Voluntary Welfare Organisations: how boards can help in human capital management

Voluntary Welfare Organisations: how boards can help in human capital management

In human capital, VWOs need strong support and oversight from their boards to design, implement and sustain strong strategies to be market competitive in attracting and retaining talent. The need for better human capital management in VWOs There are currently over 450 Voluntary Welfare Organisations (VWOs) in Singapore, each working on various causes to improve the welfare of the local community. However, as the social fabric of Singapore becomes more complex amid challenges such as an aging population and the tapering of economic growth, the social service sector needs to grow in tandem to respond to society needs more effectively. To sustain the growth of the sector, sound human capital management practices are necessary. Particularly, the attraction of talent into the sector is critical, since the growth of VWOs is largely spearheaded by and dependent on the innovation, mission-mindedness and dedication of high-performing individuals. To position the social service sector as a desirable career choice, the National Council of Social Service (NCSS) recently released salary guidelines for the sector. More, however, needs to be done by VWOs to enhance their talent attraction and retention. Should VWO boards get involved? VWO boards should have oversight of all business-critical risks, and that includes human capital. Indeed, the recent signing of a Memorandum of Understanding between the Social Service Institute and the Singapore Institute of Directors to develop a flagship training program for board directors of the non-profit and social service sector affirms the importance of boards in providing advice and guidance to their VWOs. In human capital, VWOs need strong support and oversight from their boards to design, implement and sustain strong strategies to be market competitive in attracting and retaining talent. VWO boards should consider setting up human resource (HR) committees to look into issues such as compensation for key management personnel, succession planning and performance management, which are traditionally considered within the scope of these committees. More importantly, these HR committees should also monitor strategic talent management areas such as HR strategy, organisational culture, and employee engagement and development. Gaining a deeper understanding of the talent and culture issues that the company and the industry face is important for boards to support the management team in the delivery of the business strategy. Further, the heightened media scrutiny amid recent cases of corporate governance lapses in nonprofit organisations, together with the increased complexity of business management, have led to a greater need for proper governance of human capital matters by VWO boards. 2

What can VWO boards do to enhance human capital management? Apart from compensation for key management personnel, succession planning and performance management, we recommend VWO boards provide oversight and advice for the following critical human capital areas: Talent attraction and retention strategy The social services sector is in stiff competition against the private sector for talent. To address this, VWO boards need to consider human capital as an asset that provides them with a good understanding of and planning for long-term organisational needs. To increase the involvement and impact in talent strategy, there are two fundamental requisites for VWO boards: the availability of quality information on human capital issues within the organisation, and sufficient human capital expertise among board members. For this, VWO boards need to work with their HR professionals to gain a better understanding of ground issues and culture within the organisation. They will need to ask illustrative and thought-provoking questions that will help to stimulate deeper and well-rounded discussions at each stage on the board s calendar. Are we ensuring that employees are not only technically competent, but also a cultural fit with the organisation. Have we identified our high-performing employees and how do we ensure that they are challenged and motivated? Do we understand who our key performers are, and are we at risk of losing them? Culture and organisational health Successful organisations that face demanding conditions are those that develop a strong set of values stemming from a clear vision and culture, which forms their corporate DNA and basis for relationships with employees. These boards consider culture to be a top priority and have a clear understanding of how it can nurture or hinder organisational growth. With a growing emphasis on culture, more boards are reviewing different approaches to oversee culture through various committees. With talent and culture becoming key drivers in organisational development and priorities of leading boards, VWOs are encouraged to integrate these elements into the agenda of board meetings and allocate adequate time for discussion. After accurately identifying the needs of the organisation, boards should then to develop and implement effective processes to oversee human capital priorities. Some questions relating to talent strategy include: Are the talents qualified for the jobs, and how should we compensate them? (See Appendix 1 for recommended compensation approval process for VWOs and Appendix 2 for the framework tool for board accountability with regard to compensation) Voluntary welfare organisations: how boards can help in human capital management 3

Conclusion Research suggests that an organisation s compensation and talent practices are strongly correlated to performance. To enhance the attraction and retention of talent within the social services sector, more needs to be done to enhance the management of human capital of VWOs. This is where VWO boards can step in to strengthen human capital practices by providing oversight in key talent management areas. It is up to the board s initiative to establish qualitative and quantitative metrics, communicate them to the senior management, and ensure that the entire team is aligned comfortably with the terms of the plan. As part of its stewardship responsibility, the board is not only charged with strategic management but also with more specific human capital practices. Singapore s dynamic human capital landscape translates into changing human capital requirements that must be adequately addressed at the board level in order to ensure the sustained growth and success of VWOs. Case studies: VWO boards that play an active role in human capital management Ren Ci Hospital Ren Ci Hospital is a charity healthcare institution providing affordable medical, nursing and rehabilitative care services for the community. Its HR Committee comprising the chairman of the committee and three board members is committed to the attraction and retention of talent for the hospital. It seeks to accomplish the following objectives and functions: Objectives 1. Promote Ren Ci as a good employer. 2. Provide oversight and inputs on the Hospital s human resource policies for recruitment, compensation and benefits, and training and development. 3. Ensure compliance with the local employment laws, workplace safety, insurance and health guidelines. Functions 1. Review the hospital s salary scale for all employee levels to ensure alignment with market movements and practices. 2. Review the hospital s performance management system for fairness, transparency and robustness. 3. Evaluate the mid-year and year-end performance-based incentives for employees (such as salary increments and performance bonuses) proposed by the hospital management, and make recommendations taking into consideration the National Wages Council guidelines. 4. Serve as panel members regarding the recruitment and remuneration of senior management staff. 5. Evaluate the hospital s strategic workforce planning, including staff positions, staffing levels, manpower requirement projections and recruitment plans. Methodist Welfare Services The Methodist Welfare Services (MWS), founded in 1981, is a multiservice charity that provides a myriad of services for children, families, the chronically ill, destitute and frail elderly. Through its services, MWS aims to nurture disadvantaged children, empower families in distress, care for the elderly and engage the socially isolated in the community. The overall winner of the Large Category for the Charity Governance Awards in 2014, MWS has established strong talent management practices to attract, motivate and retain talent. The board plays a crucial oversight role in management of these practices, with a focus on the following areas: 1. The HR committee, which reports directly to the board, is consulted on all major HR-related policies and procedures. For issues pertaining to payout to staff (e.g., performance bonuses), approval from the Finance Committee will also be sought as well. Thereafter final approval will be required from the board to allow for good governance over HR-related issues. 2. The board and the various Centre Governance Committees are involved in the recruitment of senior and critical positions within MWS. 3. The board monitors the macro-level talent indicators and ensures alignment with human capital guidelines developed by the NCSS and the Agency for Integrated Care (AIC). 4

