Senior executive performance measures do not yet value EB

Just how important is the Employer Brand to FTSE 250 CEOs?The answer seems to be ‘Not much’ on the basis of how they are rewarded.

Last week, I saw a presentation by the leading remuneration adviser Kepler Associates who work with 50 of the FTSE 250 Remuneration Committees. They revealed some excellent thought provoking recent research they had conducted amongst REMCOs and one aspect prompts me to write this blog.

This was the blend of financial and non financial measures used in these companies annual bonus plans to demonstrate the usage of short term incentive measures. Financial measures led with Profit/EPS followed by Cashflow, Revenue, Returns, EP, Total Shareholder ReturnandNet Asset Value. 

How did people related dimensions fare in The Non Financial measures which typically had a weighting of 20-30% of the total?  In descending order of usage(based on the % of short-term incentive schemesoperating across the FTSE250) the table listed-

-          ‘Personal Objectives’36%comprising areas like controllable costs, maintenance of capital disciplines, enhancing value via M&A

-          Health and Safety measures12%

-          Operational Measures 9%

-          Customer satisfaction 7%

-          Staff satisfaction – bottom of the list with 4%

So much for ‘People are our most important asset’ type statements! When I questioned thispretty abysmal figure (which is made worse if one considers the effect of the weighting towards financial measures), the answer from the consultants and the audience of Non Executive Directors was the difficulty of objectively measuring performance.Attracting, retaining and motivating talent is becoming even more of a critical issue for companies. However, the challenge remains on how to effectively combine key performance indicators in bonus plans that are measureable, understood by participants and acceptable to shareholders.

My view is that they have not tried hard enough. Of course, an overall measure of employee satisfaction is a very broad issue but there are many indicators of EB performance which seem to me to provide a better assessmente.g.

-          Can the CEO recruit and retain great senior talent? ie business critical executives who either turn down offers to join or existing stars who become voluntary leavers

-          Overall employee turnover figures on voluntary leavers improve

-          Sickness/Absence figures drop

-          Ditto Employment Tribunals

-          Net Promoter scores strengthens ie the % of people who would recommend an outsider to join less those who would not

-          A fall in the premium over current remuneration which a new employee will need as an incentive to come aboard.  Truly top employers with great EBs will pay less because of the CV building reputation they provide.

It seems to me that this vital assessment of people related ability cannot just be one number and are a combination of actual behaviour as well as attitudes. Whatever the combination it needs to be a more respected set of measures than most REMCOs seem to seek. Maybe they need more familiarization with what really matters at work as demonstrated in the implementation of people and commercial strategy.

Final thought. How do HR facing people feel about their contribution to a measure of Executive performance ie ‘Staff Satisfaction’ which is so low in the table? What does that say to others about the importance of their work? What does that say about their preparedness to eyeball REMCO and show them a better way? What if anything do REMCOs know about the Employer Brand anyway?

Simon Barrow

simon@pib.co.uk

07 976 700 603

HRD confidence and courage at Carnival Corporation

At a private meeting two evenings ago I heard a leading UK CEO state what he expects from his Human Resource Director (who was sitting at the same table). He spoke of the phenomenal business and reputation failures which are down to people and cultural issues and he believed that any HRD needs the insights, confidence and courage to ensure that the CEO and the Board are aware of these risks and the need for a plan to address them. He added other expectations including the ability to inspire, to be a great communicator (and to be responsible for internal communications) and to make sure HR plans reflect the Company’s strategy.

The ensuing discussion started with HRD confidence and courage and It made me wonder about the background to the recent Costa Concordia cruise ship tragedy and the role of its master Captain Schettino. The Captain may face prosecution for his role but I have broader and more systemic questions for his successful employers Carnival Corporation and its CEO Micky Arison:

-       What are the key responsibilities of any Carnival Captain in the company’s fleet of 101 ships (and 10 on order)? In particular the role of safety and the maintenance of safety culture? Frankly, I don’t give a damn about his/her customer service duties - the Captain’s Cocktail Party and the like that is deck chairs stuff compared to his core duties.

-       Against this standard, how are Captains appointed? What tests of competence, character, intelligence and leadership are in place?

-       What training informs Captainson the latest technical, navigational and human factor thinking?

-       How is a Captain’s current ability assessed? An airline pilot will have regular simulated flight sessions, during which a Training Captain will subject him or her to many potential incidents where flight crew knowledge and judgement will be rigorously reviewed.

-       What was the management style of Carnival and the values which actually underpinned behaviours (as opposed to the usual list of commonplace worthy beliefs)?

-       What was the role of the Carnival Group HRD (according to the website it is Jerry Montgomery appointed in 2011 and, according to the Carnival press release at the time ‘a long time hospitality industry veteran’)? Reverting back to my central point of HR confidence and courage, did he have a record of alerting previous employers to the potential risks of people and cultural issues in the context of safety? Equally, did his predecessor Wayne Byers have this reputation? It was Mr Byers retirement after 28 years which prompted the need to recruit.

-       According to the same release Jerry Montgomery reports to Howard Frank, Carnival Corporation’s Vice Chairman and COO. Did Montgomery express an opinion on the areas above and if so did Mr Frank and Mr Arison act on it?

Carnival have announced a review to be led by Captain James Hunn a retired US Navy Captain and currently the company’s senior VP of Maritime Policy and Compliance. The press release states they will ‘review all safety and emergency response policies and procedures, officer and crew training and evaluation, bridge management and company wide response and support efforts’. Captain Hunn will report to the Health, Environment, Safety&Security Committee of the Board and to Howard Frank , vice chairman and chief operating officer of Carnival Corporation & plc’

This reminds me of the Bank of England’s enquiry into the Nick Leeson/Barings Bank collapse. It was all about the relevant process not about culture and the behaviours which were really valued. The Carnival enquiry needs to be broader and assess the overall employer brand of the company including the priorities of its leadership.  As I heard recently ‘Culture always has Compliance for lunch’. I hope that the level of HR involvement is included and I have to say that I also hope that Captain Hunn, as an existing company employee, does, like any great HRD, have the confidence and courage to search and report on the soft issues as well as the rule books. Carnival has a brilliant record and deserves no less.