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First it was the pandemic. Now it’s the competition to recruit and retain talented employees amid transformed expectations of where and how work gets done.
Events of the past two years have put employees front and center. Now more than ever, human capital management (HCM) is critical to a company’s performance and reputation and should be embedded in its environmental, social and governance (ESG) strategy.
ESG encompasses a multitude of issues touching on corporate purpose, strategy, risk and talent. Institutional investors have been increasingly vocal about the importance of human capital and talent development programs and their link to strategy — including calling for more engaged board and committee oversight and enhanced disclosure of HCM-related metrics.
As this dynamic unfolds, we can expect continued scrutiny of how companies are adjusting their talent development strategies.
Companies are being called on to disclose their HCM resources based on SEC principles, with a focus on how material those disclosures would be to understanding a company’s business.
In addition to monitoring SEC rulemaking developments in this area, boards and their committees will want to discuss HCM disclosures with management — including processes for developing metrics and controls for data quality — to assess whether disclosures demonstrate commitment to critical human resource issues.
The challenge of finding, developing and retaining talent in a labor-constrained market continues to intensify. Board oversight of plans for recruiting and retaining top talent is critical. Does the board have a good understanding of a company’s talent strategy and its alignment with the broader strategy and forecast needs for the short and long term? Which roles throughout the organization are mission critical, and what are the challenges in keeping those roles filled with engaged employees? Which talent categories are in short supply and how will the company successfully compete for this talent? Does the talent strategy reflect a commitment to diversity, equity and inclusion (DEI) at all levels? As employees increasingly choose employers based on alignment with their own values and as talent pools become globally diverse, is the company positioned to attract, develop and retain top talent at all levels?
Corporate culture plays a critical role in driving a company’s performance and reputation. Many boards are taking a more proactive approach to understanding, shaping and assessing culture. Boards should closely monitor the tone at the top and culture throughout the organization with a sharp focus on behaviors — not just results — and yellow flags. Is senior management sensitive to human resource issues such as employee health, safety, well-being, productivity, engagement and morale, especially in the context of remote work arrangements? Does the company make it safe for people to do the right thing?
At KPMG, we’re differentiating through our people-first mindset. We recognize recruiting and retaining top talent in the current market requires an innovative and inclusive environment that offers flexibility and support.
We’re enabling our people to be together when it’s important and using technology such as virtual audit rooms to stay connected when working remotely. Our flexible working arrangements enable teams to collaborate across geographic areas, leveraging a culture of innovation.
Not only is the audit itself changing with new technology, data analytic capabilities and AI, but the mission of the auditor is also broadening. New professionals are working on ESG assurance, bringing the auditor skill set and mindset to tackle societal challenges. Digitization of business processes also means auditors are increasingly called on to review a company’s controls, and systems addressing cyber risk, assuring artificial intelligence and automation systems, and enabling blockchain.
We’re empowering our auditors through learning and development opportunities, a flexible work environment and programs focused on well-being. Our people-first focus integrates learning into our strategy so our professionals have opportunities to develop next-gen auditor skills in technology, data and analytics. We’re connecting our people with mentors to chart clear career paths.
We are also continuing to develop a broad and diverse talent pool. Our DEI initiative Accelerate 2025 addresses how we recruit, develop, retain and promote people from underrepresented groups. In 2021, the diversity of our Audit team increased at the partner, manager and associate levels. Our efforts in 2022 include promoting an equitable first-year experience and expanding KPMG’s Master of Accounting with Data and Analytics Program to include more historically Black colleges and universities.
In addition, KPMG announced mid-year raises and implemented significant enhancements to its benefits and compensation package, such as lower employee healthcare premiums, an automatic firm-funded 401(k) contribution and expanded paid leave for parents and other caregivers.
At the heart of it all is a better audit experience for our people and our clients. By developing a comprehensive HCM and ESG strategy, employees can learn, grow and engage in fulfilling and rewarding work and companies can meet the evolving expectations of their shareholders to remain competitive.
John Rodi is an Audit Partner and Leader of the KPMG Board Leadership Center. Becky Sproul is an Audit Partner and Talent and Culture Leader – Audit for KPMG LLP.
