What can you do to address inequality?

While inequality is a worldwide problem, South Africa has been named as the most unequal country in the world.

And it’s said that inequality poses the single biggest threat to our constitutional democracy. 

You would think that, if someone on board a ship at sea reported that there was a serious leak below the water line that threatened the safety of the ship, it would be taken seriously and attended to immediately.

Exactly who should be doing something about the leak would not pose a problem. It’s in the interests of everybody on board the ship to do what they can to ensure the vessel doesn’t go down. It’s therefore in the interests of all of us to ensure that the good ship South Africa doesn’t go down because of inequality.

Simply put, equality and inequality are really about money. On the one hand, they’re about wealth in terms of people’s assets, savings, investments and other equity they own. On the other hand, they’re also about people’s disposable income after tax, regardless of whether they have any wealth or significant assets.  

Put simply, who are the main players responsible for creating wealth and income for the nation’s people? Not politicians, contrary to popular opinion. They are generally not in the business of creating wealth. The people who create wealth in our country are the country’s business leaders, whether they like to accept that or not. Yet, few business leaders seem concerned about doing anything about inequality. They just don’t seem to see that as their problem. Most of them still seem stuck in the adolescent mindset of making as much money for themselves as possible, with little thought for the implications of an ever increasing income and wealth gap.

There are a select few who are doing what they can and they are to be saluted for their efforts, but they are in the minority and will sadly never be able to do enough on their own to make an impact on the inequality that millions have to deal with on a daily basis for their whole lives. Business leaders need to undertake a collective effort if we really want to tame this inequality beast.  

I therefore want to encourage HR Directors, HR Managers and HR Professionals to start expanding their own vision, and the vision of their leadership teams to go way past the company’s gates – into the homes of their employees (the community) and into the homes of their fellow countrymen and women.

The first thing HR Professionals could look at are the obscene “performance” bonuses paid to their executives. I am not suggesting that performance bonuses are morally wrong. They are a key component of attracting, rewarding and retaining good quality executives but, while other employees are living in appalling conditions, how much is enough for executives already earning excellent salaries?

Many years ago, I interviewed Charles Handy, author of The Empty Raincoat. He made some powerful points which I’ve never forgotten to this day. One of them was that he had some highly successful friends who had Rolls Royces (not the plural), Bentleys and other luxury cars standing in their driveways but who were still desperately trying to make even more money simply because, as he put it, they have failed to understand the Law of Enough.

Maybe it’s time to start teaching greedy executives (that’s what they unfortunately look like whether they want to or not, when they keep awarding themselves ever inflated bonuses on the back of work done by employees further down in the organisation) the Law of Enough.   

One could simply give everyone shares in the company, making everyone a shareholder. That, of course, is also not necessarily the answer as that could turn the business into a democracy where everyone has the right to vote. Businesses are not and should not be democracies because democracies are governed by the decisions of the majority. And the one flaw of democracy is that the majority are not necessarily right – because the majority are not necessarily qualified and competent to make decisions about a company’s future and you can’t put that kind of power in the hands of people who are understandably not competent to make sound business decisions.   

It therefore requires a lot more wisdom, insight and innovation to come up with ways to make your employees more equal.

I urge you, together with your colleagues, to exercise your minds as to how to start making things more equal in your company, your community and your country. In so doing, you will be doing your part in addressing the inequality that has turned us into a nation of haves and have nots – a nation where both groups fear one another for different reasons.

Alan Hosking is the Publisher of HR Future magazine, @HRFuturemag. He is a recognised authority on leadership skills for the future and teaches business leaders and managers of all generations how to lead with integrity, purpose and agility. In 2018, he was named by US-based web site Disruptordaily.com as one of the “Top 25 Future of Work Influencers to Follow on Twitter“.

How to encourage loyalty from a younger workforce

Youth Day is an apt time to focus on the importance of the youth to our country, and reflect on how businesses can ensure a positive and enriching future for this generation in the corporate world.

However, the findings of the recent 2018 Deloitte Millennial Survey reflect a very different reality, where most companies are viewed as failing miserably at fulfilling their societal and ethical roles, and are seen as being solely motivated by profit. This is quite worrying, especially as millennials are considered to be the largest generation ever to enter the workforce and are now taking up positions of influence and leadership within businesses.

Millennials are ‘disillusioned and uneasy’

The recent 2018 Deloitte Millennial Survey, which was the seventh such study to be conducted by Deloittes in as many years, surveyed the opinions of 10,455 millennials across 36 countries, including South Africa. All of those surveyed had full-time jobs, and were predominately employed by large companies from the private sector. Significantly, for the first time, the research also included nearly 1,900 respondents from Generation Z, the ‘new millennials’, who were born between 1995 and 1999.

