Boards must understand how their companies’ people strategy aligns with overall strategy and drives growth.

Questions about how best to attract, hire and retain workers have increasingly made it onto the board agenda since at least 1997, when a McKinsey study identified the “war for talent” as an emerging business challenge. In 2001, a breakout book, The War for Talent, helped redefine the role of human resources by focusing on the need to create a value proposition that would attract employees, establish a long-term recruiting strategy and utilize coaching and mentoring to cultivate management potential.

“That’s when people at the top began to realize, ‘If we don’t have the talent to deliver on our strategic initiatives, we’re not going to deliver on our strategic initiatives,’” says Libby Sartain, former CHRO at Southwest Airlines and Yahoo and now a director of ManpowerGroup and AARP. 

The past two years have supercharged those discussions. From the increased scrutiny on corporate DEI programs to the “Great Resignation,” the “Great Reshuffle” and now “quiet quitting,” our media feeds fill with a constant stream of new trends impacting the talent front. These issues, coupled with the seismic shifts brought about by changing demographics, technology and automation, create an imperative for boards and management teams to update their approach to oversight of talent and culture.
 
“The bottom line is we can’t manage people the way we used to even two or three years ago,” says Shaara Roman, founder and CEO of The Silverene Group and author of The Conscious Workplace: Fortify Your Culture to Thrive in Any Crisis.  
 
There are some key factors that underpin this shift in how we think about the evolving talent landscape. Understanding them can provide a roadmap for directors to ask the right questions to properly evaluate talent strategy.

Demographic Headwinds

According to the U.S. government, the country’s birth rate fell 4% in 2020, the largest single-year decrease in nearly 50 years. This was true for every major race and ethnicity, and for nearly every age group, and it marked the lowest point since federal health officials started tracking the data more than a century ago. At the same time, our largest generation — baby boomers — is aging out of the workforce.

It all adds up to what Johnny Taylor, director for XPO Logistics and CEO of SHRM, calls a “perfect storm” for U.S. businesses and the boards that oversee them. 

“I don’t think board members and senior execs fully appreciate the long-term implications of this. We know that millennials and Gen Z are putting off childbirth or forgoing it altogether. So, you have a growing economy, but we’re having fewer children to supply talent to this economy,” says Taylor. “When we talk about 10.7 million open jobs in America, only five and a half million people looking, that doesn’t go away overnight.”

Taylor says one potential remedy is rethinking talent pools your organization might have skipped over in the past. This includes the formerly incarcerated, caregivers and others returning to the workforce who might have gaps in their résumés. 

Companies may also have to reconsider how heavily they weigh where — and if — a candidate went to school. “I am a big advocate of community colleges,” says Kim Hunter, who has served on the boards of SCAN Health Plan, CalPrivate Bank and Orchestra Partners, and owns his own boutique recruitment firm, KLH & Associates. “The conventional wisdom was a four-year degree was the baseline. That’s changing. Just a couple of years ago, Google was having challenges filling their pipeline, and they decided maybe it’s OK if you don’t have a degree. I believe education is the foundation of success, but I also believe good common sense and work ethic can get you very far, too.”

Learning Agility vs. Tenure

The good news is that the push to take a fresh look at traditionally neglected talent dovetails nicely with another major talent trend — learning agility as a core competency. This means redefining the characteristics of a good employee in an economy defined by disruption and digital transformation.

“We are grappling with world-changing technologies on par with how the Internet changed life as we know it: Things like AI, quantum computing, and robotics and genomics,” says Josh Klein, CEO and cofounder of employee behavior analytics firm Indigometrics. “They’re all moving faster than any other technological evolution we’ve had, and they’re doing it all in synchrony. According to the World Economic Forum, roughly 50% of existing jobs will disappear because of automation. Out of the remaining jobs, six out of 10 segments are looking at having something like 30% of their workload automated. This means a massive, global reskilling challenge.”

