Investors are shifting the goalposts for business accountability beyond the traditional quarterly reports on revenue, profit and growth. As well as traditional reporting, forward-thinking investors now want to see how a business maximizes its human capital without creating any associated harm or risk within the organization or in the wider community.
This new focus is called human governance, and over the next few years it’s set to become as important a measure of corporate performance as traditional reporting has been over decades past.
Human governance manifests itself through ensuring the entire extended workforce can maximize its own personal value, and through this, a business is able to maximize its own value. This maximization of value comes about through the broader expectations the community has for business. While profit remains important, the community – and now investors – are also putting value on how sustainable an organization’s operations are, how well it treats its employees, and the broader contributions the business makes to society as a whole.
This new focus on maximizing human value also has significant ramifications for the HR operation within an organization. Gone are the days of HR being policy and governance police, the home of hiring, firing and vetting staff performance.
Culture and human governance
Instead, HR now has the role of providing an environment where human governance obligations are attainable, and where the right culture is nurtured so that governance is self-managed and maintained and human potential is maximized.
An example of where HR falls down on its governance obligations and cultural nurturing is in the finance industry, where a trader goes rogue and loses the organization significant amounts of money.
In the past, HR would have viewed the rogue trader as just that – an individual breaking the rules for personal benefit. An HR organization focused on proper human governance, however, recognizes that it’s the organizational culture that allowed the trader to wreak havoc. The reality in this situation is that at some point, the behavior and ethics of the trader were condoned somewhere in the management chain. The tacit approval of rogue behavior then fundamentally points to an overall failure of human governance. It also highlights significant fractures with the corporate culture as a whole.
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In this situation, the real role of a modern HR operation is to ensure the elements fundamental to human governance, such as “whole system thinking,” “value motive” and “improvement philosophy”of the organization are robust and self-sustaining to the point where rogues aren’t condoned, tacitly or otherwise. All this points to an HR organization that is evolving, and working in terms of human governance to identify and manage people so that their best performance comes to the fore.
By implementing systems that promote human governance throughout the organization, HR is also able to reap the benefits of analyzing and acting on the data the governance systems generate. It’s increasingly easy to gather a lot of information, from human performance through to transactional information, and even from the Internet of Things and the way intelligent devices interface with the workforce.
The only problem is that HR, in general, is still very immature when it comes to analyzing data and then acting on deep insights to maximize the human performance of the organization. In part, this is because it’s still early days for HR data analytics, and in part it’s because it requires HR operatives to think in a different way. As HR matures into analytics, it will be able to feed operational data back into the business, and will also be able to use that data to maximize the human potential of the workforce.
Taken together, new investor focus, human governance and data analytics are reshaping organizations. It’s no longer business as usual. Instead, it’s coming to an understanding where profits, maximized human value and social and environmental sustainability that is shaping the organization of the future.