Since before the pandemic, the social contract defining the interaction between employers and employees has been changing. Rapid advancements in automation as well as the increasing significance of commitments to environmental, social, and governance (ESG) and diversity, equity, and inclusion (DE&I) have all contributed to this shift. The pandemic only furthered the shift by elevating elements such as employee wellbeing and organizational purpose.
Employees today show a preference for companies that support their beliefs regarding social responsibility while providing flexibility and specialized opportunities for professional growth. They also want a fair compensation system that includes a transparent rewards and recognition program, which is understandable given the current economic landscape. According to the EY 2022 Work Reimagined Survey, the chance to increase their compensation is the main driver of job switching among employees.
Companies are becoming more aware of these expectations and the need to address them. Two-thirds of CEO respondents from the latest EY CEO Outlook Survey agree that pandemic-related working habits are becoming more important for lowering staff attrition and attracting new talent. However, according to the EY 2022 Work Reimagined Survey, only one-third of companies are actively changing how they handle these practices, particularly those involving technology, flexible working, and real estate.
The EY Center for Board Matters investigated how boards can help reshape the shifting social contract between employers and employees, sharing three ways that boards can support their organizations.
LISTENING TO THE RAPIDLY EVOLVING WORKFORCE
Organizations all across the world are aware that Gen Z workers are responsible for a significant portion of the fundamental shifts in employee expectations. Whereas a greater emphasis on sustainability may have been “nice to have” for millennials, it is non-negotiable for Gen Z. Furthermore, this generation embraces and integrates technology into their way of life. As true digital natives, Gen Z is leading the charge in creating the products, customer experiences, and ways of working that are revolutionizing how we live and work. By 2025, Gen Z will account for 27% of the workforce, and employers will depend heavily on Gen Z to actively contribute to the future success of their companies.
Boards can take steps to help their organizations realize this potential by collaborating with their Chief Human Resources Officer (CHRO) or a corresponding function to create a connection with younger workers. That entails encouraging relationships built on active listening, two-way dialogue, and a sense of purpose and value. This means finding ways to involve young professionals in decision-making instead of simply passively listening, and allow decision-making based on personal beliefs and preferences. In addition, the scope for collaboration and the resources available to support health and wellbeing must be emphasized. This group must be able to challenge the organization regarding transparency in its operations, its ESG and DE&I activities, and potential inconsistencies between the organization’s commitments and reality.
While talent transformation is crucial, CEOs and their boards may want to consider elevating CHRO support to accomplish these essential changes.
AN EMPLOYEE EXPERIENCE TAILORED FOR LONG-TERM SUCCESS
It is imperative to pay attention to the right signals and act upon them to make the changes necessary to successfully attract, engage, and retain talent. This requires boards to have a process for monitoring outside trends and their effects on talent. One approach to achieve this is to include external specialists on the board, such as behavioral psychologists or anthropologists.
Another crucial step is collaborating to create an employee value proposition that satisfies the needs and preferences of a multigenerational workforce. This should reflect diversity in the fullest sense, including demographic diversity and inclusion, opportunity, and skills application.
In order to acknowledge that talent is both a long-term issue and a short-term challenge, boards can also broaden the scope of the compensation committee. In the current labor market, salary plays a major part in influencing decisions. The organization’s compensation strategy must be able to support employee financial wellness in the short term to attract top talent in the long term.
More CEOs are concentrating on talent retention strategies rather than managing talent acquisition costs as a result of recessionary pressures. Prioritizing the continued usage of technology and upskilling employees is one way they can respond.
Boards can collaborate with management in retaining talent by viewing talent development as a process of progressing individuals. Employers can encourage continuous growth by offering employees new opportunities once they reach the peak of a developmental curve, such as pursuing further education or training, which would facilitate the mastery of a new job or skill. However, as change happens more quickly, these developmental curves get shorter, and skills will need to be renewed sooner. Employers must change the way their learning processes deliver skills and experience in order to do it in a more flexible, timely, and engaging manner.
RESHAPING SOCIAL CONTRACTS TO EFFECT POSITIVE CHANGE
Boards are poised to affect how quickly and urgently firms refresh and reshape their social contracts with employees. They must, however, push management and themselves to use diverse thinking if they are to have the greatest impact on their talent agenda. By doing so effectively, organizations will be able to effect positive change and evolve for the future.
On behalf of everyone at SGV, we would like to wish all those who work a Happy Labor Day!
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Rossana A. Fajardo is the EY ASEAN business consulting leader and the consulting service line leader of SGV & Co.