There is an increased expectation from investors and shareholders that organisations will be able to evidence improvements in gender diversity because of the link between gender diversity and financial performance, according to AMP Capital.
“When we meet with company boards, we ask directors for updates on issues like gender diversity, safety and employee engagement, and ask for examples of policies being put into practice,” said Ian Woods, AMP Capital’s head of environmental, social and governance (ESG) investment research.
“The quality of their response indicates how seriously the issues are taken by the company and whether any change is really occurring across the organisation.”
Woods pointed to a trend for more detailed quantitative data on gender diversity as well as health and safety and said this has a number of implications for HR.
“It will not be enough to adopt a policy on these issues, investors will ask to see evidence that the policies are being adopted across the business,” he said.
“It will not be enough to adopt a policy on these issues, investors will ask to see evidence that the policies are being adopted across the business”
There a number of key HR metrics which investors and analysts may look at in assessing companies, according to Woods, who said that no one metric can express all the nuances that come from managing employees – however, some metrics are certainly more important than others in certain industries.
“Employee turnover and absenteeism rates are good measures of employee satisfaction and ability for a company to retain key personnel,” he said.
“While overall turnover is useful, employee turnover of senior management and/or key divisions can provide particularly useful insights, especially if it can be compared against other companies in the same industry.”
Safety metrics are key for resource and industrial companies, and Woods also said certain industries have specific metrics: for example, mining companies have percent indigenous and/or local employees is a useful metric to see how embedded and connected the company is with the local community.
“The biggest shortfall is that the HR strategy often isn’t integrated into the broader company strategy or they struggle to articulate the link between the two”
However, Woods said the ability for HR functions to deliver this type of information varies widely between companies.
“The biggest shortfall is that the HR strategy often isn’t integrated into the broader company strategy or they struggle to articulate the link between the two,” he said.
“As a result, the appropriate HR metrics are not measured or metrics are collected without real understanding of the reason.”
The key step in bridging this gap is that the role of HR in the company strategy needs to be clearly articulated, according to Woods, who said there is an expectation on the part of investors and shareholders that HR will be incorporated across the organisation, rather than being a stand-alone function that administers HR.
“Boards are expected to be across HR issues affecting their workforce,” added Woods, who also pointed to increased scrutiny of all workers across the supply chain, meaning that companies will be expected to be able to report on workplace health and safety issues and human rights across the supply chain.
Additionally, communicating with shareholders and helping them understand the value of HR metrics can sometimes be a challenge, given the pressure of short-term reporting cycles/profit result announcements.
“The best way for a company to communicate with shareholders is to clearly link how employee management fits into the company strategy and then which metrics are used to measure this contribution, with trend data demonstrating improvement (hopefully) in these metrics,” said Woods.
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