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Kevin Martin: Empowering Your Board with the People Analytics That Matter
- 1. Empowering Your Board with the People Analytics that Matter Kevin Martin Chief Research Officer, i4cp 2 June 2023
- 2. We discover the people practices that drive high performance to help you see what’s coming around the curve.
- 3. High-Performance Defined • Revenue growth • Market share • Profitability • Customer satisfaction What do high-performance organizations do differently? Do those practices correlate to market performance? Our Research Focus Over a 5-year period.
- 5. Questions Asked 70% answered on behalf of a public company board they serve on. 70% answered on behalf of large companies (1,000+ employees) Financial Services & Insurance was the most represented industry, followed by: Energy & Utilities, Retail, Consulting/ advisory services, Business Services, Consumer Goods Manufacturers, Health Care 80 corporate directors took part in this study
- 6. Corporate boards must emphasize the key intangible assets more.
- 7. Intangible assets now command over 90% of the S&P500 market value.
- 9. High Performance 5 Essential Elements of High-Performance Organizations Market Market Strategy Culture Leadership Talent Successful business strategy execution Innovation + satisfied and loyal customers Inclusive, change- ready environment Highly engaged and aligned workforce What you need, when and where you need it Talent Leadership Culture Market Strategy Source: Institute for Corporate Productivity (i4cp), The People-Profit Chain™
- 10. As board attention on strategy heightens further, emphasis on culture health is a must.
- 12. “…at some point, the concept you started with will run out of gas. You now need a new concept. That new concept will need new capability, and that’s hard. Mostly because culture will not let you build that new capability.” ~ Satya Nadella, CEO Microsoft (2017 FinTech Ideas Festival) “…at some point, the concept you started with will run out of gas. You now need a new concept. That new concept will need new capability, and that’s hard. Mostly because culture will not let you build that new capability.” ~ Satya Nadella, CEO Microsoft (2017 FinTech Ideas Festival)
- 13. Culture impacts Productivity Culture fitness explained nearly 20% of the variation among organizations’ employee productivity over the past two years.* *Controlling for size and market performance
- 14. Be crystal clear about the key Leading Indicators
- 15. Path Analysis for Productivity Reboot: The following model accounts for 62% of the variance in MPI Culture Health i4cp Market Performance Index Size Productivity Leaders Model Organizational Values Trust Index Coefficients are standardized direct effects with p < .001 • Senior leadership team is trusted by employees • Managers are trusted by their direct reports • Employees trust their team members • Senior leaders trust our employees • Managers trust their team members
- 16. Do we measure and manage our key intangible assets with as much rigor as our tangible assets?
- 17. The human capital data most boards receive tells an incomplete story.
- 18. The biggest thing we lack in (most) organizations is the ability to distinguish between strong and weak signals. Directors Advice to HR: Lead with Strategic Insights Robert Herz Board Member at Morgan Stanley, Workiva, Fannie Mae, and the Sustainability Accounting Standards Board Foundation Source: Institute for Corporate Productivity (i4cp), The New Corporate Currency (HR) has got to be looking at the human asset capability of the company – its ability to deliver on the strategy in terms of the workforce now and into the future. They’ve got to be experts in that. Joan Amble Board Member at Zurich Insurance, Buzzfeed, Spire Global, and Booz Allen Hamilton Every business leader must provide clarity on how they are dealing with important issues such as the 4th Industrial Revolution. Irene Chang Britt Board Member at Victoria’s Secret, Partake, and Brighthouse Financial Be courageous in keeping your fingers on the pulse of where things are headed. Challenge yourself to contribute insights: ‘Here’s an area we need to explore,’ or ‘There’s strategic advantage in directing attention there.’ Holly Gregory Partner and Co-Chair, Global Corporate Governance & Executive Compensation Practice, SIDLEY AUSTIN LLP
- 21. The HR function is increasingly becoming more important and strategic.
- 23. 80% believe the HR function will become more important in the next 1-3 years.
- 26. Key Questions to Consider How quickly can we sense and pivot to meaningful change in our Markets? How effective are we at converting relevant external and internal data into actionable insights? Where do we have talent risk in our key markets and where do we have talent advantage? Are the skills, capabilities, and work most critical to executing Strategy now the same as those that will be most critical in the next 1 -3 years? What presents the greatest barriers to executing and advancing our strategy? How will we know whether our Culture will support or impede the strategy and/or capability needed to support it? What shifts (if any) in culture will be required? How will we know those shifts are happening (or not)? How will we ensure the Leadership capability and mindset needed to support our desired culture and advance our strategy going forward? What indicators will determine which leaders are (and aren’t) able to make that transition? What’s unique about our company that makes a diverse array of top Talent want to join and stay? What is it that makes key talent decide to leave? What are we doing to ensure the critical skills and capabilities needed? Market Market Strategy Culture Leadership Talent Strategy Market Culture Leadership Talent
- 27. Thank You i4 cp .com Kevin Martin Chief Research Officer kevin.martin@i4cp.com
Hinweis der Redaktion
- On this slide, remind the listener of our elevator pitch: i4cp is a research firm that discovers the people practices of high-performance organizations. “i4cp does more human capital research than anyone on the planet, always with a focus on what do high performing organizations do differently than low performing organizations. Essentially we are applying a business lens to HR, and are focused on the people practices that drive bottom-line business impact.” --- We help you – your head of HR and the HR leadership team – see what’s coming around the curve so you can make better human capital decisions. We do this by sharing with you the successful and the next practices that drive high performance. For example, at <<xyz company>>, we did this… (TO REP- if you do not have a story to share here-ASK MADELINE, MARK, OZ or RYAN) In our research, we found <<xyz>>…. TO REP: CHOOSE A RELEVANT AND COMMON TOPIC like Culture, DEI, HR DEVELOPMENT, RETURN TO WORK, etc…) Then relate to a case study.
