As human capital management, or HCM, has become increasingly linked to key company performance drivers — such as employee engagement, skills development, and talent management — some powerful voices are asking companies what they’re doing about it.
Among them: large institutional investors like Vanguard, Black Rock and State Street who are focusing on HCM as a key factor in a company’s ability to create value and manage risks. As a result, companies face rising expectations to demonstrate to investors how they’re addressing challenges that involve a broad range of “people” issues; not just traditional topics like compensation and succession but also culture, diversity, sexual harassment and ethics.
In the absence of government regulation, many U.S. companies and their boards appear hesitant to talk about an issue with few clear markers to guide their oversight. A recent review of the top S&P 250 by market cap, for example, found 82 companies mentioned human capital management, but only 12 had integrated HCM into their analysis for performance-based compensation.
A review of company reports, however, shows a growing number diving into the subject through their actions, compensation practices and the development of meaningful metrics. A few examples:
- BristolMyersSquibb: Our short-term annual incentive program will include assessment of the following key integration execution metrics: Near-term pipeline delivery milestones; Human capital management, and Synergy savings.
- Regeneron: Key Factors for 2018 Compensation Decisions: Human Capital Management – Grew size of workforce… attrition rate… recognized as the No. 1 employer.
- Southern Company: Human Capital Engagement – Gained insight at each regular Committee meeting about key talent, specific human resources initiatives and actions on diversity and inclusion, culture and employee attraction, engagement and retention.
- Wells Fargo: We continue to develop and implement a core and common performance management experience for team members…to make our policies and processes more consistent, strengthen the role of Human Resources as a control function, and improve the tools and resources used by managers to coach team members and manage their performance.
Our advice: put HCM on your radar screen
As culture and HCM continue to increase in importance, boards need to look at how they are engaging in these areas and prepare to communicate about it. Your investors are listening!