When interviewing new talent for your business, you'll want to be as thorough and selective as possible. To get the best feel for your candidates, however, you have to get them to open up about topics ranging from their values to their intentions with your business. We interviewed experts for their input on the matter. Here are must-ask questions every employer should ask potential employees, categorized by their overarching topic.
Questions about their values
While you don't want everyone on your team to be copies of each other, you should still share some common values or principles to establish a mutual understanding. Ask these questions to identify their priorities:
What do you look for in a company?
How do you find purpose in your career?
What are some must-have values you look for in an employer and why?
Questions about the future
Your candidates' aspirations and outlooks on the future tell you a lot about them as workers and people, like how motivated they are and how hard they are willing to work. Find out more about them by asking questions like these:
Where do you see yourself in five years?
What are some anticipated industry changes on your radar and how are you preparing for them?
Define your aspirations. How do you plan to achieve them, and what is your timeline?
Questions about past work experiences
Odds are, if you brought an applicant in for an interview, they have experience of some sort, whether it's college internships or years of professional work. Find out more about your applicants' background, dedication and expertise in the field by digging into their past. Here are some questions to ask:
Why did you leave/do you plan to leave your most recent job?
What is one accomplishment you're most proud of and why?
How has your past work experience helped you grow?
What have you learned while working with other individuals/businesses in this industry that you didn't know before?
Questions about personal or professional challenges
Adversity often makes people stronger. Don't be afraid to ask about any obstacles your potential workers have endured and overcome. Here are some examples of questions:
What are some challenges you've faced, either professional or personal, that have impacted your career, and how did you overcome them?
Explain a time of conflict in your professional journey. What caused it and how did you resolve it?
Everyone makes mistakes. Name one you've made in the past and tell me how you handled it.
Was there ever a time you fell short of your goals? How did you move forward?
Questions about interests
Get to know your candidates on a more personal level by inquiring about their passions and understanding what work they'd prefer to do. Consider asking these specific questions:
What are your professional interests?
What are your personal interests? How might you channel them in your career?
What motivates you to get out of bed every morning?
What are your most passionate about?
How do you define success?
Questions about their intentions, both in the industry and with your company
As much as you'll want to know about your future employee, one of the most important points of topic is what they can do for you. Here are some questions to help you find out:
Why did you enter this industry?
What attracted you to our company?
What can you do for our company?
Overall, ask what you want to know without overstepping boundaries. For instance, in many states, it's against the law to seek an applicant's pay history. Familiarize yourself with regulations, and stick with questions that simply allow you to get to know your potential employees. You can also learn more about illegal job interview questions by reading this story on our sister site Business News Daily.
It finally happened: You got the buy-in to launch a (much-needed!) working parents’ network in your organization. You’ve sent out the blast announcement and secured a small budget. The kickoff cocktail party drew a crowd of parents eager for advice — and curious about this new resource. You’ve done everything needed to get this thing up and running. But as the energy and excitement from that first event fades, you’re left wondering: Now what?
And you’re not alone…because if you’re spearheading the effort to build a working parents’ group, two things are dead-certain:
1) The work you’re doing is important, necessary, and welcomed; and
2) There’s no template for it. No playbook, no best practices, no roadmap to success.
As a full-time consultant on working-parent issues, I’ve seen this dynamic play out time and time again. At their start, corporate working-parent affinity groups are greeted with enthusiasm. But what these groups should be doing longer-term — what value they should be providing their members, how their leaders should steer and contribute to the effort, and what types of events and services they should offer — is frustratingly hard to see, or agree on. As a result, network momentum — and credibility — can fizzle out quickly. As one of my clients, a VP in a technology firm, told me recently, “Getting the parents’ group launched was easy. But now our meetings consist of working moms and dads sitting awkwardly in a conference room, talking about how hard it all is. There’s so much goodwill, but nobody really knows how to make this thing work.” And when the working parents’ network itself isn’t working, it sends an unintended, negative message: This organization and working parenthood don’t go together.
