If you’ve missed it, the Financial Reporting Council (FRC) brought in legislation a couple of years ago which means that they need to detail in their Director’s reports how they engage with their people. Not only is this a legal requirement, but it’s also a great opportunity to improve employee engagement and ultimately business performance.
In January, the FRC released a report on compliance and they found that a disappointing number of companies treat the Code as a box-ticking exercise. If your business has two of the following, then you’re subject to this reporting:
- More than 250 employees
- A balance sheet exceeding £18m
- Turnover that exceeds £36m
Why should you care?
Firstly, not complying with the legislation is illegal. But, also because happy organisations perform better. Happy employees are 12% more productive than average and 22% more so than unhappy workers. Plus, businesses that are rated as the best companies to work for provide stock returns that are 2.3-3.8% higher than average.
Actively listening to, reporting on, and acting upon employee engagement data is a vital first step in creating a thriving company culture. By implementing a feedback programme, you will have people data and insight into company sentiment. This will help inform new initiatives and action plans to improve all aspects of your business. This data can also be used to help put numbers around intangible metrics, such as happiness, engagement and culture.
What can you do to improve compliance with FRC legislation?
There are many ways in which the FRC suggests you can improve your compliance with their legislation.
- Have a well-defined purpose and clearly show progress towards achieving it
- Provide clear and meaningful explanations of how to achieve good governance standards
- Discuss the issues raised and feedback received during engagement with shareholders and employees
- Clearly show the impact of this engagement with stakeholders, including employees, on decision-making, strategy and long-term success
- Increase focus on the assessment and monitoring of culture, with particular consideration to the methodology and metrics used
- Demonstrate commitment to diversity and inclusion through actions, such as improved succession planning and recruitment from diverse talent pools
- Clearly show the impact of engagement with shareholders on remuneration policy and outcomes
- Clearly show the impact of the engagement with employees in relation to executive remuneration policy
Are you doing enough when it comes to employee engagement and culture reporting?
The FRC is clear that using an annual employee survey is often not sufficient by itself to comply with the code. They expect companies to fully explain why their method of employee engagement is effective.
Consider the following:
- Following-up via more regular surveys since an annual survey in isolation can only offer insight at one point in time.
- Generic annual engagement surveys can hinder full understanding of the issues which underpin responses. Instead, more information can be gleaned from targeted surveys e.g. culture surveys.
- Taking a more rigorous approach to culture, for example by setting up effective ways of monitoring and assessing both the culture and its alignment with purpose, values and strategy.
- Employing a ‘culture dashboard’ which the board considers regularly and strengthens employee voice in the boardroom.
- Ensuring leaders set out their plans to deal with concerns raised by employees.
- Allowing employees complete anonymity in sharing their views to deliver meaningful and regular feedback.
The bottom line? Transparency is king.
Alongside Gender Pay Gap reporting, executive pay ratio disclosure and anonymous online employee reviews, FRC legislation acts as a powerful agent for change in a world where organisations are now glasshouses. It’s a great opportunity to bring employee voice into the boardroom, and help your business create a human-led thriving culture.