CIPD Lab: Perspectives on the world of work
Thought leadership, challenges and reflections on issues impacting the world of work
Governance is increasingly a key focus for senior HR leaders. But where are the key links and opportunities for the function? And what’s leading to this new interest?
No organisation exists in isolation. Externalities influence and shape how organisations operate and whether they do or don’t succeed. Organisations of every type must manage their externalities; be they multinationals, public sector bodies or global charities, there are very many forces which exert pressure on business today. Changing regulation, such as revisions to the corporate governance code, the gender pay gap (and potentially the ethnicity pay gap), and underlying social discontentment with ‘big business’ are shaping decision-making, meaning that boards are increasingly being taken to task. And with socio-political complexity coming over the horizon, the ability of the board to make clear, sound and well-evidenced decisions has risen to the top of the governance agenda.
Arguably, the factors mentioned above have been emerging for some time, having been exacerbated and brought to a head by the 2008 global financial crash. That global event had a considerable impact on trust in business. Some indicators, such as the Edelman Trust Barometer, highlight that over the last decade trust has barely recovered. Corporate governance scandal after corporate governance scandal illustrates why. Many believe that decision-making is broken at the top of some of the UK’s best-known companies. Short-termism, unfair pay and a lack of employee voice in decisions are just some of the flags that something is wrong. New models that incorporate fairness and transparency are needed.
Change does appear to be on the horizon. In summer this year the influential US business group the Business Roundtable updated its declaration to make clear the need for companies to define a purpose that goes beyond delivering value to shareholders. Instead, what they call for is a ‘fundamental commitment to all…stakeholders’. This includes serving customers, employers, the supply chain, communities and, finally, shareholders. Advocates for this approach are coming forward from across the business landscape; accountants who seek to quantify the true value of organisations (for example with integrated reporting), corporate responsibility and sustainability experts, and now impact or ethical investors, keen to generate sustainable long-term value.
There is an obvious opportunity emerging for the people profession: to shape the discourse of modern organisations and modern governance and enable better management of the workforce to deliver value over the long term. Powerful actors are asking important questions that many boards (who are stuck in the old world) are finding it difficult to answer. Job quality, sustainability, fair pay, supply chain workforce practices, business culture – all are topics of interest to a broad church of business stakeholders. Regulators, investors, customers and consumers, and even employees, are demanding more of business.
At the CIPD we’ve been exploring what senior leaders in the people profession see as the key opportunities and risks associated with taking a leading role in the culture and governance space. While the opportunity to shape discussion and debate is obvious, there are several challenges that need to be overcome to be able to effectively influence how boards consider people factors in their decision-making:
Over the coming year we are continuing our work with senior leaders to explore how the people profession can help to shape conversations around people and culture at the top of organisations. There is clear appetite in the profession to lead on these issues – now appears to be the time to shed the old models of value creation and incorporate new, more sustainable and purposeful concepts into how, and for whom, the biggest and most powerful actors in society are led and run.
Ed is the CIPD's Head of Research and Thought Leadership. Ed writes and speaks on various workplace topics, including data, governance and sustainability, and emerging trends in HR and OD. In his spare time Ed is an avid reader of science-fiction, and has interests that include urbanism, urban futures and LGBT equality.
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Thought leadership, challenges and reflections on issues impacting the world of work