Fortunately, there’s a fix that any network leader, in any sized company, and in any industry, can use: A set of simple, practical techniques and approaches that can help turn your working parents’ network into an asset — one that improves overall morale and retention, and that provides tangible, practical benefit to individual employees, too. Take the following steps before and after your network is launched, and you’ll develop a network with a large following and with powerful, positive impact.
Build up from what works. Don’t spend time intuiting and hypothesizing what the network should do; scale up what’s already working. Every organization has an existing working-parent network — organic and unseen, perhaps, but functional. Maybe there’s an email chain through which new parents in the marketing department swap out gently used baby gear, and maybe Mary over in finance has a reputation as an “on top of it” mom — and ends up mentoring and informally coaching a disproportionate number of colleagues as a result. In ID-ing these kinds of under-the-radar peer-to-peer relationships, you’ll discover a lot about what employees want and need, how those needs can be met, and who can help meet them. This helps you build an agenda, or plan of action based on a proven approach. Make that email chain an Intranet page or Slack channel, available to all working moms and dads throughout the company. And then rope Mary in as a featured speaker at an early network event — and ask for her ideas on where you should focus future programming.
Be assertively inclusive. Working parents come in all packages. They’re male, female, biological, adoptive, gay, straight, from every conceivable background, and from all parts and levels of the organization. And as network lead it’s your job to make sure that every single one of those parents gets the message, loud and clear, that “You are welcome here. This if for you.” Start by ensuring the group’s leadership is demonstrably diverse; prospective members will want to “see themselves” in the network’s composition. Make sure to keep communications demographically neutral: In emails, for example, specify that “this group/seminar is open to every interested working parent at [organization name].” And don’t be afraid to get personal: walk down the hall and invite that single, adoptive dad of a 16-year old to join you at the group’s next meeting. Remember: The broader and deeper your network is, the stronger it will be.
Align it to the organization’s mission — and DNA. At Kramer Levin, a leading law firm, the Working Parents Affinity Group features seminars on how to navigate legal issues important to new parents, like drafting a will. At Dana-Farber Cancer Institute, the “mission of the Working Parents Group is to improve conditions for the working parent” — just as the mission of Dana-Farber itself is to improve conditions for everyone touched by cancer. In these organizations, the working parents’ groups feel like natural and essential outgrowths of core operations. They’re easy for working parents to align themselves to and for senior leaders to get on board with.
Keep your figureheads relatable. In an effort to generate maximum visibility and “street cred” for a new network, you may have enlisted a working mother or father at the very top of the organization to serve as public face of the effort, or to speak at an early event. But if that person makes an enormous amount of money, has a large in-office team and three nannies on call at home, they’re going to be hard for most employees without those resources or advantages to identify with. Try tapping a broader pool of sponsors and speakers, ones who can address the day-to-day challenges most of your parent-colleagues are living. If you are fortunate enough to have the advantage of a C-suite supporter, help sensitize him or her to what’s really on other parents’ minds: Finding good day care, being able to work from home when their child is sick, figuring out how to save for college.
Have a curriculum that puts parents in control. At the network’s outset, and at the beginning of each year following, have a clear view of what you want members to learn — and be able to do for themselves. Whether it’s “to better manage time,” or “find greater flexibility,” or any other key working-parent skill, organize your events and programming around teaching it. Without that focus and narrative thread, the network’s activities risk becoming disjointed; you may end up with a “grab bag” of events and activities, each of which seemed like a good idea at the time, but which together don’t provide the punch of a more curated, planned-out effort.
Use internal experts and select “friends of the firm” as your faculty. The best way to create a rich and relevant curriculum on a limited budget? Use resources on hand. Have Rob from finance lead a seminar on tax-law changes that affect working parents, or on how to set up a college savings account. Ask someone on the IT support team to do a session on “the best apps and tech hacks for parents and caregivers.” Ask the outside law firm who your organization does a lot of business with to send over a Trusts & Estates partner to speak about how to set up wills and life insurance trusts. Scope the range and depth of expertise around you and bring it to bear for your membership.
