With record-high inflation, the beginning of the Fed’s tapering program, erratic market movements and oil prices rising above $115 per barrel at the time of this writing—all amid a war in Europe and continued disruptions along the supply chain—it may not come as a surprise that the economy was the #1 strategy influencer of 2022, according to our What Directors Think survey of 300 public company board members, conducted in partnership with the Diligent Institute in the fall of 2021.
Adding to boards’ expanding list of challenges are quitting rates that have been at record highs for nearly a year now. Forty-two percent of directors surveyed said their company’s ability to attract and retain talent would play a key role in influencing strategy in 2022—only surpassed by the economy. By year end, however, that order had reversed, with talent outranking the economy as strategy influencers, 35 percent vs. 25 percent, according to our Director Confidence Index.
What’s more, workforce matters rank second this year on the list of most challenging to oversee for directors and on the list of topics that will be most prominent on boards’ agendas in 2022—up from tenth place the year prior.
“Everyone’s losing talent, no matter how good your culture, policies or pay packages,” said Scott Gibson, a director on the boards of Northwest Natural Gas Company and Pixelworks, when interviewed as part of the research. “The velocity of change is unprecedented, and expectations are so much higher in terms of freedoms and allowances and work-from-home percentages, vaccination policies, to go down the list of complicating factors. Then [for] some jobs you really want people in the office more, some you don’t. So again, there’s a complexity that’s affecting talent. It’s a really, really challenging time.”
This helps explain the somewhat sudden prominence of the issue across America’s boardrooms—over the 19 years Corporate Board Member has conducted its annual What Directors Think survey, the topic had not once ranked as a top concern for boards. Kathleen Camilli, a member of the board of Toronto-listed AGF Management and NYSE-listed UniFirst Corporation, says talent is a topic that’s discussed at every board meeting.
“Our turnover has gone up to 70 percent for our line workers,” she says, noting that Amazon or Walmart set the bar for the country in terms of wages, and the environment has become much more competitive. “You have to [increase wages], because you can’t run a company without labor.”
Then, another research conducted by Corporate Board Member, in partnership with the Society for Human Resource Management (SHRM), reveals that 27 percent of directors believe the board should be deeply involved in overseeing the talent strategy as a regular, stand-alone agenda item—and an additional 39 percent say it should at the very least be included in the overarching risk discussion. More than two-thirds (68 percent) also reported a year-over-year increase in the time they devote to discussing talent strategy in their meeting.
Exploring strategies with management around talent retention and development will be key to winning this race. Understanding what’s working, and what’s not, is critical. Traditional work environments and compensation practices no longer work in this new era. Directors must ensure they receive regular updates from the CHRO and hold senior management accountable within the current labor market. Some boards may want to consider forming a sub-committee or task force to take a deeper dive into this matter. Others may benefit from bringing in outside experts to help navigate the unique circumstances. Whatever the course of action, there’s no doubt one must be taken.