Cara Brennan Allamano, cofounder of the advisor network People Tech Partners and chief people officer at Lattice, says adaptability is key. “The value and the necessity of having people who can operate with the right level of flexibility and with a true growth mindset has become even more important. That’s why I believe that learning agility is going to become the number one most sought-after skill as we consider our talent strategy.”

In other words, says Klein, you need to look at the person and their potential for adaptation and growth, not a static set of skills. “You need people with the ability to metabolize new information and rapidly align it to the goals of the organization in whatever function you’re in, because a candidate can be incredible at managing a spreadsheet, but in six months’ time, you’re going to need them to do nothing but information visualization.” 

Boards and executive teams should ask questions to ensure the company’s procedures have evolved to prioritize learning agility.
“You want people that have a strong, informed sense of judgment based on their professional experience and the learning that they are doing about your business day to day,” says Brennan Allamano. This may mean rethinking your recruitment and hiring practices and revamping performance review processes to probe for and incentivize a growth mindset.

Klein agrees, and stresses that the idea of adaptability as key to success works both ways. Workers need to be curious and flexible, but companies must be the same. He coined the phrase “the permeable organization” to represent what this looks like at a macro level. 

“I have observed that the organizations that tend to be most successful, that have grown in the face of dynamic market conditions and new geographies, are the ones that are the most permeable, by which I mean it is easiest for them to utilize external resources, whether that’s software talent, contractors, new service lines or different supply chains,” says Klein. “I would say the more you can optimize your ability to get who and what you need, when and how you need it, the more successful you will be. That means shortening your contracting, paperwork and bureaucracy, expediting your access to new environments and new networks, and creating more trusted brand alliances with sources of talent and resources. It’s hard to do, and it’s expensive and risky, but not doing it is a death knell.”

Employees as Customers

Employee engagement has been a buzzy term in boardrooms and the HR space for the past decade, but it received a new spotlight during the COVID pandemic, as employers scrambled to meet the needs of a workforce that was both suddenly remote and under unprecedented mental and physical stress. As with anything that threatens our safety and forces us to confront our mortality, it also caused employees across the spectrum to rethink what truly matters.
 
All of this meant accelerating a trend that started years earlier: Employees increasingly prioritizing a sense of purpose when considering where to work.

“What employees as consumers want from their employers, and what they’re expecting, is different than what many board members might have experienced,” says Roman. “Many board members grew up in organizations where it was, ‘I say, ‘Jump,' and you say, ‘How high?’ Now it’s, ‘I say ‘Jump,’ and you say, ‘Why?’” 

It all boils down, experts say, to reframing old mindsets from one of “talent as resources to be used” to “employees as customers to be cultivated.” When done right, this can unlock enormous business potential.  

“We have shifted our marketing tactics because we know that consumers buy differently than they used to,” says Roman. “But somehow, we have not taken those lessons and realized these consumers are our employees as well. And just like everybody wants to tap into the Gen Z wallet and get into their mindset and seed their brand, it’s the same thing from an employer perspective.”

Liza Mash Levin, cofounder and CEO of the remote work platform Gable, believes the strongest companies think of their people function as a service and respond accordingly. “Every product has iterations. You ask what is working, and whatever worked in the beginning might not work now, so you are constantly improving and iterating. It’s important not to get stuck in the mindset of ‘This is the policy. This is how we’re going to work moving forward.’ That policy might be fine for now, but what about as the company grows? Just as you would with other parts of the business, you need to be continually refining your workplace strategy.”

The Return of Middle Management

This greater focus on employee satisfaction also points to a need for boards to take a fresh look at the value they place on people management as a mission-critical capability. 

“In the 1980s, we flattened organizations and cut out that middle layer because it was seen as overhead,” says Roman. “In the process, we did a huge disservice to organizations and the people in the organization, because we took away the opportunity for managers to spend time caring for the people in their charge. So, now the people who are managing, for the most part, have technical or functional responsibilities as well as managing, and the cultivating and nurturing of people is a side job.”
 