Stay in the solutions frame. Working parenthood can be overwhelming, and it’s a natural tendency for working mothers and fathers to connect over — and take comfort in — comparing notes about challenges and pain points: Exhaustion, difficulties with their kids’ schools, long to-do lists, lack of flexibility. But as network lead, your job is to help move people forward: To help them find the ways to cope, to effectively manage through what they’re facing and to feel more empowered and positive while doing it. In other words, your job is to keep the network events, dialogue and members in the “Solutions Frame.” Do so by focusing group discussions — whether in person or online — around alternate approaches, hacks, and fixes. Start a network email thread on “best advice for back-to-school season,” or organize a group discussion on “effective ways to talk to your boss about flexibility.” You’ll be unearthing specific, actionable advice that helps fellow parents find new ways to handle common challenges.
Use it to help amplify other resources and benefits. It may be HR’s job to provide and manage your organization’s benefits offerings — parental leave, flexibility programs, family health care plans, and the like — but it’s the network’s mission to help keep those benefits accessible and top-of-mind. Hold a panel session for expectant fathers about what taking parental leave really involves from men who have already taken it. Lucky enough to have corporate back-up daycare? Organize a tour of the center your company has contracted with: have parents meet the care providers, help them with the enrollment paperwork, and walk them through what the drop-off process looks like. “Believe it or not” says Lindsay Bell, founder and CEO of Bell Family Company, a leading provider of corporate backup- and emergency childcare, “many families that already have these benefits don’t actually know how to start using them. To help them do so, organizations need to work closely with moms and dads — to educate and inform.”
Keep all events on “working parent time.” Make gatherings short, and if possible, hold them outside of the morning and evening working-parent crunch times; the 30-minute brown-bag lunch can be your most powerful format. And always distribute summary notes to those who couldn’t make it, or had to leave early. (Remember, the network is about working parents giving each other a hand!)
Working parenthood is a gigantic challenge for those living it day-to-day — but it’s also a major challenge for organizations, too. People drive performance and they need to feel in control and supported. Luckily, with some advance planning and the right approach, you can create a working parents’ network that will help get them there.
When the FDA issued its first approval for a gene therapy for an inherited disease nearly a year ago—a cure for a type of blindness—it was heralded as breakthrough, a moment decades in the making. With dozens of other genetically engineered therapies moving through clinical trials, the long-promised era of personalized, gene-based medicine seemed to be at hand.
But there was a catch: the one-time treatment, Luxturna from Spark Therapeutics, costs $850,000.
In a recent Goldman Sachs research report about the promise of gene therapies, analysts asked a question that gets to the heart of a growing dilemma for the healthcare sector: “Is curing patients a sustainable business model?” As this first wave of genetic treatments hits the market, industry leaders face a stark choice. These therapies could save or change lives, but they come at unprecedented cost. Indeed, Novartis recently said that its life-saving gene therapy for spinal muscular atrophy would be “cost-effective” at $4 million to $5 million – hinting at the pricing the company has in mind. As the use of these expensive drugs grows, there seems to be no way traditional insurance models will be able to pay for them without breaking the bank or requiring patients to assume a big chunk of the cost.
Consider what happened to Amsterdam-based UniQure. In 2016, the company had to pull its gene therapy for potentially fatal fat-processing deficiencies from the E.U. market. With a $1 million price tag, limited data on efficacy and just 700 potential patients in Europe, health systems were unwilling to pay for treatment. Biopharma companies now have 58 gene therapies and gene-modified cell treatments in Phase III clinical trials, with about 35 expected to be FDA-approved by 2022, out of about 1,000 candidates in the total pipeline. These new therapies could face a similar fate if prices can’t be brought down. Something has got to give.
