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Human capital management

Effective management of human capital is critical to an engaged and productive workforce.

 

THEME IN FOCUS: DIVERSITY IN THE WORKPLACE
Purposeful leadership is critical to defining and creating the conditions to drive workforce productivity growth that will support long-term performance. We believe the recruitment, development and retention of the right personnel are critical to the successful execution of a company’s overall strategy – and there is growing evidence a diverse workforce is key to achieving it.

CASE STUDIES

Company 1 Company 2
Company 1

Why did we engage?
This UK utilities company is held in several of our equity and fixed income strategies. Over recent years, the company has had a good track record of protecting its balance sheet and ratings. However, since appointing a new management team in 2019, and with the changes a new board introduced, we engaged to discuss how it was also promoting diversity in the workplace. 

How did we engage?
We held a virtual meeting in which we asked what initiatives were in place to increase the female workforce, and how the company retained its staff and created an inclusive culture. We also noted that many companies were focusing on promoting their work on diversity and inclusion, and said we were keen to understand what approach it was taking.

Outcome
The company believes diversity will drive better results, and its board has set an ambitious ESG strategy despite experiencing challenging operating performance. By 2030, the company wants to have attracted and developed 100,000 people with essential science, technology, engineering, and mathematics (STEM) skills, and aims to have women make up 40% of its workforce.

Year to date, the company has around 17% female representation within the STEM program. In 2020, the board elected a female director, bringing female representation on the board to 33%.

The company has also rolled out several other projects to address diversity issues. These included unconscious-bias training for people in leadership positions and for other employees. The company has introduced a support scheme for workers with caring responsibilities, helping them balance their jobs with time spent supporting family members. It has also offered further training through specialist learning academies, apprenticeships and a career development hub.

Mentoring has empowered staff to amplify their personal and professional development. This spanned cross-sector mentoring via the 30% Club to in-house “reverse mentoring,” which empowers staff at different levels to learn from one another. These actions are all having a positive impact on employees.

Next steps
We will continue engaging with the company to monitor how it will achieve its ambitious target to have a 40% female workforce. We believe the company has a model to build the workforce for its future, helping staff develop vital skills and creating a more inclusive workforce to ensure the company delivers for its customers.

Company 2

Why did we engage?
We engaged with this U.S. oil and natural gas company to improve diversity across management, the board and the general workforce. In 2017, the board had no female or minority representation. Executive management has acknowledged the energy industry is not highly diverse and has had challenges with attracting female talent.

How did we engage?
We asked the company to review its initiatives on diversity, inclusion and its board refreshment process. We also encouraged the company to disclose more granular data on the gender and ethnic makeup of its workforce.

Outcome
The company has made progress on diversity. The composition of the eight-member board has improved, with the recent addition of two women and one ethnic minority. The percentage of women across the company has fluctuated around 30%, while the percentage of women in management had climbed above 25% before dropping under 20% in 2019. The percentage of minority employees has climbed from a little over 10% in 2016 to around 20%. Minority representation in management positions has similarly climbed from 15% to 25% over that time.

Given that its professional ranks are almost entirely sourced from on-campus recruiting, the company had three focus areas for 2020. It is widening its intern outreach, adding colleges with more diverse student populations. The company has supported organizations including the National Society of Black Engineers, the Society of Hispanic Professional Engineers and Society of Professional Women in Petroleum to promote name recognition.

To have a broader reach, the company has placed advertisements in national magazines. It has completed internal reviews to assess how its two main offices compare with the local population regarding minority and female representation. Any shortcomings are flagged as areas for improvement.

We commend the company for acknowledging where it can improve and for its actions on diversity in the workforce. We believe diversity and inclusion are integral to a company’s culture as they can improve decision-making and lead to better long-term performance. It is encouraging to see senior management and the board setting the tone at the top.

Next steps
We will review disclosures for progress on diversity and will continue to engage with the company.

EXPLORE MORE

Stewardship priorities

  • Governance
  • Strategy alignment
  • Stakeholder engagement
  • Climate risk

Investment stewardship report

Our global annual report for 2020 illustrates not just that we are engaging with a wide range of companies, but how we are doing it, too.

Download the report

Investment stewardship overview >

 

 

Risk summary

Certain client strategies invest on the basis of sustainability/Environmental Social Government (ESG) criteria involves qualitative and subjective analysis. There is no guarantee that the determinations made by the adviser will be successful and/or align with the beliefs or values of a particular investor. Unless specified by the client agreement or offering documents, specific assets/companies are not excluded from portfolios explicitly on the basis of ESG criteria nor is there and obligation to buy and sell securities based on those factors.

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