Managing the Effects of Short-Termism on Risk Oversight

Jim DeLoach

Jim DeLoach

The complexities surrounding short-termism make it a tough nut to crack. Short-termism in this instance refers to a focus on short-term company performance results at the detriment of achieving long-term strategic goals. But in all its forms, short-termism is not sustainable in a rapidly changing world. That’s why directors need to ensure that the organizations they govern seek a healthy balance in addressing short- and long-term interests of the organization’s senior executives and stakeholders.

Short-termism is certainly not a new concept. In a recent survey of more than 600 public company directors and governance professionals conducted by NACD, 75 percent of respondents indicated that pressure from external sources to make short-term gains is compromising management’s focus on long-term strategic goals. This pressure can affect the board’s risk oversight.

Short-termism manifests itself in many ways. The more common example is focusing on quarterly earnings at the expense of funding long-term sustainable growth. But it can also lead to the pursuit of several risky activities, including: M&A deals for growth’s sake without clear linkage to the overall corporate strategy; releasing new products to market without sufficient testing; allowing cost and schedule considerations to undermine safety on significant projects (e.g., deferring maintenance or taking risky shortcuts); and taking on excessive leverage to pursue activities that are currently generating attractive returns.

Underlying the evidence of short-termism is a complex series of root causes. Globalization, technological developments, improved transparency, and reduced transaction costs have facilitated capital flows, enabling investors to reallocate their assets to seek higher yields with greater ease. Hedge funds and other activist shareholders are also acquiring small stakes in a company with the objective of steering profits to shareholders immediately (through higher dividends, stock buybacks, asset spinoffs, or downsizing in lieu of investing in innovation that will improve productivity and drive future growth, for instance). Still another cause is the existence of compensation structures emphasizing executive pay over the near term to the detriment of long-term shareholder interests. These compensation models skew management’s decision-making toward maximizing short-term profits even at the cost of taking on excessive risk.

Following are six concrete steps the board can take to ensure short-termism does not compromise risk oversight:

1. Focus the board’s oversight on risks that matter. If risk management is focused primarily on operational matters, chances are management is not focusing attention on the right question: Do we know what we don’t know? To face the future confidently, both management and the board need to focus the risk assessment process on:

a. identifying and managing the critical enterprise risks that can impair the organization’s reputation, brand image, and enterprise value; and
b. recognizing emerging risks looming on the horizon on a timely basis.

Even though the day-to-day risks of managing the business are important, they should not command the board’s risk oversight focus except when truly pressing issues arise.

2. Lengthen the time horizon used to assess risk. Focusing on quarterly performance, annual budgets, and business plans may lead to a risk assessment horizon of no more than three years. That period may be too limiting because strategic opportunities and risks typically have a longer horizon—even with the constant pressure of disruptive change on business models. For example, the World Economic Forum uses a 10-year horizon in its annual risk study. Longer risk-assessment horizons are more likely to surface emerging issues, along with new plausible and extreme scenarios, that might have been missed with a shorter time frame. Thus, the board needs to satisfy itself that management is using an appropriate horizon.

3. Understand and evaluate strategic assumptions. Management’s “worldview” for the duration of the strategic planning horizon is reflected in assumptions about several topics: the enterprise’s capabilities; competitor capabilities and propensity to act; customer preferences; technological trends; capital availability; and regulatory trends, among other things. Directors should weigh in on management’s assumptions underlying the strategy. Doing so could reveal insights into the external environment and internal operating impacts that could invalidate the critical assumptions underlying the strategy. This is a useful approach to understanding sources of disruptive change.

4. Integrate risk and risk management with what matters. Short-termism can render risk to an afterthought to the formulation of strategy. Risk management similarly can become a mere appendage to performance management. The strategy, therefore, may be unrealistic and may involve taking on excessive risk. In addition, performance management may be overly focused on retrospective, backward-looking lag metrics. The board should ensure the strategy-setting process considers risks arising from strategic alternatives, risks to executing the strategy, and the potential for the strategy to be out of alignment with the organization’s mission and values. Directors also should insist that prospective, forward-looking leading metrics be used to complement the more traditional metrics used to manage the day-to-day business operations.

5. Watch out for compensation imbalances. Publicly listed companies on U.S. exchanges are required to disclose in the proxy statement whether the company’s system of incentives could lead to unacceptable risky decision-making in the pursuit of near-term rewards. The compensation committee typically conducts a review for excessive risk-taking in conjunction with its oversight of the compensation structure. Board concerns with respect to short-termism are a red flag for the compensation committee to sharpen its focus on the potential for troubling compensation issues that could lead to bet-the-farm behavior. A key question: Do key executives have sufficient “skin in the game” so they will be incented to take risks prudently in the pursuit of value-creating opportunities?