Handicaps Welfare Association The Handicaps Welfare Association (HWA), founded in 1969 to promote self-help and provide mutual support among the persons with physical disabilities in Singapore, leverages strong human capital management practices to attract, motivate and retain talent. The board enhances HWA s employee value proposition through the following focus areas: 1. Promote employment stability by adhering to transparent and ethical governance practices. 2. Foster strong alignment with both the NCSS salary guidelines, and the AIC manpower development guidelines. 3. Ensure good talent management, succession planning and career development practices for critical roles within HWA, with high-performing employees receiving high performance-linked pay. 4. Achieve a low attrition rate by ensuring satisfaction in every aspect of an employee s experience in HWA. The Organisation of Senior Volunteers (RSVP Singapore) RSVP Singapore is dedicated to attracting and engaging seniors in volunteerism. Its board, aware of the crucial role it plays in creating vitality in the organisation, holds regular reviews of its growth plans. Outside expertise is engaged as needed. To achieve alignment with members, the strategy is widely communicated via townhall-like meetings, newsletters and e-media. Mindful of the small staff strength, the board seeks to ensure staff retention by benchmarking salaries to market and using the HR services provided by the NCSS. It allocates specific duties to individual board members based on their competencies and assigns oversight on staffing matters to persons with background in HR. Annual performance reviews, job rotation, job sharing are some methods used for staff development and to foster a collegiate work environment. Given its non-profit status, pro-bono consultancy services is an avenue used by RSVP to support its HR framework. Reports and recommendations are brought to the board for review and decision-making. Voluntary welfare organisations: how boards can help in human capital management 5

Appendices Appendix 1: Compensation approval process for VWOs Compensation Position or role Recommend Approve (in alignment with the NCSS salary guidelines for the Social Service Sector) Total compensation (Base salary + benefits + variable pay) Executive Director/ Agency Head Human resources Board/Chairman Total compensation (Base salary + benefits + variable pay) Executive (other than Executive Director) Executive Director/ Agency Head Board/HR committee Total compensation (Base salary + benefits + variable pay) All other management staff HR Head/ Executive Director Board/HR committee Appendix 2: Framework tool for board accountability on compensation Level 1: Getting Started Develop and disclose a compensation strategy and action plan Annual reporting of remuneration bands of different job grades and scopes Disclosure of remuneration committee (if any), and policies in place to govern the process of compensation management Level 2: Getting there Annual reporting of measurable objectives as set out in compensation policy Internal procedures to review effectiveness of compensation policy Level 3: Getting serious Key Performance Indicators (KPIs) to be included on annual performance scorecards for remuneration committee or board of directors KPIs to be included in annual performance scorecards for all managers 6

Appendix 3: Sample annual meeting planner for HR Committee These items may vary depending on the maturity of the organisation s human capital strategy No. Item March May August November 1. Total rewards strategic review (includes philosophy, guidelines, competitive status) 2. Policy review for incentives and bonuses 3. Executive evaluation of prior-year performance and incentive payments approval 4. Establish current-year targets for short-term incentive plan 5. Review Executive Director performance criteria and protocol 6. Employee engagement survey report 7. Review annual talent strategy and overall talent attraction metrics 8. Review strategic workforce plan 9. Review management and executive directors succession plan 10. Conduct executive directors performance review 11. Benefits review 12. Review organisation s safety and health strategy 13. Review diversity and inclusion agenda and status Voluntary welfare organisations: how boards can help in human capital management 7

Contacts Samir Bedi Partner, People Advisory Services samir.bedi@sg.ey.com +65 6309 6648 Goh Jia Yong Senior Manager, People Advisory Services jia-yong.goh@sg.ey.com +65 6309 6652 Dilys Boey Partner, People Advisory Services dilys.boey@sg.ey.com +65 6309 6246 Teresa Mok Director, People Advisory Services teresa.mok@sg.ey.com +65 6309 8111 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organisation, please visit ey.com. 2015 Ernst & Young Solutions LLP. All Rights Reserved. APAC no. 12000590 ED None. Ernst & Young Solutions LLP (UEN T08LL0784H) is a limited liability partnership registered in Singapore under the Limited Liability Partnerships Act (Chapter 163A). This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com