How Can an Employer Incentivize Social Responsibility?

How Can an Employer Incentivize Social Responsibility?

At an all-company meeting last week, Facebook CEO Mark Zuckerberg announced that the company was retooling its employee bonus system to reflect a new set of priorities, focused on addressing the controversies surrounding the social media giant concerning the proliferation of hate speech and misinformation on its platform. In addition to traditional metrics like user growth and product quality, Facebook will reward employees this year based on their success at promoting the social good including combating fake accounts, protecting users’ safety, and making progress on other social issues affected by Facebook and the internet in general.

The decision to reward employees for doing social good reflects a challenge that many companies, particularly large corporations with major public profiles, are facing today. Investors, politicians, the media, and consumers are paying more attention than ever before to the social, environmental, and ethical consequences of what businesses do. And Facebook is not alone in this desire, for example, Chevron recently announced that it would tie executive compensation to reductions in the energy corporation’s greenhouse gas emissions. This dynamic, in turn, puts more pressure on corporate leaders to deliver sustainability and social responsibility as well as growth.

For Facebook, awarding bonuses to employees for meeting social responsibility goals will inevitably test the company’s ability to live up to two truisms: “actions speak louder than words,” and “what gets measured gets done.” To the first point, companies can articulate all the values they want, but at the end of the quarter or fiscal year, what matters is whether the organization actually lived up to those values in its day-to-day business practices. We’ve seen companies attempt to project an image of social responsibility, only to get called out for not really reflecting that image in their work. The impact of Facebook’s new policy will take time to fully materialize, but when it pays out bonuses for 2019, investors and reporters will be curious to see whether they have really rewarded the kind of choices they say they intend to, and whether those rewards reflect a real change.

As to the second point, Facebook has set itself an ambitious goal of identifying quantifiable metrics by which to determine progress against its goals of social good. Facebook has acknowledged that there is no easy or obvious formula for doing this, but they are looking at targets like number of fake accounts shut down daily or improvements to safety and security as possible metrics. Being a data-driven company, Facebook will likely get more granular and detailed about how it defines success, especially with both the media and governments paying closer and closer attention.

Here are four things that any company considering a similar change should be ready to do to make it more likely that an incentive program like this will be successful:

Read more

C-Suite Leaders Lack Trust in Talent Analytics, Survey Shows

C-Suite Leaders Lack Trust in Talent Analytics, Survey Shows

SHRM’s Roy Maurer recently highlighted a survey from KPMG showing that corporate leaders around the world remain distrustful toward their organizations’ data and analytics when it comes to using these tools to make business decisions:

In the survey of 2,190 senior executives from Australia, Brazil, China, France, Germany, India, South Africa, the U.K. and the U.S., just 35 percent said they have a high level of trust in their organization’s use of data and analytics. Another 40 percent said they had reservations about relying on the data and analytics they produce, and 25 percent admitted they have either limited trust or active distrust in their data and analytics. Nearly all respondents (92 percent) worry about the impact flawed data could have on their company’s business and reputation.

“Executives and managers are being asked to make major decisions based on the output of an algorithm that they didn’t create and don’t always fully understand,” said Thomas Erwin, global head of KPMG International’s Lighthouse, the firm’s center of excellence for data, analytics and intelligent automation. “As a decision-maker, you really need to have confidence that the insights you are getting are reliable and accurate, but many of these executives can’t even be sure if their models are of sufficient quality to be trusted. It’s an uncomfortable situation for any decision-maker to be in.”

One barrier to the credibility of analytics for business leaders is the prevalence of incomplete data; another is that the metrics against which organizations are measuring are often ill-defined. HR metrics like source of hire and quality of hire are particularly hard to measure accurately, Kevin Wheeler, founder and president of the Future of Talent Institute, tells Maurer, and there is significant disagreement on how best to define them.

Read more

Are Organizations’ Talent Strategies Hung up on Benchmarks?

Are Organizations’ Talent Strategies Hung up on Benchmarks?

Benchmarking surveys can be a useful tool to understand how your organization compares to its peers across a variety of metrics, including talent metrics. However, Scott Mondore writes at Talent Economy, some organizations become over-reliant on benchmarks in defining their talent strategies, which “takes away from the value of the metric as a strategic tool.” Rather than chasing potentially arbitrary benchmarks, Mondore, co-founder and managing partner of the human capital analytics advisory Strategic Management Decisions, argues that talent leaders should use their data and analytics capabilities to figure out what talent metrics really matter to the organization’s performance:

Consider that a benchmark is just an average. Thus, the pursuit of outperforming a benchmark is simply a chase to be better than average against a number that may not reflect a true reality — it just reflects your particular vendor’s database. Benchmarks are also subjective. They’re a number that can change when, for instance, a vendor surveys more clients or you switch vendors. If the target is arbitrary and highly fluctuating, why spend time and money aiming for it? Shouldn’t leaders spend time and money focusing on improving metrics that have proven connections to building their business, and not just trying to outscore the average organization?

Read more

Investors Urge SEC to Mandate Human Capital Disclosures

Investors Urge SEC to Mandate Human Capital Disclosures

The Human Capital Management Coalition (HCMC), a group of 25 institutional investors with more than $2.8 trillion in assets under management, has petitioned the US Securities and Exchange Commission to enact a rule that would require companies to disclose details about their human capital management in their reports to shareholders, David McCann reports at CFO:

The group did not define any specific metrics that it wants to be reported, instead offering nine broad categories of information deemed fundamental to human capital analysis as a starting point for dialogue:

  • Workforce demographics
  • Workforce stability
  • Workforce composition
  • Workforce skills and capabilities
  • Workforce culture and empowerment
  • Workforce health and safety
  • Workforce productivity
  • Human rights
  • Workforce compensation and incentives

At present, public companies are not required to disclose anything about their human capital other than their number of employees, unless you count the requirement to reveal the compensation paid to top executives. Investors don’t even know how much money a company spends on its workforce each year.