6. Pay attention to the culture. Short-termism can contribute to a dysfunctional environment that warrants vigilant board oversight. For example, management may continue to execute the same business model regardless of whether market conditions invalidate the underlying strategic assumptions. Also, operating units and process owners may be fixated on making artificial moves (e.g., deferring investments) and manipulating processes (e.g., cutting costs to the bone) to achieve short-term financial targets. Instead, the strategy should be focused on fulfilling customer expectations and enhancing the customer experience by improving process effectiveness and efficiency. These and other red flags warrant the board’s attention because they signal the possibility of unacceptable risk-taking that must be addressed.

If short-termism is a concern of the board, directors need to ensure their risk oversight process isn’t compromised by it. A strong focus on linking risk and opportunity can help overcome some of the “blind spots” that a myopic, short-term outlook can create.


Jim DeLoach is managing director of Protiviti. 

Talent Development Leaders Tackle Four Challenges

Directors spend the bulk of their time every quarter reviewing financial results and receive updates on enterprise risk. However, very little time is spent reviewing talent development and succession planning. Compensation committee agendas and metrics tend to be dominated by executive compensation discussions, and relatively little focus is given to measuring and tracking talent development and retention across the leadership suite.

Talent Development

From Left: Steve Newton, Barbara Duganier, Eileen Campbell,  and Doug Foshee

Panelists at a recent event hosted by NACD Texas TriCities’ Chapter, all leaders in the field of executive management and human resources (HR), discussed board-level talent oversight. Barbara Duganier, director, Buckeye Partners, served as moderator of a panel including Eileen Campbell, former vice president of human resources for Marathon Oil; Doug Foshee, former chair and CEO of El Paso Corp.; and Steve Newton, partner, Russell Reynolds Associates. The conversation confronted the fact that while the vast majority of CEOs are promoted from within, boards spend very little time on executive leadership development—and even less time on talent development beyond the chief executive.

The development of executive HR talent in an organization seems often to be left to chance. Whether it’s because the CEO and board don’t place critical importance on the position, or the HR leader views their role less as a strategic asset and more as compensation or benefits cost center, development of HR talent—and others in the executive pipeline—deserves more board-level attention.

Below are several challenges that were discussed, as well as some solutions to developing talent and value from your company’s HR leadership.

Challenge 1: People think they’re good at recognizing talent, but biases and lack of process might lead to missing out on promising people. Ask any executive to identify high potential employees, and they can always name a few promising people. However, because the ability to recognize a talented person is considered a soft skill, it doesn’t get measured or tracked on a regular basis. Interestingly, most people will identify people in their own image—just younger. Therefore, if the leadership team is not diverse, promising people may go overlooked that do not meet preconceived notions of what leadership looks like.

A Solution: Measure and track. HR leadership and the board should insist on tracking talent development-specific metrics with the same level of importance as financial metrics. Measuring also allows boards and executives to notice unconscious biases in recruitment and talent development.

Challenge 2: People are protective of their highest performers. Lateral moves and broadening development positions are imperative in order to assess and build talent across the organization. But as Campbell pointed out, managers are often reluctant to recommend their highest performers to other divisions.

A Solution: Once people are identified as high-potential employees, they should be considered “group resources” rather than belonging to a department or division. By operating across departments, leaders outside of the individual’s direct supervisors can take part in nurturing the long-term development of employees’ talents.

Challenge 3: People are reluctant to put high performers in certain roles due to a fear of failure that could result in career derailment. As a result, sometimes leaders are not “tested” outside their comfort zone, and can remain unproven until they’ve ascended to the role of CEO.

A Solution: Develop a program similar to General Electric Co.’s “popcorn stand,” a concept shared by Doug Foshee. This concept provides a future leader with significant responsibility outside his or her comfort zone in a part of the business where commercial impact on the overall organization is less relevant. In smaller organizations, these could be roles that require managing through ambiguity or necessitating cross-functional skills. In larger organizations, these could be special projects or small profit and loss businesses whose bottom line is minimal or negligent.

Challenge 4: Boards are not comfortable addressing CEO succession if they have just named a new CEO. Steve Newton remarked that given the average tenure of a CEO is four to five years, it’s never too soon to begin assessing readiness of internal candidates if you believe they have gaps between current and desired capabilities.

A Solution: Identify a wide candidate slate within an organization early in a CEO’s tenure and begin developmental plans to grow a leadership team that has both breadth and depth of understanding.

For additional NACD thought leadership on effective management of human capital culture and talent development, members can review the Report of the NACD Blue Ribbon Commission on Talent Development. Key takeaways from speakers at the chapter program can be downloaded here, and to view the entire program visit NACD Texas TriCities Chapter YouTube Channel.


