boards internationally, prompting boards to reconsider talent management and its impact on corporate strategy. The common practice has always been that the board’s responsibility for managing their organisation’s talent should begin and end with the CEO and C-suite executives. It is understandable, given that boards are reluctant to be perceived as micromanaging or undermining their executive team.
However, the common principles of corporate governance expect board members to lead effectively with a forward-thinking and transformative mindset. The issue of talent management in foreign jurisdictions such as the United Kingdom and the United States is gradually evolving from an agenda solely for the succession planning or compensation committee. Talent management is now a process needed to drive strategic decisions about fostering innovation, development, value creation and the potential to outperform the competition.
The notion that the team you build is the company you build may become the new mantra in the future, and it is for this reason that talent management deserves a place on the board agenda.
The quality of an organisation’s talent management processes has a substantial correlation with its financial performance. According to a report by Accenture Modern Boards, its 2020 survey revealed that Covid-19 enhanced board member involvement in the company’s workforce strategy by 70%.
The survey results discovered that modern boards exhibited visionary leadership and outperformed traditional boards in terms of workforce strategy, revenue and innovation. Compared to their competitors, their substantial involvement in workforce strategy resulted in a 10% revenue growth over the last three years. Boards less engaged in workforce planning witnessed a 5% drop in revenue growth.
In addition, The PwC’s 23rd Annual Global CEO Survey stated that the Fourth Industrial Revolution has brought about new business models and innovative working methods that demand critical technological, digital and soft skills. Some CEOs identified a shortage of essential skills as one of the top 10 ‘grave concerns’ impeding a company’s growth and innovation.
In light of this, the need to upskill and develop a fit for the future workforce should no longer be a side- discussion or a topic for debate. Instead, the board’s involvement in talent management should be a new oversight function as part of the board’s fiduciary duty to act in the company’s best interest.
As board members, how can you adopt this new oversight responsibility for talent management in your organisation?
Engage the CEO:
Enquire from the CEO about the quality and effectiveness of your company’s talent management processes. The areas of enquiry should focus on the company’s efforts to attract, assess and hire top talent, develop, reward and retain talent as well as how the company’s workforce strategy aligns with its mission, values and vision.
Get your finger on the pulse of the company by requesting a talent evaluation of your organisation from the CEO at least once a year. Allocate enough time on the board agenda to allow for a complete discussion of the assessment findings. The evaluation will also assist you in comprehending and evaluating the company culture’s health.
The CEO should be willing to discuss the appraisal of the staff’s strengths and weaknesses, and the strategies available to address developmental needs, such as offering coaching or professional development training.
The chief human resources officer and the Governance and Nomination Committee can lead the talent assessment process, laying out the criteria and expected outcomes on behalf of the board.
You should consider the composition of the company’s executive leadership team. The same techniques used to measure your effectiveness as a board member can be readily applied to the executive team, for example reviewing the company’s skills matrix if one exists.
Ask senior management whether recent or projected changes in the business strategy have materially altered the requisite skills/expertise, and whether those changes resulted in a skills gap in the existing leadership team.
Furthermore, take note of the executive team’s demographic composition. Is the team made up of a diverse group of people? Is the team representative of the employee population and the company base? Has a strategic assessment been conducted to determine which positions are best- suited for internal versus external candidates?
Elevate the role of the Chief Human Resources Officer (CHRO) to the boardroom:
With human capital strategy oversight becoming increasingly essential, your human resources’ manager must serve as a trusted adviser in the boardroom. The CHRO should be aware of what is going on at all levels of the business, particularly in terms of hiring, turnover, engagement and company cultural challenges. Combining this with company strategy and performance is a powerful combination.
A CHRO may provide the board with valuable insights based on their expertise, which will be beneficial in talent and succession discussions. Some CHRO’s are actively involved in succession planning for senior executives, examining potential talent and determining the competencies required for a role. They also understand remuneration, and how to instil practices that reward and inspire employees and recruit top talent.
In addition to the above action steps, the PwC Governance insights centre recently released an article titled “A deeper dive into talent management: the new board imperative” , which provides further recommendations for boards to ensure that a company’s talent management approach aligns with its corporate strategy. The publication also provides a list of talent questions directors should be asking management regarding critical areas such as the overall company strategy, succession planning, diversity and inclusion as well as board composition.
So, as corporate boards evolve, I believe there will be an increased desire to be involved in talent management. More visionary boards will actively seek to assume that obligation because they appreciate the value that strategic talent management adds to ensuring its organisation’s long-term viability.
Therefore, I recommend that you bring your diverse viewpoints to bear, and assist your company in shaping its future talent requirements and development needs. It would also help to discuss the company’s industry or market segment, competitive dynamics, company strategy, competencies and experience that the workforce requires.
* Chisom Obiudo is an admitted legal practitioner and a corporate governance adviser. She currently serves as a governance advisory committee member to the board of VG Capital Partners (Pty) Ltd. She holds a master’s degree in commercial law-corporate governance. Email: firstname.lastname@example.org