New business models
Our research on major innovations finds that when disruption occurs, technologies don’t replace technologies; systems replace systems. Put another way, product classes with fundamentally new performance profiles can’t be dropped into an existing business model and expected to work. The business model — how value is created, captured, and delivered — needs to be reinvented to support the new proposition.
When it comes to gene therapies, there’s a growing recognition that harnessing breakthrough science to cure diseases simply isn’t enough. Some industry innovators are creating novel payment models that share the risks and costs in ways that may help jump-start new markets and cure more patients. Some of these new models are already being rolled out — and others are more theoretical. But they illustrate the levers companies can pull in order to make therapies more affordable and accessible.
As Spark CEO Jeffrey Marrazzo says, “We are striving to bring the same level of innovation to the delivery of, and access to, this product” as the company did in developing the treatment. To this end, Marrazzo has led an effort to develop a new business model under which Spark gets paid only if the cure is successful and endures over the long term, and payments for successful treatment are made in installments. Such a model will be more attractive to insurers as it eliminates the risk of paying for failed treatment, and it benefits Spark by increasing insurers’ willingness to pay for the expensive therapy. In addition, Spark will issue rebates to the payer if a certain measured outcome—in this case quality of vision—is not reached over time, with markers set at 1 month, 3 months, and 30 months.
Spark has entered into such a contract with Harvard Pilgrim Healthcare and is also negotiating with the Centers for Medicare and Medicaid Services (CMS) to put in place a model where payments can be spread out over years and only continue if the cure appears to be permanent.
New financial instruments
But such value-based models may not be enough. Part of what makes the economics of curing patients challenging is that the average U.S. consumer switches health plans every two or three years, due to job changes or their employer switching insurance plans. No payer wants to foot the bill for a lifelong cure only to lose the patient and let the next payer “free ride” on that investment.
Enter the concept of a “HealthCoin,” an approach that incentivizes insurers to reimburse for preventative measures and costly one-time treatments by generating credit that they can trade like a bond. At scale, and perhaps enabled by blockchain technology, HealthCoin solutions could help “securitize” measurable improvements in health, providing a transparent way to value small things like effective behavior change and big things like curative gene therapies. That value can then be passed from one stakeholder (such as an insurer) to another.
The solution was first proposed in a 2016 paper by University of Washington researcher Anirban Basu, with Pfizer researchers Prasun Subedi and Sachin Kamal-Bahl, as a way for ensuring that payers can capture the value they create.
For instance, the authors suppose, what if a genetic cure for Type 2 diabetes was developed? “The annual medical and indirect costs associated with the prevalent cohort of diabetes are approximately $218 billion in the United States alone,” the authors write. To overcome the free-rider problem—where an insurer could wind up covering the full one-time cost of a cure for a patient who then moves to another payer—the new payer would be required to purchase the HealthCoin of the patient. But since that bond would still retain value over years, they could resell the HealthCoin at a later date, recouping most or part of the cost.
Other payment systems are even more theoretical, though inspired by existing related models. For instance, consider the true case of Alex, a 30-year-old professional living in Boston. Recently, Alex used the 23andMe service for an analysis of his DNA and the test found an elevated genetic risk for Alzheimer’s. “This is a terrible, scary disease,” Alex said. Knowing what he now knows, Alex started donating money to a foundation supporting Alzheimer’s research, in the hope that a cure is found by the time he might need it later in life.
This willingness to pay well in advance of need leads to the idea of an annuity-based business model. People in their 30s or 40s could pay small monthly premiums in order to fund development of new treatments, and if such therapies prove successful, they’d collect dividends, not in the form of preferential access to the therapies but as an impact investor, like those who invest in cleantech companies.