Catalano_Anna Anna Catalano is director of Willis Towers Watson, Mead Johnson Nutrition, Chemtura Corp., Kraton Corp., NACD Texas TriCities Chapter, and the Alzheimer’s Association.

Driving Behaviors Through Incentives and Risks

The following blog post is one installment in a series related to board oversight of corporate culture. The National Association of Corporate Directors (NACD) announced in March that its 2017 Blue Ribbon Commission—a roster of distinguished corporate leaders and governance experts—would explore the role of the board in overseeing corporate culture. The commission will produce a report that will launch during NACD’s Global Board Leaders’ Summit Oct. 1–4.

CompensationCulture

Incentives can reward performance—and create tension and unintentional risks.

One element that helps define an organization’s culture is the set of incentives motivating employees to act. While incentives can effectively reward performance that benefits the enterprise, the compensation committee—and the board more generally—must factor in the tension and unintentional risks that incentives can create.

NACD, along with Farient Advisors, Katten Muchin Rosenman, PwC, and Sidley Austin, last fall cohosted the first-ever joint meeting between the NACD Compensation Committee Chair Advisory Council and the NACD Advisory Council on Risk Oversight. Committee chairs from Fortune 500 corporations joined governance stakeholders for an open dialogue on incentives and risk taking.

The discussion was held under a modified version of the Chatham House Rule, under which participants’ quotes are not attributed to those individuals or their organizations, excepting cohosts.

Six questions emerged that boards and compensation committees should consider:

  1. Do we have an appropriate balance of metrics?
  2. Are we calibrating goals and upside opportunity appropriately?
  3. Are we considering the quality of performance?
  4. How robust are the controls on data that is used as inputs to the compensation plan?
  5. How are our board’s committees collaborating on developing and monitoring incentive plans?
  6. Are we actively exercising discretion?

Below are details for three of those questions. More information is available for download in NACD’s complimentary brief, Incentives and Risk Taking.

Do we have an appropriate balance of metrics?

The Report of the NACD Blue Ribbon Commission on Performance Metrics states, “Corporate leaders must select metrics that encapsulate the company’s strategy, the balance of risk and reward, and the milestones along the way.” Management chooses appropriate metrics for the company. The board’s role is to decide if those metrics help create long-term value for shareholders—and also to ask management the right questions to ensure that risks associated with compensation plan incentives are being mitigated.

“Our responsibility is to understand the business and the industry,” said one director at the meeting. “The more we understand the business, the more [any] red flags will become apparent.” Meeting participants added that just as there is no silver bullet or single perfect metric to use when developing incentive plans, there is no one-size-fits-all approach to finding a satisfactory balance of metrics.

“There’s no perfect performance measure because every one of them can be gamed either deliberately or not deliberately,” said Dayna Harris, vice president at Farient Advisors. “In addition, it’s important to factor in trade-offs—for example, between metrics related to earnings and those related to revenue or returns—in order to get a combination that works.”

Thomas J. Kim, partner at Sidley Austin, said, “Performance metrics for compensation should be consistent with how management and the board think and talk about the business, both internally and externally. Qualitative metrics are generally more appropriate for, and tailored to, specific individuals, rather than for management as a whole.”

Are we calibrating goals and upside opportunity appropriately?

In addition to selecting performance measures, compensation committees must ensure the pay plan keeps the firm’s risk appetite in mind. The goal is to avoid unintended consequences that might compromise the enterprise’s reputation or its long-term viability. At one council delegate’s company, “the chief risk officer does a risk analysis of the executive compensation plans and shares it with the board. We can assess where it nets out on the risk spectrum. The analysis is repeated at the end of the year to look at incentive payouts and whether any business area took undue risks.”

Participants highlighted two areas for compensation committees and boards to consider:

  • Incentive thresholds. “Stretch goals are great and often important to strategy execution. But the board needs to ask whether high incentive thresholds may encourage bad behavior,” one participant said.
  • Slope-of-the-payout curve. Harris advised, “Make sure the upside [payout] opportunity is not excessive, especially for annual incentives. Three hundred to four hundred percent payout ranges can be dangerous.”

Are we considering the quality of performance?

Council delegates also emphasized that it is essential for compensation committees—and, indeed, for all board members—to ask probing questions about the way in which management achieves results, not just whether or not a particular performance target has been met: “How you get there makes all the difference: we have to look at the quality of earnings,” one delegate said. “If our incentive plan is heavily weighted toward rewarding revenue, did we end up with a bunch of low-margin or bad deals?”

One compensation committee chair reported, “To make sure that our results are sustainable, we’ve introduced strong metrics around employee satisfaction and engagement, along with customer satisfaction. These can count for as much as 25 percent of the CEO’s annual bonus.”