The HCMC’s proposal is in keeping with a trend we’ve observed in our recent research at CEB (now Gartner) of investors taking an increasing interest in talent issues: Earlier this year, we released our Investor Talent Monitor (which CEB Corporate Leadership Council members can read in full here), showing that among the 900 largest companies in US equity markets, the percentage of organizations talking about talent on investor calls increased from 55 percent to 70 percent from 2010 to 2016. Culture and recruiting were the most common talent topics brought up on these calls, but other issues, like diversity and inclusion, are also subject to growing attention from investors.

Read more

In Measuring CEO Performance, There Are no Easy Answers

In Measuring CEO Performance, There Are no Easy Answers

The question of whether and how to reward CEOs on the basis of their companies’ financial performance has been the subject of much debate in recent years, with critics of pay-for-performance schemes arguing that incentive pay packages for CEOs are impossible to design in a way that actually improves their performance and can even backfire by incenting CEOs to focus on the short term, while proponents of these schemes counter that they are effective when designed properly and necessary to attract and motivate talent at the top of the corporate pyramid.

One question that comes up frequently in this conversation is how CEO performance should be evaluated to ensure that incentive structures are rewarding the right choices and behaviors on the part of the chief executive. At the Wall Street Journal, Theo Francis and Joann Lublin look at a new analysis from the proxy advisory firm Institutional Shareholder Services, showing that 250 S&P 500 companies last year paid their CEOs cash incentives above target, and 150 below. Overall, ISS says, recent data indicate that large companies may be setting their performance targets at levels they know their CEOs can meet, rather than challenging them to exceed expectations:

For two-thirds of S&P 500 companies, the overall pay CEOs received over the past three years proved higher than initial targets, according to an ISS analysis. That is typically because performance triggers raised the number of shares CEOs received, or stock gains lifted the value of the original grant. On average, compensation was 16% higher than the target.

Read more

Is ROI the Right Way to Measure the Success of Wellbeing Programs?

Is ROI the Right Way to Measure the Success of Wellbeing Programs?

At Personnel Today, occupational physician Dr. Paul J. Nicholson offers a detailed criticism of research purporting to show a return on investment from workplace wellness programs. These studies, Nicholson argues, are seldom rigorous and often appear designed to “show what people wish to demonstrate”—i.e., a direct financial benefit from wellness or wellbeing programs, when the real benefits may be less tangible:

A systematic review of the methodological quality of 34 economic evaluations of occupational health interventions reported that less than half of the studies satisfied more than 50% of methodological quality criteria, and only three studies met more than 75% of the criteria. After all, workplace wellbeing programmes are conducted at work sites and not in controlled environments, hence several intervening factors might explain, to some extent, the results of an evaluation. …

Taking note of the small, diverse body of evidence with many methodological limitations and risk of publication bias, the most that we may be able to say currently is that studies graded as having low strength of evidence support the effectiveness of wellbeing interventions for improving some health behaviours (reduced tobacco use, improved diet and reduced sedentary work behaviour); evidence is insufficient or lacking for other outcomes of interest.

The methodological problems with these studies range from selection and attrition biases, to the absence of a control group, to limited timeframes and subjective metrics. Nicholson points out these flaws not to disparage employee wellbeing as a goal of management, but rather to stress that “cost-effectiveness is not the only driving force for providing access to occupational health and wellbeing services”:

Read more

The Challenge of Mainstreaming Human Capital Reporting

The Challenge of Mainstreaming Human Capital Reporting

David McCann at CFO Magazine takes a look at two groups—Principles for Responsible Investment and the Human Capital Management Coalition—that are working to encourage more organizations to publicly disclose human capital metrics like turnover, absenteeism, and employee engagement. It’s an uphill battle for these advocates, McCann writes, as not everyone is convinced that these metrics are worth using or disclosing:

[A] former finance and marketing executive waves off the notion that such data is a good barometer of management quality. Tom McGuire, now talent strategy leader at Talent Growth Advisors, says: “Whether a company is well-run is a good question, but a more relevant one is, how do its people impact its value? To understand that, you need to look at the company’s intellectual capital—patents, brands, and proprietary technologies and methodologies. The only source of any of those things is people.”

For that reason, McGuire also quarrels with the idea that disclosure about a company’s entire workforce has much value. … Similarly, [Jeff Higgins, CEO of the Human Capital Management Institute,] points out, if you lose 20% of management in a year, that’s way too high. Losing 20% of your call-center workers is OK. It’s also fine if 20% of a retailer’s customer-facing staff is lost. But it’s disastrous if a professional services firm has 20% turnover among customer-facing professionals. The metrics that come out of the investor groups’ engagements with retailers may be used to compare the companies with one another, but it’s unknown how granular the information is, so therefore it’s unknown how useful such comparisons will be.

This discussion shows that investors are starting to understand the importance of human capital when looking at the value of a company and looking for ways to get data and information related to that. But actually understanding what the metrics are saying and how to interpret them is harder than it may seem. This might be a place where talent analytics professionals and HR leaders more broadly can step in and educate their peers in corporate leadership about not only which metrics to share but also how to think about them. People data is only going to be as strong as the story built around it.

Read more