This is the second of three articles on the topic of human capital. The first, Overseeing “Our Greatest Asset”, dealt with the board’s role in Human Capital Management. Next week’s article will deal with Organizational Culture.
Providing oversight of an organization’s top talent has long been a core responsibility for boards of directors. They play a critical role in hiring and firing the CEO, evaluating the performance of top executives, and developing leadership succession plans.
Traditionally, directors have focused their efforts on the organization’s most senior leaders – typically the C-suite and senior executives – leaving oversight of the broader workforce to management. Oversight of senior leaders was seen as strategic, while the rest of the workforce was viewed as operational – the purview of management.
But nowadays, boards are coming to understand that even the most brilliant strategy is only as good as the ability to execute it – and that strong execution requires talented people at all levels of the organization, not just at the top of the hierarchy.
In other words, it requires a talent management strategy.
Talent management refers to the overarching process of getting the right people onboard and helping them grow to their optimal capabilities, all the while keeping organizational objectives in mind.
It encompasses everything from identifying talent gaps, sourcing for and onboarding suitable candidates, developing employees’ needed skills, training with a future-focus, and engaging, retaining, and motivating them to achieve the organization’s long-term goals.
A talent management strategy, then, is the plan of action the organization intends to take in order to optimize employee performance in the broadest sense. It answers questions like “How will we find and recruit the best people?”, “How will we bring them up to speed faster?”, and “How will we keep them around longer?”
The ability to attract, develop, and retain the best talent is becoming more of a challenge every day. The pandemic, along with other external forces, has given rise to changing business models, transformed working environments, and flexible working conditions.
The lack of an adequate talent management strategy poses a major risk. It’s a risk that all boards need to oversee, but the extent of the board’s involvement differs according to the organization’s governance model.
Working boards may get actively involved in helping to develop and implement the talent management strategy, while governing boards focus on assuring themselves that management has a talent management strategy in place, evaluating it to ensure it addresses the organization’s talent needs, and monitoring its execution.
Understanding the Employee Life Cycle
When it comes to overseeing talent management, it’s helpful for directors – especially those without an HR background - to understand a few key concepts. These provide a lens through which to review the strategy, assess the risks, and evaluate the results.
At the core of talent management is the concept of the employee life cycle - a model that identifies the different stages an employee advances through in an organization. There are a variety of models out there – the six-stage model depicted below is typical.
Stage 1 - Attraction
Attraction involves projecting an image of the organization as a great place to work. These days, job candidates have a lot of choice, and they are apt to choose an employer based on alignment with their own values. Millennial and Gen Z candidates, in particular, want to work at an organization with a meaningful purpose and a commitment to ESG.
Knowing this, board directors may want to ask about the organization’s talent attraction efforts, its target candidates, and the image it projects in the labour marketplace.
Stage 2 - Recruitment
This stage involves seeking out and hiring the best talent to join the organization. Organizations need an effective, comprehensive, and responsive recruitment process – one that provides potential employees with a positive candidate experience and offers them a realistic job preview, as well as insight into the company culture. It’s much easier – and far more valuable for the organization – to retain employees who were carefully chosen for their skills, experience, attitude, and cultural fit.
In a world of remote workplaces, the global talent pool is a reality, especially for knowledge jobs. To attract, recruit, and retain the right people, organizations have to cast a wide net, diversify their talent pool, and look outside traditional recruitment efforts.
If the organization is having trouble recruiting top talent, or if there is a pattern of new employees leaving within a short time of being hired, board directors may want to take a close look at the recruitment process.
Stage 3 - Onboarding
The onboarding period is critical to getting new hires adjusted as smoothly as possible. During onboarding, new employees are provided with information and tools, undergo training, and integrate into the company culture.
The onboarding stage is not typically an area of focus for the board of directors, with the exception of a new CEO or C-suite executive. Directors may want to ensure that newly hired executives get some exposure to the board within a few months of being hired.
Stage 4 - Development
This stage includes professional development, coaching, and feedback. These processes help employees improve and grow so they can pursue a career path in the company.
