How HR can help communicate shareholder value

HR needs to play a greater role in communicating shareholder value to analysts and investors

HR needs to play a greater role in communicating shareholder value to analysts and investors who are looking for metrics which demonstrate alignment between what they hear from leaders and official channels of communication, with their experience of the organisation.

What appears to be particularly important to analysts and investors, according to Jerome Parisse-Brassens, regional director Asia Pacific for Walking the Talk, is consistency of the organisation’s culture and metrics across levels of hierarchy.

“The consistency between management and the broader employee base is particularly revealing to them,” he said.

“This alignment translates for them into better communication, greater buy-in, greater cohesion, and greater performance.”

Such consistency can be found in classic metrics such as staff turnover rates, engagement scores, absence rates, tenure, workers compensation statistics, according to Parisse-Brassens, who said investors also look for measures indicating a healthy culture, such as OHS metrics, training hours and number of job applications.

Other critical metrics include those related to the following cultural attributes: transparency, integrity, honesty, openness, simplicity and customer-focus.

“If they are able to demonstrate that link, then the pressure on short-term cycles is not as strong”

There are a number of ways HR can help with shareholder communication and help them understand the value of intangibles, especially people and HR-related ones.

“I strongly believe that the HR community has an education role to play with shareholders via their leaders,” said Parisse-Brassens.

“They must ensure that their leaders fully grasp the importance of a healthy culture and engaged workforce and how it can help deliver on business strategy.

“The leaders and HR can then discuss with investors and shareholders the link between intangibles such as culture and engagement, and business outcomes and results (including financials).

“If they are able to demonstrate that link, then the pressure on short-term cycles is not as strong.”

Walking the Talk’s research shows that 66 per cent of investors recalled at least a case where culture had significantly affected a company’s valuation, either positively or negatively.

As such, Parisse-Brassens said the HR community must be able to articulate the risk between unwanted cultural attributes (such as bureaucracy, arrogance, focus on results at any costs, high levels of staff turnover) and poor performance, which are directly linked to reputational risks.

“The organisation would then be in a position to articulate it with analysts and to show they are addressing them,” he said.

“HR needs to be seen as more strategic by CEOs if they want to be able to play this educational and strategic role”

Investors who want to understand a company’s culture place great emphasis on meeting senior leadership of the companies they want to invest in, Parisse-Brassens observed.

“They listen to what they are being told and try to determine whether the information can be trusted or not,” he said.

“The top sources of information for investors and shareholders are company reports and media commentary as well as discussions with senior leaders.”

However, HR is not always significantly involved in this step of the process.

“Sometimes they have not been in a position to work closely with top leaders to ensure they are trained on those intangible elements such as culture,” he said.

“Investors report a lack of understanding by a number of senior leaders of the link between culture and engagement and results, as well as the kind of metrics, measures or other elements that would demonstrate organisational health.”

“The pressure on businesses will keep increasing until it won’t be possible for top leaders to declare they don’t know how people behave in their organisations”

Parisse-Brassens said HR needs to be seen as more strategic by CEOs if they want to be able to play this educational and strategic role.

“This is still often not the case,” according to Parisse-Brassens, who said another issue for HR is the lack of established metrics to measure the health of organisational culture.

There is an opportunity and need for HR to step up and play an educational role with senior leaders, according to Parisse-Brassens.

“They need to make sure senior leaders can articulate the link between intangible and results to be in a position to explain it to the analysts and, more importantly, to act on them,” he said.

Another step that is needed is to provide executives with culture metrics when meeting with the investment community.

These metrics can be generic or customised, and not necessarily HR focused (customer retention, for example), as long as they measure a direct outcome of culture and engagement.

“They need to make sure senior leaders can articulate the link between intangible and results”

Parisse-Brassens observed a number of trends impacting both HR and investors and analysts, and said there was an increased understanding of the link between intangibles (such as culture and engagement, and staff satisfaction) and business results.

Other trends he noted were an increased need to establish accepted and well understood metrics to measure those intangibles, increased pressure on senior leaders to understand and use culture metrics with the investor community, and a stronger emphasis on corporate culture by the analysts community when valuing stocks.

“Our research shows an increased sophistication of the investor community in how they assess culture,” said Parisse-Brassens.

“The pressure on businesses will keep increasing until it won’t be possible for top leaders to declare they don’t know how people behave in their organisations.

“Culture is more and more recognized as a critical enabler of strategy, with expectations from analysts and shareholders to see real improvement.”

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