Taylor draws a straight line between weak people managers and material risk to the business. “We know that 60-to-65% of employees report leaving their jobs because of their people manager. It’s that manager four layers down into the organization who manages 20 or 30 people who literally, if they screw up, they’re going to lead to lawsuits or turnover or employee disenchantment. All of that happens deep into the organization.”

That value imperative is a call for boards to take a fresh look at their organizational structure with an eye toward minimizing risk and maximizing returns, says Roman. “Take a look at things like: Are you too flat? Who are the types of people that are getting moved up? We need to invest in these managers, and we need to consider whether we build back some of those layers — not considering them a cost, but as an investment.” 

Putting the “B” in DEI

The past two years have shone a spotlight on how companies prioritize DEI. Companies must evolve with the broader conversation, which means a greater focus on a traditionally overlooked facet: belonging.
 
“We can do certain things to make people feel included, but they may still not feel like they fully belong,” says Roman. “When we think about that belonging component, it’s beyond just bringing your true self into the workplace. It’s so much deeper. It’s asking, “Can I connect with the people here? Is my voice fully heard? Do I have people who care about me?”

Belonging is a critical part of a healthy culture that breeds retention, but it can be hard to define. As with other business best practices, the key to truly understanding how an organization is doing at fostering belonging comes down to intentionality and data.
Klein says a key indicator of a healthy culture that truly prioritizes DEIB is “a willingness to get into the data and try to investigate why these problems are happening. One of the biggest red flags I see with organizations is when they are willfully not examining data they already have because it could be scary. For example, our marketing team has very high turnover. So, what’s the demographic of the people that are leaving? We don’t gather that information because we don’t want to be perceived as being favoritist or racist. But if this is happening for reasons of racial inequity, don’t you want to know?”

The bottom line, according to Hunter: “We’re more comfortable talking about historically taboo subjects like sexual orientation, but we’re still not comfortable talking about race.” Race can be one of the thorniest topics for a company to tackle, which makes assessing the racial makeup of the organization a productive measurement of whether the company is truly committed to a healthy culture that aligns with its brand and mission. Fostering a healthy sense of belonging also means considering how company policies account for other differences like physical ability, neurodiversity and religious diversity.

Privacy and Surveillance

Issues around employees and privacy have been bubbling for years but are under fresh scrutiny as the last two years have ushered in wholesale changes in where and how we work. Increasingly, employers are grappling with the tension between a need to put reasonable guardrails in place to protect data and ensure productivity and the downside effects of policies that are so heavy-handed that they introduce other unintended risks.

As Josh Klein points out, “one of the things that we see often is that the larger and older a company is, the better it’s done at putting mechanisms in place to protect itself from risk, all of which cumulatively makes it less nimble, which introduces a new element of risk.” 

For many companies, especially those that might still feel a bit dyspeptic over the abrupt switch to remote work, implementing tracking technology to ensure productivity can feel like a security blanket. While these practices may create short-term comfort, they can point to longer-term issues that impact the health of company culture and strategy. 

For example, says Klein, younger workers in particular have a different view of privacy, centered on value exchange. Understanding that view is critical to hiring and retaining top talent. “If I walk into a company and I’m told, ‘Here’s your job, and, oh, by the way, we’re going to be video-recording you eight hours a day, and if you walk away from your desk, you’re going to get dinged,’ that’s not a good deal. That doesn’t benefit me at all, and it doesn’t functionally impact my role or empower me in any way.”

Roman points to another reason this kind of excessive surveillance can indicate bigger questions about whether or not a company is using the right metrics to measure success. “When you measure productivity by time, as opposed to outcomes and outputs, you miss the bigger picture of what actually makes your business competitive.”

As with most of the aspects of good management, understanding what truly makes your business competitive requires a heavy dose of intentionality.

“The horse is out of the barn on whether measuring keystrokes or time at our desks are actually reasonable metrics for performance,” says Brennan Allamano. “Instead, we need to do the deeper work of making sure that we have effective goals at every level of organizations, that people are able to report out their impact on those goals and that people are given feedback on what that impact looks like.”