Such a model might be a hybrid of condition-specific “venture philanthropy” funds (like the Juvenile Diabetes Research Fund’s T1D Fund, which invests in products and therapies for treating Type-1 diabetes) combined with rare-disease risk pools in single-payer systems. In Canada and the UK, for instance, the Canada Drug Insurance Pooling Corporation and the UK Cancer Drug Fund spread the impact of high-cost drug claims across all payers while also raising money from donors and dedicated government funding.
It’s unlikely that there will be a one-size-fits-all business model for curative gene therapies; the particulars of each drug, disease, patient profile, and health system will determine the types of innovation required to get transformative therapies to patients in need. But for the genetic revolution to truly pay off for patients as well as biopharma companies, leaders must put their innovation horsepower into creating new business models while they develop and test the therapies themselves.
In any team or organization, some individuals are consistently more likely to come up with ideas that are both novel and useful. These ideas are the seeds of innovation: the intellectual foundation for any new products and services that enable some organizations to gain a competitive advantage over others. However, organizations are often unable to put in place the right processes, leadership, and culture to turn creative ideas into actual innovations, which causes even their most creative employees to underperform. This mismanagement of innovation is further exacerbated by the fact that managing creatives tend to require special attention and consideration. Indeed, decades of psychological research suggests that creative people are quite different from others when it comes to personality, values, and abilities. In light of that, here are eight evidence-based recommendations to get the most out of your creative employees and to stop them from underperforming:
Assign them to the right roles: No matter what industry or job people are in, they will generally perform better when you can maximize the fit between their natural behavioral tendencies and the role they are in. This is why the same person will excel in some roles but struggle in others. Thus, if you want your creative employees to do well, you should deploy them in tasks that are meaningful and relevant to them. In fact, research shows that while creative people are generally more likely to experience higher levels of intrinsic motivation, they also perform worse when not intrinsically motivated. There is therefore a higher cost and productivity loss when your disengaged employees are creative; but the benefits of engaging them are also higher.
Build a team around them: It’s been said that there are “no statues of committees,” but innovation is always the result of coordinated human activity — people combining their diverse abilities and interests to translate creative ideas into actual innovations. Just try managing a team full of creatives and you will see that very little gets done. In contrast, if you can surround your creative employees with good implementers, networkers, and detail-oriented project managers, you can expect good things to happen — such are the benefits of cognitive diversity. Whether in sports, music, or regular office jobs, creatives will thrive if they are part of a team that is able to turn their ideas into actual products and services, freeing them up from implementation.
You and Your Team Series
Reward innovation: You get what you measure, so there’s no point in glorifying creativity and innovation if you then reward people for doing what they are told. Paying lip service to innovation will frustrate your creative employees, who will feel underutilized if you show indifference to their creative ideas and imaginations. Conversely, if you actually incentivize people to come up with new ideas, to think outside the box, and to devote some of their energy to improving existing processes, products, and services, you will notice that even those who are not naturally creative will attempt to do things differently and contribute to innovation.
Tolerate their dark side (but only up to a point): Everybody has a dark side, defined as his or her undesirable or toxic behavioral tendencies. Research has shown that creative individuals are naturally more irritable, moody, and hard to please. Furthermore, because of their imaginative disposition, creatives may come across as odd or eccentric, and they often specialize in making simple things complex, rather than the other way around. However, these non-conformist and individualistic tendencies also provide some of the raw ingredients for creativity: it is usually those who are likely to question the status quo and defy existing norms and traditions that push the most for innovations to happen. As the artist Banksy recently posted on Instagram when he made one of his art works self-destruct at a recent auction (just after the buyer spent over $1.3 million on it): “The urge to destroy is also a creative urge”. In contrast, if you only hire people who are well-behaved and do what you tell them, you can forget about innovation! However, it should be needless to say, no matter how creative employees are, there is no excuse for misbehaving or harming other employees and the organization.