The development stage often merits particular attention from the board, especially as it relates to performance feedback, leadership development, and succession planning for high potential employees. Management should provide directors with a good understanding of the organization’s approach to these important processes, and directors should ask questions to assure themselves that the organization has in place a modern, comprehensive, and inclusive system for developing its people.
Stage 5 - Retention
This stage focuses on keeping top employees, ensuring they are engaged and challenged in their roles. Today’s employees are seeking a greater sense of inclusion and belonging at work, where people with diverse backgrounds can see themselves represented at all levels of the organization, including positions of leadership. Knowing that there are career advancement opportunities for people of diverse backgrounds creates a powerful incentive to stay.
Cultural fit is also a key factor in retaining employees. Read next week’s blog on the topic of organizational culture to take a deeper dive into this topic.
Given today’s challenges, the lion’s share of board discussion time is often focused on the retention stage, along with recruitment. While organizations cannot thrive without recruiting the right employees, retaining them is just as vital. Turnover is costly, in both tangible and intangible ways. The board should regularly review information about employee turnover – not just aggregate statistics, but breakdowns by job level, team, location and diversity characteristics, as well as qualitative information like reasons for leaving and findings from exit interviews.
Stage 6 - Separation
There comes a point where the employment life cycle reaches a conclusion, from retirement, new employment, or for personal reasons.
When it comes to separation, the board’s involvement is usually minimal, but directors should be kept informed of any extraordinary circumstances surrounding employee departures, such as involuntary terminations for misconduct or disciplinary reasons.
The Board’s Role
In the first article in this series, Overseeing “Our Greatest Asset”, The Savvy Director made the point that it’s important for the board to take a more substantive role in human capital management than might be considered traditional. This is especially true in the case of talent management.
To fulfill that role, directors need a good understanding of the organization’s talent management and how it aligns with the business strategy. The board has to act strategically and hold management accountable, but without stepping into the role of management.
Where exactly does that healthy balance lie? The answer is that it shifts according to three different levels of the organization.
C Suite. C-suite oversight involves setting performance objectives related to talent management, upholding ethical corporate values, and creating a diverse and inclusive culture. Measuring executive performance in these areas is critical, as is making it clear that the board expects executives to set the right tone at the top.
Up and comers: The board should ensure the company has a robust talent pipeline for all C-suite functions, identifying candidates ready to assume those positions now and in the future. The board should get to know these high performers – they could present to the board on major initiatives, work on special board projects, or attend board retreats and dinners.
Middle management: The board can provide oversight at this level by understanding the organization’s talent philosophy, culture, and needs for the future. They can review retention strategies and compensation programs, monitor key metrics, and ask probing questions about management’s plans to address skills gaps.
Questions for directors to ask
Here are just a few questions directors might want to ask on the topic of talent management:
- What are our talent needs in the short and long term?
- Which roles are mission critical?
- What are the challenges in keeping our critical roles filled?
- How will we successfully compete for the talent we need?
- Are we well-positioned in the marketplace to attract, develop, and retain top talent at all levels?
- How can we ensure our talent strategy reflects a commitment to diversity, equity and inclusion?
- How are we investing in recruiting, developing, and promoting a diverse workforce?
- What data do we need to gauge progress on our diversity, equity, and inclusion efforts?
- What are the challenges to executing our talent management strategy?
- How can we ensure senior leadership recognizes the strategic importance of talent management?
- How can we ensure that the executive in charge of Human Resources has the right level of visibility in the boardroom?
- What is our current succession plan, and how far into the organization does it go?
- How can we ensure that management below the C-suite is getting the experience and training they need to drive strategy?
- Talent management refers to the overarching process of getting the right people onboard and helping them grow to their optimal capabilities, while keeping organizational objectives in mind.
- It’s helpful for directors to understand the stages of the employee life cycle – attraction, recruitment, onboarding, development, retention, and separation.
- Employee retention begins with recruiting the right employees for their skills, experience, attitude, and cultural fit.
- In the realm of talent management, the board has to act strategically and hold management accountable, but without stepping into the role of management.
Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online hub with hundreds of guideline questions and resources to help prepare for your next board meeting.
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