Fortune Director Round Table Series: Overseeing Human Capital Risk and Company Culture
Companies and the boards that oversee them have changed drastically in the past 50 years, and perhaps even more in the past four years alone. With the global COVID-19 pandemic and rise of stakeholder capitalism, leaders are increasingly focused on their employees: what makes them happy, how to bolster their skills, and how to maintain a company culture to support them. Fortune gathered an intimate group of board members and C-suite executives to grapple with these changes and explore how to oversee human capital in a modern business. The event began with a conversation between Paolo Gallo, former CHRO, World Economic Forum, and author of The Seven Games of Leadership: Navigating the Inner Journey of Leaders, and Peter Vanham, Executive Editor, FORTUNE.
The new focus on human capital is well founded, Gallo told us. He noted that, some 50 years ago, 85% of company assets were tangible and today 85% are intangible. “What makes up intangible [assets] are mainly the people working [in] the organization,” Gallo said, noting that employees carry much of a company’s reputation and public perception, two components of intangible value. Several other executives seconded the new value of human capital, particularly in the age of immense changes precipitated by generative AI. They discussed the importance of leaders’ ability to manage this technology transformation, which will ultimately increase shareholder value.
In his new book, Gallo discusses what it means to be a leader at a time when human capital is so vital to a company’s success. “Being a leader is very different from being in a position where you have a lot of power,” he said. Leadership, he stated, requires an inner journey that he explains in depth in his book. True leadership, he highlighted, is key for helping employees to become ambassadors, which will ultimately uphold intangible value via reputation and perception.
The question is, how do board members now step into this role of managing human capital? Vanham asked Gallo to discuss the expanded role of boards in the management of human capital today. Gallo explained that boards have been involved in discussions around headcount, costs, and major policy changes, but these matters often came at the end of the agenda. To manage human capital proactively, Gallo suggests focusing on learning for employees, including upskilling and reskilling, relationships ensuring stronger collaboration, and reputation.
Following the conversation between Gallo and Vanham, leaders on the call discussed major challenges they are facing as C-suite and board members of major companies. One clear theme emerged: remote work and the return to office. Executives discussed that remote work came with many challenges. One leader noted that cybersecurity is a bigger issue with a remote workforce. Interestingly, she told us that remote employees at her organization failed phishing tests at a higher rate than office-based employees. In addition to cybersecurity challenges, several leaders noted that it is more difficult to build a company culture in a remote work environment, and company culture is key to attracting and retaining quality employees.
Most on the call have settled into a hybrid work environment that they feel is beneficial to their organizations and helps them build human capital. One executive described her organization’s strategy for encouraging employees to come into the office. She said that office work must have a new purpose and it cannot be about sitting in a cubicle.
She explained that HR and communications departments have been orchestrating events such as lunches and happy hours to foster connection and collaboration. Of course, hybrid work doesn’t make sense for all companies. One leader discussed that her industry relies on in-person labor. At the same time, she pointed out that highly skilled workers in her country found work in entirely different countries, complicating the effort to return to in-person work.
Despite the varied contexts in which our attendees work, many of the challenges remained the same: fostering a strong company culture, encouraging collaboration, returning to hybrid or in-person work, and technology transformations. “There is such a shared commonality of the challenges that we’re facing at the board level and at the management level, almost regardless of [the geographic area] and jurisdiction you sit in,” Nithya Das, Chief Legal and Administrative Officer, Diligent and Board Member at Outbrain (NASDAQ: OB), observed at the end of the conversation noting the value of coming together as directors for peer discussions. That is why Fortune and Diligent have partnered to continue this virtual Fortune Director Roundtable series over the next year. In closing, Vanham encouraged participants on the call to attend upcoming sessions to continue this valuable conversation.
