A number of factors are contributing to the rising importance of talent management at U.S. companies. This means that corporate boards are likely to play a larger role in decisions on staffing and workplace culture than they have in the past. As employees are asked to return to offices while the Covid-19 pandemic rages on and as companies begin implementing their growth plans for the next 10 years, boards will be held more accountable for making sure the skills and capabilities of the company’s workforce meet the needs of its business strategy.
Frithjof Lund, global leader of McKinsey’s board services work, Hugo Bague, non-executive director at Jones Lang LaSalle and Mary Meaney, senior partner and former co-leader of McKinsey’s Global Organization Practice, shared some insight on the board’s impact on talent and culture during a recent McKinsey podcast. The panel agreed that more responsibility for talent and culture is shifting to the board, but noted that directors must maintain an advisory role and allow the CEO and management team to execute any talent strategy or culture shift.
Bague pointed out that, “The board can be enormously powerful in the questions they ask or fail to ask and what they put or don’t put on the agenda. That sends a big signal about what matters.”
Expanding on how boards could use their power, Meaney explained that, “The board has to hold the senior executive team to account to make sure that they are fully addressing talent, culture and purpose, because in today’s world, strategy is relatively easy to replicate and capital is relatively easy to access. What gives you a real source of competitive advantage is your talent and culture.”
During the podcast, questions boards should look to raise included:
Do we have the right talent to fulfill our strategy? What are we doing to retain our talent? If we are considering a major shift in business strategy, does our talent possess the critical skills necessary to make that shift? If we are considering a merger, is the target company’s talent a good match in terms of values and culture? Based on our strategy, what cultural elements and themes are most important?
These questions should motivate boards to consider other issues around talent and culture:
• Diversifying the workforce and business strategy
With shareholders asking companies to complete diversity audits that provide data on demographics and culture, it might be good for the board to ask management how it would communicate the link between workforce diversity and the company business model if stakeholders ask. Questions about workforce diversity (especially regarding race and gender) may be asked more frequently as diversity, equity and inclusion becomes more of a governance best practice, so be prepared to address the issue.
• Upskilling (or reskilling) of workers
Boards can ask management if upskilling can play a role in executing the business strategy or improving productivity. Instead of trying to recruit new workers all the time, companies can consider retraining workers to move into future areas of emphasis. This approach is often cheaper than training new workers, and if it’s done properly, upskilling can build loyalty in the workforce because it shows the company is willing to invest in its employees.
• Company-wide succession planning
Boards can also ask to be kept up to date on the succession plan for leaders of key business units or departments and the candidates who might succeed them. Having some of these business unit leaders present before the board could be helpful if directors have specific questions and it provides great experience for executives who may ascend to higher executive roles. Making sure the company’s executive pipeline has capable people can provide a competitive advantage.
• Strengthening the relationship between the board and management
If the board and management don’t have a good relationship, it will be hard to send positive messages about culture throughout the company. The board will need to make sure that its culture is a good example for others to follow, while extending a spirit of collaboration and respect to the management team that can build a culture of trust.