October 21, 2019 | General | Posted by Ascentis
4 Key Steps HR Can Take to Help CEOs Lead a Once-in-a-Lifetime Shift in Corporate Strategy
On August 19th, the Business Roundtable – an association of CEOs from America’s leading companies that has significant influence over the direction of corporations throughout the world – announced a groundbreaking shift in corporate focus.
Signed by 181 CEOs from America’s largest corporations, the association stated that the primary purpose of an organization is no longer only to provide shareholder value, but that “we share a fundamental commitment to all of our stakeholders,” including employees, customers, suppliers and partnerships, and the communities in which they work.
This “Statement on the Purpose of a Corporation” is the first significant acknowledgement since 1987 that organizations exist to do anything other than create wealth for its shareholders. HR executives across the country have been on the frontlines of a significant cultural shift among applicants and employees for years, and corporate executives are paying attention.
Read on for four actionable ways to help your executives be leaders of positive organizational change in this new corporate environment:
1. Understand the financial impact challenges have on your organization.
HR leaders have understood for years the impact that employees have on the bottom line, but it is not easy to communicate. Items like turnover and employee engagement don’t have a dedicated line on the income statement, but the business impacts are real.
There are statistics out there that help us monetize these challenges, but the problem is that these costs vary significantly from industry to industry, and even from organization to organization. For example, it costs far less for a fast food restaurant to replace an employee and train them than it does to replace an engineer at an engineering firm.
Everyone knows that an unengaged employee produces at a lower rate than an engaged one, but how much? The first challenge is to understand the costs to your organization.
As an example, let’s start with replacing an employee. Here are some potential costs to consider:
- When an employee leaves, there is a financial impact in the form of either lower production results or higher wages in the form of overtime. These costs continue daily until you can fill the open position.
- Resources in the form of job postings, interviewing time from HR and hiring managers, recruiting firms, etc. are utilized to fill an open position.
- Additional administrative time is needed when a candidate shows up to work on the first day, such as filing paperwork, delivering training and setting up the employee.
- A new employee consumes the resources of those around them as they acclimate to their new position. Employees produce less while they are showing their new colleague how to complete their work.
- Finally, a new employee naturally produces less as they are learning their job. In some cases, it could take months before an employee is producing at the same level as their peers.
This is just one specific challenge, but do you know what it costs your organization to replace an employee when they turnover? Understanding the financial impact of the challenges your HR team faces is the first step to finding a powerful solution and driving a positive change in your culture.
2. Use data to understand strengths and weaknesses.
As organizations grow, it becomes increasingly difficult for executives and HR professionals to make accurate observations related to the culture and talent within a company. HR teams comprise only 1-2% of an organization after all, and executives may have an even more limited view.
Data is used to measure every aspect of organizational performance, allowing leaders to fine-tune business strategy to maximize profits. All too often, there is very little information related to the health of the talent and culture of an organization available to leaders. Bad information leads to bad conclusions and strategy. Fortunately, there are steps you can take to arm your team with powerful data to make great decisions and develop great strategies.
- Performance tuning with coaching and feedback - For years, companies have used performance reviews as the primary medium to collect information and data about front line employees. The challenge with a traditional performance review is the limited range of data that is collected. Managers are only reporting information once per year, which leads to data that only reflects performance for a very small window of time. Additionally, employees don’t have an opportunity to improve their performance based on the feedback received.Increasing the frequency of manager and employee interactions and changing the focus of those interactions results in better data and better results from employees. Performance management needs to be an ongoing and organic process. Make it easy for managers to provide regular feedback and coaching to their employees and to record their interactions by providing an easy-to-use “performance tuning” technology.
- Frequent targeted employee surveys – Employee surveys can create a baseline understanding of the health of your organizational culture. They also can help to pinpoint areas of your organization where you may have specific challenges. The opinions, ideas and perspectives of your employees are extremely valuable, so why would you do an employee survey only once per year?Instead, utilize employee surveys to take a regular pulse of your organization and to chart the change in your organizational culture. These regular datapoints will help your team understand if efforts to improve performance and culture are effective.
3. Create champions of your operational leaders.
With an average of one HR person for every 100 employees, how can an HR team possibly execute initiatives that will positively impact their organization? With help, that’s how.
If you’ve collected valuable data about your employees through performance tuning and frequent employee surveys, and you understand the financial impact of the challenges your organization faces, you’re ready to develop a plan that can improve your organization.
It’s your managers and operational leaders, however, that will be executing that plan. If they don’t understand or believe in the value of what you are trying to accomplish, it is doomed to fail. From the very beginning, it is important to include your leadership team and managers of your efforts. If they buy in to the data you collect, and understand how your strategies will impact the company, they will become champions of your efforts.
A champion who has contributed to a specific strategy and is armed with the knowledge of how it will impact your company will execute more effectively and increase the odds of a positive outcome.
4. Execute against specific measurable goals.
Are you trying to reduce turnover in your organization by 5%? Develop a bench of promotable candidates in a key division? Improve safety outcomes on the manufacturing floor through additional training?
Measuring the return of an HR-based initiative can sometimes be extremely difficult because there are so many variables. It’s hard to know, for instance, if a specific action will reduce turnover, or if specific training will improve safety.
Whatever challenge you are tackling within your organization, it is important to understand specifically what you are trying to accomplish and the metrics you will be tracking to measure the results. The data that you have collected from your employee population can be invaluable as you are tracking your results.
“The Statement on the Purpose of a Corporation” was an acknowledgement of a long missing reality in corporate strategies of the past – profits don’t happen in a vacuum. The actions of a corporation toward each of its shareholders, including employees, have a significant impact on the long-term value of that organization.
Armed with a financial understanding of organizational challenges, actionable data from their workforce, and acting with champions in their organization toward specific measurable goals, HR leaders will be in a position to help their executive teams lead in a new age of corporate awareness as they meet the expectations of future generations of employees.
About the Author
Matt Hassler is a professional consultant with Ascentis. During his 14 years in the Human Capital Management technology sector, he has worked with 1000s of executives and HR professionals to help them improve their organizational cultures and increase efficiencies through technology.