Putting people at the heart of Environmental, Social and Governance (ESG)

Photo by Alexander Suhorucov

Written by Zeng Han Jun

 

Enabling a people-first approach in all aspects of business, is one of the pillars that promotes and enhances Environmental, Social and Governance (ESG) values. If carefully utilised, it can build trust among the staff members, serve as an important tool for handling feedback internally and act as an enabler for attracting more business and talents. 

In a way, smaller companies have it easier because most of their operations are within the span of control of the senior executives. It becomes more challenging when the oversight goes beyond the span of control due to factors like growth of operations, work extending to different geographical locations, tasks becoming more complex, increasing administrative processes, etc. 

Inefficiencies and informal work processes could unknowingly leeched onto official work processes, and all these could translate to unnecessary and unexpected increases in business cost.  In a recent example, a company had extended its direct distribution network to another foreign country. Shortly after that, one of their local senior managers started to make use of the company’s distribution network to distribute his own products. The local senior manager’s act was found out later because one of the staff members complained about it. 

In this case, it was the people’s trust in the company’s system, company’s strong investment in its people, and the transparency in communication between all levels that allowed for a swift and clean end to this.  

This is not new. Variations of similar situations could happen in different sectors. Let me just cite another recent example. This case is not about bad corporate governance within business processes but concerns with basic human rights in the workplace; A senior manager in another company was verbally abusing his staff members and behaved inappropriately with them as well. Following his actions, one of the staff members set out to record the senior manager’s behaviour on her handphone and uploaded the video on a social media platform. The video became viral and people started boycotting against the company’s products. 

In this case, it was the lack of trust in the company’s system, company’s lack of investment in its people and lack of transparency in communication between all levels that led to this unfortunate event.

I felt that it was important to spend some time to think about both cases; why it happened the way it did, what the companies had done to produce such outcomes, how did the outcomes affected both companies and if the outcomes were negative, what could the companies do to improve?

In the two examples that I have surfaced earlier, the outcomes were triggered by releases of information. In the case of the distribution company, a staff member provided feedback to the senior management. In the second case, the staff chose to stay clear of the company’s internal feedback procedures and relied on social media platforms to whistle-blow on the senior manager’s abusive behaviour. 

Technology has made it so easy to share information, to the point that it has become increasingly challenging for companies to control information flow. Additionally, the growth of supposedly neutral websites and applications makes them far more appealing as platforms to air feedback anonymously. Companies must work harder to convince their employees to stick to guidelines and use the company’s feedback mechanisms. 

A feedback mechanism can be as simple as providing an email address that staff members can send their feedback to. Some companies establish clear guidelines for handling feedback and encourage their staff to stick to it. Those who fail to stick to the guidelines, may face drastic measures. Others help their employees feel like they are part of the company so that they feel responsible for the company’s well-being. 

The latter approach is what I called putting people at the heart of ESG. Ensuring a people-first approach towards staff members so that they would in turn adopt a company-first approach towards the business. 

I organised three key ideas that underpin the people-first approach: 

  1. Trust in the system; 
  2. Investment in people; and 
  3. Sufficient transparency in communication between all working levels.

Trust in the system

Companies can have the best system in place to handle feedback but does the staff member trust the system enough to make use of it? Do they believe that their feedback will be considered and fairly dealt with? If not, the staff member might resort to external platforms to air their grievances. Winning the trust of staff members is not an easy task and can only be established through repeated positive actions. In fact, nothing beats walking-the-talk because it is very difficult to dispute the facts. 

Well, even though it is very difficult to dispute facts and data, it is still wise to adopt a human-centric approach when working with data. Strangely, the use of facts and data can result in unexpected negative outcomes if handled in the wrong way. That is why many companies use data to showcase their achievements and additionally seek consensus with their employees before including that information in the ESG report. 

For example, when using a data chart to show the increasing trend of learning opportunities for staff, some companies are also including surveys of employee’s satisfaction with the learning opportunities, their perception of access to such learning opportunities, their perception of the fairness in allocating these learning opportunities, etc. 

People engagement combined with concrete data can lead to very meaningful insights. In reality, it is challenging for a very small number of people to publish less-than-stellar results but that is what transparency is all about. It forces one to acknowledge the current position and then commit to continuous improvement. This is the first step to building trust. It is very difficult to shake the foundation of a company that has earned its social capital through organic trust building..   

