In July 2018 the Financial Reporting Council published its long-awaited update to the UK’s Corporate Governance Code. We’ve seen considerable coverage of this in the legal press but very little for HR. This seems strange given that those in HR are likely to have to implement it.
The new regulation applies to firms with over 250 employees in the UK.
What the regulation states and what it doesn’t
The new UK Corporate Governance Code states:
For engagement with the workforce, one or a combination of the following methods should be used:
a director appointed from the workforce;
a formal workforce advisory panel;
a designated non-executive director.
If the board has not chosen one or more of these methods, it should explain what alternative arrangements are in place and why it considers that they are effective.
The challenge with all of these methods is how to capture the views of the employees, to synthesise them and provide them to whichever party that has been designated to include them in the board decision process.
Of course the workforce is highly unlikely to have an uniform voice. Therefore it is essential to capture this diversity of ideas. The formal approach used to decide how to handle potentially conflicting ideas isn’t part of this article.
The challenge of upward communication
As an executive you’d like to hear about all the issues that need your attention. By ‘your attention’ I mean that either they’re things that you don’t want to be surprise with when presented from another source or things that for whatever reason need you to take action (maybe because they are cross-organisational or need your level of authority).
The problem that you’re faced with is twofold:
Only a proportion of the topics you need to hear about will reach you ‘undistorted’
Due to communication windows it will take time for these topics to reach you.
Let’s take the example of a business with 8 layers between the executive team and the folks who deal with the customers.
If a high 80% of topics that you need to hear about get through each level then this implies you’ll only hear about 21% of topics
If a more realistic 50% get through each level you’ll hear less than 1% of all issues
Of course you’ll probably hear about the the wrong topics. Because many of the issues might seem ‘too petty’ they won’t be raised. However if 500 people across the organization have this issue it probably demands your attention. Small and widespread often doesn’t get through, whereas big and niche often does. Often the real value is in fixing small and widespread issues.
The other key issue - one that we frequently see and one that is well-researched in the academic journals - is that employees often don’t raise issues - so called ‘Employee Silence’. It can be more difficult raising issues up through the chain, where it might threaten their managers than to raise it confidentially to a central point. The sort of issues here might be to do with cultural risks such as poor incentives or behaviours.
Executives often think about this as needing to facilitate ‘whistle-blowing’ or raising of issues. This is, of course, important but these instances are rare and high value - the ‘rare and niche’ that I mentioned earlier. In truth these cases need special channels and need to be treated differently than other forms of employee voice.
The real challenge is not how to find the rare event with a clear channel, it’s finding the diversity of opinions and ideas about something widespread.
Often the true value in integrating employee opinion into decision making is to understand the distribution of ideas and opinions from a large population. It’s about asking all of your employees about a decision and understand the breadth and distribution pattern of the responses.
Of course some of these ideas will be truly innovative and potentially super-interesting but often you’re trying to get a good grasp of the top ideas.
The need for qualitative information
There is a time for getting quantative information - mostly when you already know the problem and are looking to understand the scale of it. If you know all possible options, a closed question might be the best way of putting a number on it.
In most instances however you don’t know all aspects of the problem, or haven’t identified all the possible solutions. When you’re at this exploratory stage then it’s best to ask open questions.
Sufficient, reliable, relevant and useful
Adopting a concept that comes from internal audit:
Information is sufficient when there is enough of it to come to an unbiased and dependable view of the topic. If you’re asking all your employees about a subject and a meaningful number of employees raise an issue then it’s probably sufficient.
Information is reliable based on the source of the information. Customer perception data from people working day-in and day-out with customers is potentially more reliable than information that comes indirectly. Information that can be validated is more so.
Relevant information is information that relates directly to the question explored. When we ask open questions to employees relevant information is that which relates to the topic. We need to down-weight information that we’ll receive but doesn’t help us answer the question (some people have something that they will raise regardless of the question asked).
Useful information is information that helps an organization meet its goals. If the information was about an old reporting system which has since been phased out, it probably wouldn’t be useful (because the issue has already been dealt with.)
Employee feedback provided via free text can be all of these things, though it might gain extra reliability if linked to existing data. It’s important when reviewing the summarised feedback that managers assess it against these 4 lenses.
The need to synthesise
Once you’ve decided to ask your employees a series of open questions about a key topic or decision, what do you need to do?
For many of our clients if we ask a couple of open questions we’ll get on average 20 words per question per employee. This means for each question with 50,000 responses you’ll be faced with 1 million words.
The problem is that you probably need to present less than 1,000 words to your executive team, ideally 1 side of A4 paper.
How do you do this?
Technology to the rescue
Historically, analysing a large amount of free text was a long, expensive process. The quality that you’d get out of this also was probably lower than you’d imagine. Getting 80% agreement between reviewers is pretty good. It’s really hard for reviewers to be consistent throughout a review. Identifying a new category means having to start again.
There are several different capabilities that you need to have, most importantly the need to understand themes - context rich descriptions - rather than topics. Historically this level of understanding has been hard yet with the progress of text analytics over the last couple of years the best machine learning approaches can match human performance in many tasks.
What you will need your technology to do
When considering an algorithmic support to enable you to collect and understand Employee Voice you need to ensure that your text analysis tool can deliver several key capabilities
1) Ability to ask any question, and to analyse the responses
We do not believe that Employee Voice - the ability to let employees contribute to decision making - is possible without being able to ask and understand questions about the decision you need to make.
The first, and arguably the most important requirement for any Employee Voice technology is that you can ask any question, and the system can theme the answers with a decent level of accuracy.
This might seem obvious but it’s not. The best text analytics approaches work on very narrow types of text. A system might be great at parsing a CV but couldn’t understand a shopping list for example. To get the level of accuracy that you need we think you probably need to have a model fine-tuned at a question level.
2) Themes not topics
As mentioned before it’s important to understand the themes - how people describe their views - not the topics. So ‘more transparent communication’ instead of simply ‘communication’.
The algorithms should provide summaries the answers. Only if you can understand the underlying meaning just from reading the theme label then it’s probably good enough.
3) Identify notable and unusual answers
Another key aspect is the overall pattern of themes, both in terms of overall distribution and ‘hot-spots’ of feeling across the organization and employee population. Often you’ll need to identify the rare comments that might bring genuine innovative ideas (or tell you about a problem you really need to deal with).
4 Track asking and answering of questions
For compliance purposes you will want to be able to show who was asked, when they were asked, how the feedback was analysed and how the information was integrated in the decision making process. Technology is well-suited to this task.
A process for working with Employee Voice
We do not believe that technology alone will enable firms to meet the requirements of using Employee Voice in decision making. However whichever way (or ways) businesses decide to use to bring voice into business decisions it’s clear that technology can significantly improve the cost, responsiveness and quality of the process needed to maximise benefits and demonstrate compliance.
What we constantly hear from Workometry clients is that when executives experience the benefits of being able to consult their organizations quickly and effectively they want to use it more and more. We hope that this new regulation helps elevate employee voice into a standard business practice.
Taking it further
Earlier this year we published a Guide to Employee Voice. It includes a set of useful resources and documents for anyone trying to understand best practice in this area.
If you do have thousands (or even hundreds of thousands) of free text answers from your employees let us show you what is possible.