Challenge them: Few things are more demotivating than being asked to do very easy and unchallenging work, and this is especially true when employees are creative. Data show that in the U.S., 46% of employees see themselves as overqualified for their jobs. This makes it critical to push your employees beyond their level of comfort. Failing to do so will significantly increase disengagement, turnover, and poor psychological health. Investigating this issue, researchers found that situational factors can mitigate these effects. Organizations that provide their most talented people with personalized development plans and mentoring opportunities, and that promote a culture of support and inclusion, will benefit from increased creative performance. Providing such opportunities may be a heavy lift for some organizations, yet failing to do so will risk losing their creative talent to competitors.
Apply the right amount of pressure: It is often said that necessity is the mother of invention — if a problem must be solved within a given timeframe, it probably will. Yet research shows that working in high-pressure environments can harm an employee’s well-being and in turn reduce their productivity. Yet, when it comes to maximizing one’s creative output, applying some pressure can be a good thing: indeed, scientific evidence indicates that there is an optimal amount of pressure to drive creativity. Not enough pressure will lead to a lack of motivation, and too much of it will create stress that inhibits one’s ability to think creatively. Managers must get this balance right and induce a moderate (optimal) amount of pressure by first defining resource boundaries and expected output, and then clearly communicating their support for the creative process.
Promote cognitive diversity: When organizations look to hire new employees, their “fit” with the culture is often an important selection criterion, and there is good reason for this (see again point 1). Evidence suggests that employees whose psychological profile and skills match the organization’s culture and mission are more motivated and productive. Yet, if organizations are pursuing innovation, they should in fact promote cognitive diversity amongst their teams. Specifically, leaders should build teams whose members have compatible, yet significantly different, psychological profiles. This is because teams that are cognitively diverse are more likely to view problems differently and produce better decisions. This rule also applies to leaders: if you want leaders to drive any sort of transformation or entrepreneurial activity, you are better off hiring moderate misfits than perfect fits!
Be humble: With narcissism on the rise, humility is an underrated virtue in today’s society. Narcissists often become leaders thanks to their charisma, charm and confidence, which helps them attract followers and persuade others that they are more competent than they actually are. Yet such leaders are rarely more creative, even when they manage to come across as innovative to others. In fact, leaders who want to produce a creative team should practice humility. A recent study found that a leader’s humility was a significant predictor of a team’s creative output, as they evoke feelings of safety, trust, and cooperation among their followers. To practice humility, leaders should become more willing to publicly admit their mistakes and limitations and become more forthright in displaying appreciation and giving credit where it is due (Elon Musk should take notes).
As individuals are increasingly turning to self-employment and entrepreneurship, organizations are at risk of losing the talent needed to drive growth and fend off disruption. The ability to successfully manage and retain creative talent is therefore critical. While stories of innovative and revolutionary breakthroughs speak of their organic and mythical origins, the reality is that turning creative ideas into an actual reality is hard — and it requires great leadership. Fortunately, there is enough evidence to help leaders develop an effective strategy to not just manage, but also leverage, their creative employees.
The challenge of running a sustainable enterprise has taken center stage among shareholders. Last year, for example, Russell 3000 companies received 144 shareholder proposals requesting action on social and environmental issues. Meanwhile, in a survey of 89 institutional investors by Callan, 43% of respondents said they incorporate sustainability factors into their investment decisions — up 21 percentage points from 2013.
The dilemma for directors, however, is determining what aspects of sustainability, or ESG performance, should have priority — and should be linked to pay incentives. The UN, for example, has outlined 17 broad Sustainable Development Goals for 2030. Progress is measured with 169 targets. The goals include eliminating poverty, offering affordable and clean energy, achieving gender equality, protecting ecosystems, increasing responsible consumption and production, and much more. Meanwhile, a number of business organizations have created their own sustainability measures, including the Sustainability Accounting Standards Board, Sustainalytics, Bloomberg, and MSCI. And at many companies, sustainability efforts are measured with well over 10 internal metrics.