Investment in people

The key is to make the staff feel like an important part of the company. Invest in people so that they are invested in the business. People who are invested in the business, are genuinely concerned about the business. Training opportunities, new projects, new portfolios, etc are just some of the many ways to invest in people. In my first example, the local senior manager’s misuse of the company’s resources was surfaced quickly because a staff member felt that it was his responsibility to escalate this issue to the management. Obviously the company invested enough in this staff member for him to respond in this way. 

Companies should try their best to provide sufficient training on identifying bad corporate practices, encourage employees to use internal feedback mechanisms and provide the reasons for staff members to believe in the integrity of the system. The staff members must be sufficiently invested in the company to be bothered with providing any feedback. Investing in people is about putting people at the heart of ESG. 

Sufficient transparency in communication between all levels

This is an extremely tricky topic and must be handled with utmost sensitivity. Most would agree that transparency is good and want it in communication at all levels. Easier said than done. Let me explain why. 

Some managers maintain control, prevent information overload and help the team to focus on the tasks at hand by allowing staff to access only relevant and sufficient information, and encouraging communication to take place within allowed parameters. For example, staff only need to access enough information to perform their work. Reports should be directed at the next higher level and the immediate supervisor has to decide whether or not the information should be released in its entirety to the next higher level. This is to prevent “skip-level” communication. It is an important management technique that has worked well for many large organisations, especially those that span across different geographical locations and employ people who possess diverse skills with large variances in expertise. 

Nowadays, it is common for the younger generation of workers to celebrate the flat company structure, preferring its open structure that allows for quick decisions, open communication and equal collaboration. A few younger workers are even ditching hierarchical company structure to work in flat company structures, simply for its open and flat work environment. Then again, it is not realistic for every company to adopt a flat company structure like what some technology companies have done. We have to accept that hierarchical company structure will continue to exist and expect to work with it for quite some time. 

Many studies have showed that open communication across all levels within a hierarchical company structure, actually incentivises the manager to hire workers who are less qualified and less productive than himself. Managers are also human, and they are also afraid that open communication might cause them to be displaced by their subordinates who may be equally or even better qualified. 

To this, some companies actually restrict skip-level communication (conversations between subordinates and senior management) and this is to encourage managers to hire well-qualified workers. Other methods include promotion by seniority, giving superiors employment guarantee or promoting employees into other business units (Raith, Friebel, 2001). 

Even the popular open-door policy has proved to be disconcerting to many managers who have substantially much control over their workers. Because of this, some managers are extremely concerned about their subordinates’ conversations with senior management and how it might affect the managers’ working relationships with the subordinates.   

The funny thing is, and well-documented in many studies, that high performers are attracted to a work environment that promotes open communication (Martel, 2003). This is also one of the reasons why some technology companies have gone all out to attract the best talents by ensuring transparency in communication between all levels and adopting a flat hierarchical company structure. 

Transparency in communication between all levels is a very tricky topic and the solution must be carefully crafted according to the situation on hand. It is significantly much easier to pull this off in a flat company structure that employs staff who are used to such management style. As for a hierarchical company structure, it is important to enable sufficiently open communication, enough to allow for feedback but not so much that managers lose their authority to carry out their work. Careful balancing is required because tipping on either side will result in bad politics within the organisation. 

People are the company’s greatest strength and adopting a people-first approach is to amplify that strength. The foundations to building a people-first organisation is to; (1) help staff members to trust the system, (2) invest in people so that they adopt a company-first approach to their work and (3) foster an environment for sufficiently open communication between all levels. A people-first approach is to put people at the heart of Environmental, Social and Governance (ESG) values and is one of the keys to building a competitive company. 

References

Martel, L. (2003). Finding and keeping high performers: Best practices from 25 best companies. Employment Relations Today, 30(1), 27-43. doi:10.1002/ert.10072

Raith, M. A., & Friebel, G. (2001). Abuse of Authority and Hierarchical Communication. SSRN Electronic Journal. doi:10.2139/ssrn.280010

Copyright © 2021 Zeng Han-Jun. All Rights Reserved.

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