Questions about the quality of performance have risen to the top of many boards’ agendas in the wake of criticism over the consequences of aggressive incentive plans at companies such as Wells Fargo and Mylan. Reflecting on what has been publicly reported about these two situations, participants identified the following takeaways for directors:

  • Exercising skepticism is essential in times of good performance—when it is often most difficult to do. “It can be hard for directors to push back when they’re in the boardroom of a high-functioning organization and hearing lots of great stories from management,” observed one participant. Several delegates pointed out that executive sessions can be particularly useful in this regard.
  • Question over-performance as closely as underperformance. “If it looks too good to be true, it probably is,” a director said. “Wells Fargo’s cross-selling numbers were significantly above industry standard. As directors, we need to look very closely at outlier-level performance—it might be a red flag.”
  • Reputation risk can be material, even when financial losses are relatively small.

By incorporating into board discussions the above-listed questions, directors can strengthen responsible oversight of incentives. “It’s our responsibility as directors to understand the business and the industry in depth—trends, competitors, pricing models,” one director said. “That gives us a much deeper understanding about what is possible and what we’re asking management to do when we set goals and targets. It will also help us see potential risks and red flags much earlier.”

Why Are People Part of the Cybersecurity Equation?

Sedova_Masha

Masha Sedova

As many as 95 percent of breaches to companies’ data have a human element associated with them. It is no wonder, then, that security teams call people “the weakest link” in securing an organization and choose other investments for defense. Despite companies’ deep investments in security technology over the years, security breaches continue to increase in frequency and cost.

The conventional approach misses a significant opportunity to utilize people as a defense strategy against the ever-changing threat landscape. In fact, only 45 percent of respondents in the National Association of Corporate Director’s 2016-2017 Public Company Governance Survey reported that their boards assessed security risks associated with employee negligence or misconduct. Organizations that have fostered intentional security cultures from the boardroom to the server room have managed to transform employees into their strongest asset in defending against attacks, gaining advantages in both protecting against and detecting cyber threats.

What is security culture?

SecurityCulture

From the boardroom to the server room, people could be your greatest security asset.

Culture-competent boards and management teams understand that culture is the set of behaviors that employees do without being told. In simpler terms, it’s “the way things are done around here.” There are many sub-cultures within an organization, and security culture is one that often looks quite different from the expectations set by policy. Security culture has the power to influence the outcome of everyday business decisions, leaving an employee to judge for themselves the importance of security in a decision. For instance, some frequent questions that employees might encounter include:

  • Is it ok to release insecure code or should we test more, resulting in a delay?
  • Do I feel safe to report that I may have incorrectly shared a critical password?
  • Do I prioritize a secure vendor over a less expensive one?

Each of these decisions, when chosen without security in mind, add to the organization’s security debt. While likely that none of these decisions on their own will lead to the downfall of the organization, each risky action increases the probability of being targeted and successfully compromised by cyber-attackers. On the other hand, if the decisions to the questions presented above are chosen with a secure mindset, over time an organization can expect to see more secure code, better data handling processes, and an increased ability to detect cyberattacks, just to name a few examples. A positive, security-first culture makes it more difficult for an attacker to find and exploit vulnerabilities without detection, incentivizing a different choice in target. Directors at companies across industries should carefully evaluate whether management has established a security-first culture as part of their greater cyber-risk oversight strategy.

It is worth realizing that security-minded employees will not solve all security headaches. However, a company’s talent is an essential third leg of the business stool, partnered with technology and processes. An organization that does not invest in training and empowering its employees to prioritize security is only defending itself with two-thirds of the options available to it.

How do you practice it?

The first step boards and executives can take to shape security culture is to identify the most critical behaviors for your employees. Historically speaking, security culture programs used to be based on compliance and asked, “How many people completed a training?” or “How much time is an employee spending on education?” These are not the right questions. Instead, we should ask, “What will my people do differently after my program is in place?”

Prioritize behaviors by their impact on the security of your organization, customers, and data. Ideally this will distill down into two to three measurable actions that boards and executives can encourage employees to take in the short-term to be security minded. Most mature security culture programs have the following three capabilities to help develop these behaviors: measure, motivate, and educate.

1. Measure It is critical to have measures in place to show progress against culture change. When an organization can measure its key desired behaviors, it can start answering critical questions such as:

–  Are my campaigns effective at changing this behavior?
–  What groups are performing better? Why?
–  Has the company already met its goals? Can I focus on the next behavior?

Measuring culture is notoriously tricky because of its qualitative nature, but it can be done using measures such as the number of malware infections, incident reports, or even surveys that test for the knowledge of, and adherence to, policy and process. Surveys should also test for employees’ perception of the burden of security practices, as well as a self-assessment of individual security behavior.