Compensation committees often start by tying bonuses and long-term incentives to goals related to compliance and risk management. That approach pleases some stakeholders, but it may put the focus on issues far removed from the company’s core mission. For example, measures of regulatory fines gauge only a company’s environmental “hygiene,” which may reduce risk but doesn’t incentivize executives to increase the company’s broader environmental impact.
What’s a better approach? Have bonuses depend largely, or solely, on executives’ success in tapping big strategic opportunities related to sustainability. By pushing the top team to go on the offense strategically, this change brings the work of advancing sustainability from the periphery of the business to its heart.
Though not all businesses today are in a position to implement big strategic initiatives based on sustainable thinking, the opportunities to pursue them are growing fast. According to a survey by the UN and Accenture, 63% of executives believe that sustainability will cause major changes in their businesses in the next five years. And if that shift ends up determining which companies thrive in the future, then it’s likely that incentive goals must apply to bold business opportunities.
One major heavy-equipment manufacturer, for example, has 14 sustainability goals. Only one of them, however, stands out as big and strategic, with the prospect of significant returns: remanufacturing products and components, which can save customers money, extend product life cycles, and reuse materials. A logical measure for this goal — a measure to tie incentives to — would be growth in revenues from remanufacturing and rebuilding, or the percentage of revenues or profits derived from both.
By limiting the number of sustainability goals in its incentives, companies can wield huge power to change leaders’ behavior. An auto executive’s bonus might depend on advancing the company’s electric vehicle, connected and autonomous vehicle, or ride-sharing business. A financial services firm’s executives might be rewarded for the percentage of affordable capital that’s allocated to worthy sustainable projects, such as renewable energy or sustainable agriculture.
Boards should demand entirely new kinds of strategic thinking from management, the kind of thinking that not only makes the company more sustainable but also aids suppliers and customers in becoming so. If you’re a food company, can you produce healthy products that address the growing rates of obesity, diabetes, and heart disease? If you’re in agriculture, can you devise rice strains that grow in less water and yield more for farmers? If you’re in health care, can you improve care quality for the employees in the companies you insure?
To take this approach to heart, boards should ask several questions:
Where does the company have a unique opportunity to differentiate?
Does the company have the core competencies, or can it acquire them, to take advantage of the opportunity?
Is there an adequate return on investment over the long term to justify moving forward?
As a sign that many executives are thinking along just these lines, a recent McKinsey survey of retailers and consumer goods manufacturers found that almost half of those undertaking sustainability initiatives were pursuing new business or growth opportunities.
That doesn’t mean companies should abandon traditional strategies for reducing costs, mitigating risks, and preserving a “license to operate.” And when those strategies are core to the business, incentive plans should link bonuses to fulfilling them. If you need water for beverages — think Coca-Cola or PepsiCo — a bonus for preserving water sources would be strategic. If you need ore bodies to mine — think Rio Tinto or Teck Resources — a bonus for top-tier environmental protection would make sense. If you need to demonstrate appropriate labor practices — think McDonald’s, Dunkin’, and Nestlé — a bonus based on mitigating risks might be critical (as would a provision for clawing back bonuses if the risks are not discovered until after harm is done).
Directors should, of course, continue to monitor and disclose many other aspects of ESG performance. In fact, they should insist on seeing ESG metrics in corporate or individual scorecards — assuring that executives act responsibly, mitigate risks, and comply with regulations. The compensation committee can then use its discretion to adjust pay after the fact for sustainability performance in these areas. Alternatively, sustainability performance can be addressed in the objectives of individual executives or business units, rather than being used in company-wide objectives.
As with all targets for executive incentives, directors need to choose carefully to avoid unintended consequences. Do new targets motivate undesirable trade-offs? If executives hit sustainability targets at unacceptable cost, safeguards are needed to make payouts contingent on meeting core financials. Directors should remain focused, however, on isolating a limited number of sustainability goals that deliver the most value. And that value should be of such scale that it will energize executives to go after it, in turn yielding the biggest reward for shareholders, other stakeholders, and society.