The key, says Klein, is transparency and helping the employee draw a line between the policy and how it truly helps create better performance. 

“Have an upfront discussion around what data you are collecting and why. Companies need to be intentional around what data they actually need so they can make the case back to their team.”

Distributed Work as Table Stakes

It’s been nearly a decade since Marissa Mayer caused a stir by ordering all Yahoo employees back to the office. The move was a counterpoint to an argument that had been raging in corporate America about the pros and cons of remote work. Flash-forward to 2022 and we are now two years into a forced social experiment on a global scale that has proved the thesis that employees don’t have to be in an office to be effective. 

Rather than see this disruption as a negative, Roman encourages her clients to see and seize on the upside in this shift. “We advise companies to be intentional about when and how they bring people together, to use experiences to gather people together to build those relationships and have fun together. It gets back to rethinking how we work and lead. We ask our clients to dig deep into why they want people back in the office. I hear a lot of the same reasoning, like ‘We pay for the office space,’ or ‘We collaborate better in person,’ but it’s not based on data.”

Instead of focusing on whether a company should have a remote work policy, Mash Levin says boards and executive teams should focus on the how. “There are so many ways to craft and adapt a hybrid work environment. The key is to understand what works best for your employees. I don’t think that there is a ‘one size fits all.’ It’s asking, ‘Are we being intentional in bringing people together?’ It’s not just saying, ‘We’re hybrid. You should go to the office twice a week.’ The reason why people are coming to an office is predominantly to collaborate with others. So, management needs to have a clear policy on the reason for meeting with other colleagues. What’s the goal, and how do you create a process that will streamline it for employees?”

There is another silver lining to remote work, says Mash Levin, which is the ability to recruit from a wider pool of talent based across the country and even around the world. “It unlocks an incredible talent pool that otherwise wouldn’t have been available and it gives access not just to the best talent, but also diverse talent.”

Roman says there is a way by which remote work has had a democratizing effect that can ultimately connect back to equity and fostering a sense of belonging. 

“Being in a hybrid or remote environment levels the playing field for all. Everyone’s ‘office’ is the same size on the Zoom screen. Being hybrid or remote can create opportunities to model and foster wellness and mental health, offering people more opportunities to exercise, eat better, get outside and not sit in traffic for hours getting to places.”

Talent Strategy Is Front and Center on the Board Agenda

All of this points to a new imperative for boards to have a clear sense of how the company’s people strategy lines up with overall company strategy, how it helps drive growth and how it can pose risks to the business if things are not working well. In other words, boards should be looking at the company HR strategy the same way they look at financial data. It should be monitored regularly and there should be a clear sense of what it all means, says Klein. “If I talk to your CEO and ask, ‘What’s the purpose of your company?’ can they give me an answer in one or two sentences, in a way that I can directly correlate with their product and service lines, and then how that translates into talent development?”

Part of the future of talent also means that it becomes a mainstay on the board agenda. “I would say the best companies have accountability at the board of directors level,” says Brennan Allamano. “They are asking, ‘How does the people strategy align with the business strategy? Where is the risk on the people side of our business?’ You should know attrition and how it links back to your demographics. You should know what your demographics look like from a DEIB perspective. You should understand employee sentiment. It shouldn’t just be something that happens once a year. It should be something on an ongoing basis so you can be proactive about it.”

While the dizzying pace of change can feel daunting at times, the overall story of the future of talent is positive, if boards and executive teams are willing to lean into the changes, says Sartain. 

“As someone who’s been a part of this and watched it change over 40 years, it really is heartwarming to see a world where employees know they can make a difference in corporations and can transform a company from a place where you get a paycheck to a place where you have a rich experience, where you create value and you feel valued for doing so.”  

Erin Essenmacher is a board director and strategic advisor. She spent nearly 10 years in executive leadership at the National Association of Corporate Directors, most recently as president and chief strategy officer.