2. Motivate Effective behavior change requires motivation. Spending the time explaining the purpose behind each security measure goes a long way in getting employees on board. As an example, sharing case studies of successful attacks and lessons learned helps demonstrate to employees that the threat is real and applicable to their work. Some other great ways of providing motivation to follow through on security behaviors are public recognition of outstanding behavior, gamification, or rewards for success.

3. Educate Employees cannot act to change their behavior if they are not fully trained to do so. Ensure employees have the knowledge and tools to complete the security tasks. Ideally, the information presented should be tailored by role and ability level to make it as relevant and interesting to the employee as possible. One key focus should be on educating senior executives on the trade-offs between risk and growth in a company. Consider providing scenarios based on real cyber-attacks that explore the long-term impact of risky business decisions. Add these discussions opportunities into existing leadership courses to help model security-mindset as a valued leadership trait.

Senior level engagement

While the above is a framework that boards and executives can use to drive security behavior change from the bottom up, leadership has an important role in setting the security culture as well. Executives can publicly share the value of security as an employee themselves, which will reinforce the importance they see in proper security culture to the organization and to the customers they serve. Executives should hold their businesses accountable for executing on key security behaviors and publicly call out examples that have impacted the security of the organization, either positively or negatively. Finally, boards should press executives to ensure that the focus of their people-centric security program is on the highest area of risk, not just what is easy to measure.

Masha Sedova is the co-founder of Elevate Security, a company delivering interactive and adaptive security training based on behavioral science. Before Elevate, Masha was a security executive at Salesforce.com, where she built and led the security engagement team focused on improving the security mindset of employees, partners, and customers.

Five Ways to Improve Your Board’s Oversight of ESG in 2017

BoardOversightESG

Click to download this complementary publication.

The National Association of Corporate Directors (NACD) recently released its sixth annual edition of Governance Challenges 2017: Board Oversight of ESG, produced in collaboration with NACD’s five strategic content partners: Heidrick & Struggles, the KPMG Board Leadership Center, Marsh & McLennan Companies, Pearl Meyer, and Sidley Austin LLP. Environmental, social, and governance (ESG) issues encompass a variety of areas in which shareholders have demonstrated an increasing interest: sustainability, diversity and inclusion, human rights, labor practices, executive compensation, employee relations, and board independence.

According to Institutional Shareholder Services, a record number of shareholder resolutions on climate change were filed in 2016, and the average shareholder support for environmental proposals in general has increased dramatically over the last decade—from receiving an average of 11 percent of the vote in 2006 to 21 percent of the vote by June 2016. Shareholder proposals for the 2017 proxy season are also expected to focus on social issues, as there will likely be a regulatory downshift in these areas under the Trump administration.

Drawing from NACD’s report, here are five ways boards can improve ESG oversight this year in response to growing expectations from investors and consumers in this area.

1. Integrate ESG initiatives into company strategy.

How companies consider ESG issues and link them to financial and operational performance demonstrates the company’s approach to creating sustainable, long-term value for investors. KPMG recommends boards set the context for the company’s discussion around ESG issues by asking how they are applicable to the company, customers, employees, and investors. Specifically determine how environmental sustainability can support the company’s financial future. What are the board’s expectations regarding ESG? Will the company broadly address environmental and social issues, or will the company only focus on areas that directly relate to its strategy and operations?

2. Ensure key functional leaders proactively apply ESG in business operations.

All leaders in the C-suite should understand the importance of ESG and how it impacts their functional responsibilities, according to Heidrick & Struggles. For example, does the CFO include ESG elements when conducting financial analysis? Does the CMO clearly demonstrate how the company is committed to ESG goals instead of resorting to greenwashing (i.e., dedicating more effort to claiming to be environmentally responsible than actually doing it)? The board may also consider adding director ESG expertise should the company be recovering from a company-caused environmental disaster or missed opportunities in the marketplace due to lack of attention to ESG.

3. Use executive compensation to support ESG goals.

While many public companies are already engaging on ESG issues, Pearl Meyer research indicates companies fall on a spectrum from conducting basic reporting on ESG to fully integrating ESG into company strategy, culture, and executive compensation plans.

ESGContinuum

Click image to enlarge in a new window.

Alcoa and Exelon are two examples of companies that have linked ESG goals such as greenhouse gas (GHG) emission reduction to executive compensation. At Alcoa, “20 percent of executive cash compensation is tied to safety, environmental stewardship (including GHG reductions and energy efficiency), and diversity goals.” Exelon rewards executives for “meeting non-financial performance goals, including safety targets, GHG emissions reduction targets, and goals engaging stakeholders to help shape the company’s public policy positions.”

To link ESG to financial results, boards can consider the following questions regarding compensation:

  • Which components of ESG should we link to our business strategy?
  • How do these ESG factors affect our short-term earnings versus long-term value creation?
  • What are the leading and lagging metrics that matter, incorporating both financial and nonfinancial metrics?