Deloitte’s study revealed both generations to be generally disillusioned and uneasy. These generations believe that corporates have fallen short of their expectations in many ways, which does not bode well for cultivating company loyalty and encouraging productivity among younger employees. Forty-three percent of millennials see themselves leaving their jobs within two years and only 28% envision staying with their current company for more than five years. The Gen Z respondents who were employed showed even less loyalty – 61% of them want to find work elsewhere within the next two years. Millennials currently make up the biggest percentage of the workforce, and Gen Z will also soon be a force to be reckoned with in the world of work, so their satisfaction with the companies that employ them is critical for business success and continuity.

Inspiring millennial loyalty through continuous learning opportunities

One of the ways that organisations can encourage millennials to be loyal to them is through ensuring that they are regularly given opportunities to stretch themselves. Forty-eight percent of this generation put opportunities for continuous learning as an important item on their ‘Ideal Company to Work for’ Wish List. In addition, 81% of millennials believe that continuous professional development and self-paced learning will ensure they perform at their best in their job and keep pace with the changes that the Fourth Industrial Revolution will continue to bring.  However, a mere 36% of millennial respondents believed their employers were helping them prepare for this evolution.

In order to prioritise a culture of continuous learning in companies, it is vital that these organisations adopt a growth mindset, and encourage all of their employees, regardless of generation, to do the same. The concept of the growth mindset was developed from the research of psychologist Carol Dweck, who called this “the new psychology of success”. This approach, which is based on recent breakthroughs in neuroscience and neuroplasticity, maintains that people can continuously develop and even transform their capabilities. This is in direct contrast to the belief that a person’s ability is static and cannot be changed. Therefore, when a company adopts a growth mindset, the emphasis is more on improving and developing skills.

How the growth mindset can be a differentiator for employers

The challenge remains, however, that traditional learning environments and organisations place an emphasis on the fixed mindset, and it is this belief that informs how we traditionally hire, fire, and reward talent within compaies. With a fixed mindset, companies often focus on looking smart, acting like a natural, and ignoring difficulty. However, when companies adopt a growth mindset, we know that our ability can be developed, so we focus on working hard to learn, and learning from mistakes. Organisations that can foster a growth mindset can expect higher levels of engagement, resilience, innovation, and performance.

In addition, this growth mindset approach regards ‘failures’ as opportunities to learn and improve. Removing that anxiety around failing means that employees have the freedom to challenge themselves on a regular basis, inevitably resulting in more innovation and collaboration. This is in stark contrast to having a fixed mindset culture in the workplace, where our talents are seen as innate traits measured by a pre-set standard.

To enhance more of a growth mindset among the newcomers to an organisation, companies should focus less on results, natural ability and performance ratings. Rather, organisations should instead focus on growth and learning, and highlight development and progress, not only performance and results. Because an organisation’s culture consists of what that company rewards and recognises, when the focus shifts from employees proving themselves to developing themselves, the company can enhance how employees face change and challenges within the workplace.

Taking the growth mindset past the Fourth Industrial Revolution

Millennials and Gen Z believe that companies are not doing enough to prepare them for the Fourth Industrial Revolution and a significant number of them plan to leave their companies as a result. If more SA companies can join larger corporates, such as Microsoft, in applying a growth mindset in terms of how we recognise and develop our talent, we will be better prepared to navigate change and uncertainty. This is because it conveys the message that we are all – both businesses and employees – learning and developing. It is only this continual development that will enable our success and survival – both businesses and employees – past the Fourth Industrial Revolution.

Rob Jardine is the Head, Research and Solutions at The NeuroLeadership Institute South Africa.

The new age non-existent NED

In the wake of recent executive scandals, one expects that board nomination would be rigorous, systematic, and considered a key strategic action so as to ensure your board performance remains under close scrutiny. Alas, this is not the case.

Non-Executive directors (NED) are a legal requirement for organisations listed on the JSE and should play an integral role in establishing corporate governance. Furthermore, independent external advisors can play an integral role in the growth and competitiveness of SMMEs, where founders do not have the capacity to bring on a spectrum of permanent experts but require support or counsel from outside their field of expertise. But the role of the NED has exploded into an ‘unfillable’ position due its excessive requirements. The NED needs to be a technical expert, all-rounder, financial guru, legal genius, corporate governance whizz, while being objective and independent with extensive experience, the highest moral code of a saint, and committed and passionate, etcetera. Even the most talented and seasoned executive cannot reasonably meet the long requirement list. In return for being this polymath NED, with extensive responsibility and an extremely high work load, is a high potential personal risk and modest financial rewards and benefits.

Why, therefore, would anyone take on the daunting task of a NED position? It is in the aspiration of credibility as an executive to be considered a leading professional, for the prestige of a portfolio career.