- Everything we do is rooted in “high-performance organizations,” so it’s important I explain how we define that. When our analysts conduct any research study we are looking at organizations that excel in 4 key areas: Revenue Growth, Market Share, Profitability and Customer Satisfaction (INTERNAL NOTE: we collect this data through self-reporting in our surveys; we have validated this against public company data). We not only look at what do High Performance Organizations do differently than low performance organizations – and 99% of the time there is always a big difference – but through regression analysis, what specific practices are providing that bottom-line business impact. We look at this over a 5-year time horizon because things change rapidly.
- Our community plays a central role in what we do, from contributing to not only the research studies we conduct but driving the direction of our research agenda, as well as providing direct support to fellow members. We are fortunate to conduct research studies where we are drawing from a database of roughly 20,000 organizations worldwide, so we always have a great mixture of national, multi-national and global companies contributing to our research. And, we’re pleased to include the many well known, respected organizations on this page, i4cp members.
- In fact, according to Ocean Tomo, 90% of the entire S&P 500 is now comprised of intangible assets such as intellectual property, brand, and culture. This holds true for the S&P Europe 350 index where 74% of its value is now intangible assets. Among the F500, it’s 84%.
- We asked participants to rate the health of their culture currently and changes in culture health over the past two years. We also asked how various workforce outcomes, such as employee productivity, engagement, retention, etc. changed over the past two years. Our regression analysis of the data then found the health of the culture plays a significant and important role in predicting improvements in employee productivity. There’s not just a significant correlation between the two, our data found that culture directly impacts employee productivity, which in turn has a large impact on market-performance. This is equally important because measuring employee productivity is a conundrum for many employers these days, particularly with the expansion of flexible work arrangements and proliferation of digital performance tracking tools (i4cp, 2022c). The old method of managing by walking around the workplace is no longer practical in many companies. Culture health, which explained nearly 20% of participating organizations’ increased productivity over the past two years, can serve as a valuable proxy of productivity.
- Culture Health and Productivity both have a strong, direct impact on an organization’s long-term market performance. Efforts to drive greater productivity should emphasize culture health, which i4cp research on Culture Fitness has found can explain nearly 20% of an organization’s variance in productivity. Culture health is largely dependent on leadership behaviors and trust within the organization, the most important relationship of which is how employees feel about senior leaders. Our Culture Fitness study found that those who described their organizations’ cultures as toxic were 16x more likely to indicate “lack of trust in senior leaders” as an issue that needs to be addressed. Leaders modeling organizational values and Trust within the organization are co-dependent. If one changes, the other most likely does too. High levels of trust and leaders who model organizational values have a strong, direct, positive impact on culture health and an indirect positive impact on productivity. They’re mediators that help explain organizational productivity because of their influence on how participants viewed their culture. This model explains 62% of how organizations’ scored on our market performance index. Are there important variables not included in this model? Of course. But this simple system supports what HR leaders and researchers have been theorizing and philosophizing for years. This is empirical evidence of the importance of culture, trust, and leadership development on business outcomes.
- DEI – you are a brand (foremost). People connect to the brand emotionally. What emotions do your consumers associate with your brand and what functional emotions does your brand connect to its consumers. What role can HR play in both the rational and functional emotions of their consumers. The franchisee connects with the community, locally. The employees should reflect that community. Messaging the R2O: What are the benefits of being together at least a couple of days a week. We want to capitalize on those. At the same time, we’ve all come to expect flexibility in our work styles. Six months from now, we’ll huddle to discuss what we’ve learned and will decide if any changes need to take place.
- anti-Woke survey (should the company make an announcement? If so (or not), what’s the impact on sentiment? What’s the impact on productivity, applications, etc.? Cisco and UX role
- Example of how one company (Mastercard) view Culture Health: a composite of succession planning effectiveness (e.g., successor retention rate and critical role retention rate), as well as individual components that comprise three other indices (Innovation Index, Inclusion Index, and Employer Brand Index). These align strongly with i4cp research on The New Corporate Currency (Purpose, Culture, and Brand).
- As complex systems theory suggests, when there are multiple parts moving around in chaos, there are a few core elements that will drive the emergence of the desired output or result. Those elements, according to research from the Institute for Corporate Productivity (i4cp) are: Market, Strategy, Culture, Leadership, and Talent. A clear understanding of the intersectionality and interdependencies of these five elements is critical to an organization’s ability to innovate as well as anticipate, adapt, and act on change. In this era of business, change is no longer sporadic—it’s continuous. Organizations must revisit these five interrelated elements systematically in order to effectively manage organizational performance. The goal should not be to build an organization that reacts quickly to change. Nor should it only be to build an organization that is almost impervious to disruption. Rather, the goal should be to build an organization that succeeds via a systemic approach to managing continuous disruption.