4. Improve disclosure on the impact of climate change.

The Financial Stability Board’s (FSB) Task Force on Climate-related Disclosures (TCFD) is an organization initiated by the G20 Finance Ministers and Central Bank Governors that has produced recommendations for disclosing climate-related risks and opportunities. The task force recommends that directors consider the following, as summarized by Marsh & McLennan Companies, to promote better disclosure:

  • Processes and frequency by which the board and/or board committees (such as audit, risk, or other committees) are informed about climate-related issues
  • Whether the board and/or board committees consider climate-related issues when reviewing and guiding strategy, major plans of action, risk-management policies, annual budgets, and business plans, as well as when they are setting the organization’s performance objectives, monitoring implementation and performance, and overseeing major capital expenditures, acquisitions, and divestitures
  • How the board monitors and oversees progress against goals and targets for addressing climate-related issues

See the Recommendations of the Task Force on Climate-related Financial Disclosures for additional guidance.

5. Engage shareholders on ESG issues.

According to Sidley Austin LLP, it has now become the norm for investors to consider environmental and social issues when making investment and voting decisions. Boards should determine who from the board and management will engage investors on these issues. These representatives may vary based on the severity of the topic to be discussed and which shareholder the discussion is with. Tracking shareholder voting records, and analyzing which types of proposals are seeing increased traction over time, will also provide insight into the minds of investors.

For more on how your board can improve ESG oversight, download your free copy of Governance Challenges 2017: Board Oversight of ESG. For NACD members, also see NACD’s handbook on Oversight of Corporate Sustainability Activities.

Flexible Work Is The Future Of Feminism

ThriveGlobal has an excellent article on the importance of a flexible schedule to women in the workforce. (I’m pretty sure for men, too, perhaps just not the urgent need.)

A new site, Werk, focuses on flexible, career-building work. With situations such as child rearing, pursuing an advanced degree, and family care issues, Werk is a site whose time has come. Its mission is to reinvent work for women by providing a marketplace of career-building, flexible career opportunities for women. They optimize six types of flexibility so that one can customize.  80% of the companies in the United States are already providing some type of workplace flexibility, but the challenge is in the implementation (only 1-25%). With 30% of women who have had a child leaving the workforce, this site is one of the first to work to offer options for women to  continue their careers.

Winning Start-Ups: Where Are They Now?

If you joined the National Association of Corporate Directors (NACD) for its inaugural Dancing With the Start-Ups (DWTS) competition at the 2016 Global Board Leaders’ Summit, you heard from 12 cutting-edge start-ups in the financial, energy, and health care industries. Founders and CEOs from each start-up had four minutes to pitch their companies to a panel of expert judges. NACD recently caught up with the winning companies—Vital Vio, BoostUp, and Disease Diagnostic Group—to see what they have been up to in the past seven months.

Illuminating the War on Germs

Vital Vio created a lighting system that kills bacteria using its proprietary white light continuous disinfection technology. Their products currently are used in major hospital systems, pharmacies, public restrooms, athletic facilities, and—starting in 2017—even your home.

VitalVio under cabinet light

Vital Vio’s under-cabinet light illuminated in eco-mode.

Colleen Costello, president and cofounder of Vital Vio, explained that refining Vital Vio’s disinfecting technology to VioSafe, a single LED light, was a game changer for the company, allowing them to use the technology in the home. VioSafe lights continuously kill germs and, when used in combination with regular periodic cleaning, significantly reduce the number of germs on surfaces. “The individual LED is smaller than a thumbnail,” she noted. “This expanded the opportunities of where continuous disinfection lighting can be placed.” Some popular areas to place the light in the home are under cabinets in kitchens, bathrooms, and offices. These are some of the most-touched surfaces, which also make them the most likely to be covered with a multitude of bacteria.

Vital Vio began to take shape in 2012 when Costello’s grandmother contracted a MRSA infection during a routine hospital stay. Costello, who at the time was studying at Rensselaer Polytechnic Institute, did some research and found that one in 25 patients contract a health-care-related bacterial infection in hospitals. She and a team of researchers worked to develop a better way to control bacteria levels, and Vital Vio was born.

In 2017, Costello’s focus is not only on innovation, but on identifying potential new licensees. The company is working with several strategic partners to increase utilization of Vital Vio’s technology in their products. Vital Vio also was selected as a finalist for the Edison Awards, an annual competition that honors excellence in innovation, creativity, and ingenuity in the global economy.

While Vital Vio has broadened adoption of its products, it faces new challenges. “We’ve moved from the disruptor stage to focusing on further adoption in different markets,” Costello said. “We’d like our technology to be similar to a LEED certification, so it’s a standard practice for facilities.”