Why firms are in dire need of help

The purpose or intention of the NED position is to bring in objective individuals who are able to challenge strategy and executive member decisions, advocate accountability, validate the integrity of financials, keep risk in check, and bring to the boardroom table valuable networks, expertise, skills and scrutiny. Sadly, boards do not always focus on the benefits of finding the most suitable NED with high value contributions, but appear instead to focus on meeting minimum legal requirements. This is essentially turning a key strategic decision into a compliance checklist, and in doing so, forgoes the endless benefits of heavy-hitting, well-balanced, and rigorously appointed NEDs capable of furthering and supporting board performance.

It is paradoxical that the purpose of the NED is to engender corporate governance, one of the key pillars of which is transparency, and yet the process, protocol and selection criteria adopted to appoint NEDs remains vague, subjective, inconsistent and by definition un-transparent. In the wake of recent executive scandals, one expects that board nomination would be rigorous, systematic, and considered a key strategic action so as to ensure your board performance remains under close scrutiny. Alas, this is not the case and sadly the appointment process for non-executive board members in South Africa remains in its infancy. And, because of these poor nomination trends, NEDs being appointed focus on completing work allocations and provide a superficial interrogation and monitoring of the executive board members’ behaviors and performance.

The solution begins with mindset

The focus of the NED role has been to challenge executives. This archaic and damaging description instills fear of an effective NED and does not encourage, but instead deters, the board to take NED selection more seriously. A truly sad state of affairs with the reality being that instead of executives being challenged where necessary and thereby having the opportunity to grow and develop, these are missed. This is a serious disadvantage for committed executives would want the proper advice of experts who would, in turn, positively impact and therefore contribute to their career development.

The betterment of remuneration, nomination and appointment trends

Looking at remuneration trends, while NED remuneration is improving with above inflation growth, the fact remains that remuneration is not commensurate with the responsibilities and personal liability taken on with the NED role. Remuneration ought to be performance based. Underpaying non-executive directors is counter-intuitive and risks deterring top talent or discouraging commitment and work ethic. Transformation in representation of previously disadvantaged groups needs to remain high on the agenda. Progress has been made, change will not be instant, but huge strides still need to be made, with less than 25% of NEDs represented by females and less than 40% represented by black professionals. The PWC 2017 Non-Executive Directors Practice and Remuneration Trends report found that 6% of Chairmen are female.

Establishing board nomination, risk, and audit sub-committees and ensuring sufficient objectivity, is paramount. A systematic selection process needs to be followed and monitored. This process ought to be well documented, objective and conducted with rigor. The executive committee arguably has too much work related responsibility to give this process due attention. However there appears to be a reluctance to invest in expert executive search advise, advertising, or training to build the optimal board and this is often attributable to cost saving. It is extremely rare to find a budget allocated for NED appointment. Moreover, executive search firms may provide a guarantee of objectivity and access to networks outside the scope of the existing exco. Where budgets are present they are seldom a budget expected for a key hire. However, unbiased view offered by external advisors in board appointments sends a positive signal to shareholders, as they provide key market intelligence. The use of external agency in the selection, appointment, and auditing of boards is an effective way to mitigate the risks of incompetent NEDS or assembling a board that isn’t an optimal mix of talent as they provide a pool of appropriate candidates which may not be attainable through an open application process and may not even be actively searching for a position (which is typically around 60% of the market). You do not need a good enough NED, you need a really great one.

The squeaky wheel gets the grease

Small and medium sized enterprises are a key driving force being South Africa’s GDP growth (36% in the 2017 year) and contribute to employment creation. Sadly, 70-80% of SMME’s fail within the first five years of inception, most often due to cash flow problems, a lack of market or an inability to serve market needs, poor operational and financial planning, and a lack of funding appear to be the drivers behind South Africa’s staggering SMME failure rate. There is a massive need for the owners or founders of SMEs to have access to affordable external advisors in that generally founders are technical experts. There needs to simultaneously be a change in the receptiveness of small business owners to the use of external advisement in that currently external advisement is perceived as an expense as opposed to an opportunity to invest in talent. So, in summary SMMEs are vitally important to the economy but most fail and yet there is a reluctance to bring on any help – there is no logic to this. SMMEs need to open themselves to the commercially minded to engage, brainstorm, and ask for help.

In closing, the perceptions of the NED construct needs to be shifted as their appointment can contribute greatly to Exco’s performance and the position ought to be given strategic importance. Given that no one professional can reasonably be expected to meet the long and often contradictory list of NED attributes and skills it is consequently essential to persevere towards a balanced board where the NEDs collectively meet this impossible spectrum of requirements. From the perspective of smaller unlisted firms, my opinion is that these SMMEs need to stop isolating themselves. NEDs and external advisors not only challenge but provide business leaders with new lenses with which to view their business. Choose those lenses wisely, or you may land up in the dark.

Rayne Handley is the Principal Consultant for GRMs executive search, people development, board advisory, and leadership counselling practice.

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