Saving Money Made Simpler

Most of us have saved for a major purchase, and we know that saving isn’t easy. BoostUp is an app that helps people establish a daily savings plan and crowdsource additional savings from friends and family, making saving for those big purchases more achievable. Users are further incentivized through special offers from partners. BoostUp founder and CEO John Morgan noted that the app has about 55,000 users who are typically aged between 18 to 34 years. The company also sees other opportunities to engage younger savers, potentially through a parent/child joint savings relationship.

One of the new features that the BoostUp app has added is RoundUp, which is a microsavings tool. Savers connect their most-used credit or debit cards to the app to pay for every-day purchases. RoundUp then automatically rounds up the purchase price to the nearest whole dollar and saves the spare change into the connected BoostUp account.

Morgan suggested that this extra money can be great for vacation funds. “It’s like finding that $20 bill in the pocket of those jeans that you haven’t worn in a few months,” Morgan said. “You set the account up, go about your daily life, and six months later you have extra money in your account. It’s another night out in Vegas, or an upgrade to first class on the plane.”

Morgan noted that BoostUp is partnering with some travel companies to identify related savings incentives. BoostUp is also working with some new partners—including Redfin—and has renewed a multiyear partnership with Hyundai. A new type of partner the company hopes to engage is auto lenders. “The lenders could help consumers who have auto loans through RoundUp,” Morgan explained. “It’s setting money aside passively and getting to a point where you can skip a monthly payment because your RoundUp had enough funds to cover it or you can make an extra loan payment.”

Curing Disease Through Technology

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Left to right: Mark Lewandowski, Alphonse Harris, and Founder John Lewandowski. 

Using only a laser pointer and refrigerator magnets, Disease Diagnostic Group is saving lives around the globe—in fewer than five seconds and for less than five cents per patient. Disease Diagnostic’s technology screens, tracks, and diagnoses infectious diseases through a portable, reusable device. The company has focused primarily on malaria but in the past few months has broadened the scope of the technology to address a wider platform of diseases, including dengue fever. “Zika is next on our radar,” CEO and Founder John Lewandowski said.

One additional challenge Disease Diagnostic faces is finding test groups. “These diseases are rare, and it’s hard to get in touch with the right samples and the right individuals,” Lewandowski explained. “You need to find the right authorities to help you on the path toward commercialization. Sometimes you outgrow whom you are working with, or your path and priorities change.”

Over the long term, Lewandowski said he hopes that the company will continue to expand the technology to test for even more diseases. To do this, Disease Diagnostic will continue to focus on finding the right strategic partners. “To pitch a new product, you’re fighting two battles,” Lewandowski said. “One, you’re in a new market and need to convince people [to invest], and two, to prove the effectiveness of the device. On top of that, you need to prove the technique of the device as well.”

MARinside

The inner working of the simple device that diagnoses malaria.

Disease Diagnostic is prepared to work through these challenges. If successful, the company is poised to be a game changer for global health. Imagine a future where more diseases could be diagnosed less expensively and effective treatment could be administered immediately. Lewandowski said that while the company is only able to work on one to two diseases at a time, the more the company is able to prove the effectiveness of its diagnostic technology, the broader its impact could be. “If we prove the business case, then we can be licensing out to flu, TB, anything a particular partner has of interest, and develop specific applications,” he said. “The solution is potentially here, and you can put it in the hands of almost anybody.”

Join Us to See the Next Generation of Stars

Back by popular demand, NACD will host its second DWTS at this year’s Global Board Leaders’ Summit on October 1 in National Harbor, MD. Participating start-ups will be announced soon. Check our website for the most up-to-date information.

Gain a Competitive Edge with an HR Audit

The word “audit” usually promotes concerns of “what are we doing wrong” or “what did we miss”.  In reality an audit is just a standardized assessment of your organization that lifts up opportunities for continuous improvement and risk mitigation.  An HR audit helps identify whether your organization’s Human Resources department is operating in a healthy and compliant fashion.

The results obtained from an HR audit help identify gaps, ineffective processes, potential violations and more.  In addition to ensuring your HR processes, policies and procedures are compliant, HR audits will help an organization achieve and maintain a competitive workplace.  With the ever-changing nature and demand of HR management, HR professionals should always keep their focus on understanding whether their current practices have a positive impact on business goals.  An HR audit will achieve this.

If you are not convinced that an HR audit is extremely beneficial, it may be helpful to know where most employers fall short.  HR professionals are already aware that areas such as hiring, performance management, discipline and termination have caused the majority of lawsuits, however; additional risk areas that should be carefully reviewed in an HR audit include:

  • Misclassification of an employee
  • Employee handbook
  • Wage & hour practices
  • Personnel files

Almost every organization has positions that have been misclassified as exempt or non-exempt from overtime eligibility.  The complexity of wage & hour laws and its regulations creates the potential for errors that can put an employer at risk for overtime liability.

An employee handbook is an excellent business tool that enables employees to know what is expected of them and will help mitigate potential damages to the employer.  The general approach includes a review of the existing employee handbook and identifying policies that are not in compliance.  Specific recommendations can be made based on best practices as well as state and federal requirements.  The overall design of the employee handbook should reflect the organization’s business philosophy and it should clearly communicate the employer’s expectations of its employees.

Employers typically require non-exempt employees to punch a time clock or complete time sheets reflecting their hours worked.  These time records are the employer’s primary means of defense against wage & hour claims so it is imperative that time-keeping policies and practices are clearly communicated and consistently administered.

A review and sampling of personnel files often reveals inadequate, expired or wrongly placed documentation.  Accurate and detailed records are essential for employers to defend any type of employee claim, particularly unemployment compensation or wrongful termination claims.

Federal, state and local employment laws are complex, often conflicting and at times counterintuitive.  Violations, unintentional as they may be, lead to lawsuits, fines, bad publicity, loss of talent, employee dissatisfaction and lost revenue.  Mitigating those risks is a key measure of success for the HR function and is critical to the success of the organization as a whole.

Engaging in a comprehensive HR audit not only ensures compliance of applicable laws, it also highlights opportunities for increasing the effectiveness of HR practices to improve employee performance, engagement and retention.  At the conclusion of such an audit, HR leaders must engage in continuous observation and improvement of the organization’s policies and procedures to ensure best practices are utilized.

 

Peggy Neily
Vice President, Practice Leader
Human Resource Consulting
CCI Consulting

The post Gain a Competitive Edge with an HR Audit appeared first on CPI World.

Gain a Competitive Edge with an HR Audit

The word “audit” usually promotes concerns of “what are we doing wrong” or “what did we miss”.  In reality an audit is just a standardized assessment of your organization that lifts up opportunities for continuous improvement and risk mitigation.  An HR audit helps identify whether your organization’s Human Resources department is operating in a healthy and compliant fashion.

The results obtained from an HR audit help identify gaps, ineffective processes, potential violations and more.  In addition to ensuring your HR processes, policies and procedures are compliant, HR audits will help an organization achieve and maintain a competitive workplace.  With the ever-changing nature and demand of HR management, HR professionals should always keep their focus on understanding whether their current practices have a positive impact on business goals.  An HR audit will achieve this.

If you are not convinced that an HR audit is extremely beneficial, it may be helpful to know where most employers fall short.  HR professionals are already aware that areas such as hiring, performance management, discipline and termination have caused the majority of lawsuits, however; additional risk areas that should be carefully reviewed in an HR audit include:

  • Misclassification of an employee
  • Employee handbook
  • Wage & hour practices
  • Personnel files

Almost every organization has positions that have been misclassified as exempt or non-exempt from overtime eligibility.  The complexity of wage & hour laws and its regulations creates the potential for errors that can put an employer at risk for overtime liability.

An employee handbook is an excellent business tool that enables employees to know what is expected of them and will help mitigate potential damages to the employer.  The general approach includes a review of the existing employee handbook and identifying policies that are not in compliance.  Specific recommendations can be made based on best practices as well as state and federal requirements.  The overall design of the employee handbook should reflect the organization’s business philosophy and it should clearly communicate the employer’s expectations of its employees.

Employers typically require non-exempt employees to punch a time clock or complete time sheets reflecting their hours worked.  These time records are the employer’s primary means of defense against wage & hour claims so it is imperative that time-keeping policies and practices are clearly communicated and consistently administered.

A review and sampling of personnel files often reveals inadequate, expired or wrongly placed documentation.  Accurate and detailed records are essential for employers to defend any type of employee claim, particularly unemployment compensation or wrongful termination claims.

Federal, state and local employment laws are complex, often conflicting and at times counterintuitive.  Violations, unintentional as they may be, lead to lawsuits, fines, bad publicity, loss of talent, employee dissatisfaction and lost revenue.  Mitigating those risks is a key measure of success for the HR function and is critical to the success of the organization as a whole.

Engaging in a comprehensive HR audit not only ensures compliance of applicable laws, it also highlights opportunities for increasing the effectiveness of HR practices to improve employee performance, engagement and retention.  At the conclusion of such an audit, HR leaders must engage in continuous observation and improvement of the organization’s policies and procedures to ensure best practices are utilized.

 

Peggy Neily
Vice President, Practice Leader
Human Resource Consulting
CCI Consulting

The post Gain a Competitive Edge with an HR Audit appeared first on CPI World.