Guest Post by K. C. Soares, Ph.D.
Impact investment – the pursuit of social and/or environmental returns as well as financial returns – is rapidly gaining global importance. Development challenges such as poverty alleviation, sustainable development self-sufficiency and social justice can be addressed through impact investment work. The double- and triple-bottom line organizations in this field seek top tier human capital with broad knowledge and experience, but face constraints in hiring and retaining talent. The effective use of impact investment funds requires two things: (1) human capital to develop new ideas and paradigms; and (2) new ways of working together that create a meaningful workplace culture and an effective vehicle for deploying financial capital.
In late 2010, the One Planet team identified human capital and organization growth as key factors shaping and constraining industry evolution. Under the auspices of Dr. K.C. Soares, a pilot research project was developed around these topics. We wanted to understand current baseline practices among industry leaders and gain a clearer understanding of how people and workplace culture are influencing impact investment. Baseline clarity is a first step toward developing benchmarks that will contribute to healthy growth of multiple bottom line enterprises. These scalable impact investment firms will encourage increased flows of capital into ventures that benefit “the other 99%” as well as the firm’s investors.
Our self-funded research included face-to-face interviews with fourteen people in nine organizations of sizes ranging from about five to over 50 persons, and a thematic range including microfinance, social investing, VC, and an internationally respected specialty rating agency. Given limited resources, we focused on current human capital and organization development practices within participating organizations and the extent to which these are an integral part of workplace culture. Can we identify practices that increase workplace satisfaction and productivity? What kinds of initial conclusions can we draw and how might these shape industry dialogue and future research initiatives?
We began with the basic premise that impact investment requires each workplace to attract and integrate persons from diverse professions and backgrounds. In other words, social sector and development expertise is needed alongside traditional finance and investment skills. Additionally, we believe that a healthy workplace embracing change and innovation will incrementally, and possibly exponentially, improve and consolidate performance quality. Interview questions touched on structure, performance evaluation, hiring practices, communications, governance and the role of creativity and innovation in work processes and procedures.
Given our small sample size, research findings must be considered as preliminary. However, there was a recognized and articulated need to devote more time and effort to human capital and professional development, as well as to organizational culture as a means of ensuring sustainable growth. The nine discussion points below emerged from Dr. Soares’ analysis. The complete White Paper, which discusses these topics in greater detail, can be found on the TMITM blogsite (White Paper).
1. The different and specific vocabularies and approaches of financial and social sector professionals which are unique, considered sui generis, create potential barriers of mutual understanding. People are hired from these different professional and must work together productively even though each may think the others are speaking different languages. Organizations recognize the “two different worlds” phenomenon but are unprepared to handle the specific human and organization issues that arise as a result.
2. Workplace culture is rightly viewed as important. The need for mutual understanding, shared values, and collaborative approaches to work were often mentioned. Nevertheless, few organizations have specific plans or programs designed to create and maintain this type of environment. In the absence of a formal workplace culture, how people develop professionally and how they foster, learn of and share innovations in their profession are constrained.
3. Growth requires increased staff and integrating new hires into the workplace requires formal, or at least informal, on-boarding. Little, if any, formal on-boarding is planned and conducted, which worsens the problem of staff with different subject matter expertise and vocabularies. Conscious, purposeful on-boarding would foster better alignment between professed organization goals versus actual work place approaches and methods, as well as increased employee satisfaction.
4. Training and development programs need to be designed and implemented. While placing a high value on this, organizations recognized that neither appropriate time nor funding was being made available for these critical programs. Additionally, there was limited understanding of the distinctions between training (activity specific) and professional development (individual specific) programs. Sporadic and opportunistic training was thus offered, but little or no management/executive development programs. Career development, broadly defined to cover all staff, was not mentioned at all.
5. The need to harmonize across various generations of professionals in the modern workplace is well-known. None of the participating organizations had any specific tools or programs to leverage these generational differences. Although succession planning might appear as a Board level concern, the organizations were constrained in terms of “preparing for the future”, particularly with respect to human capital. Multi-year plans to increase financial capital through donations or investment were the norm, however, rather than the exception.
6. More attention needs to be given to the correlation between articulated organization values on the one hand (i.e., reduce poverty at the base of the pyramid) and objectives that directly impact the workplace. Most organizations believed that having a mission statement was sufficient to make their values clear, yet individuals are given little guidance in transforming a high-level mission into a practical plan of action. Clearly stated values would enhance the organization’s ability to attract experienced industry professionals who will fit well with existing staff and culture. An associated issue, raised by most of those interviewed, was their inability to offer competitive salaries commensurate with the knowledge and experience being recruited.
7. All interviewees commented that “people are the organization’s greatest asset”. This sentiment did not translate into meaningful actions that developed human capital within the organization. The organization’s systems, policies, procedures and values should work in synchronicity to provide meaningful human capital and organization development within the organization. When they do so, growth and expansion are more readily attained.
8. When operating funds are limited, one of the ways to attract and retain qualified staff is by offering well developed career plans and programs. Recognizing and nurturing non-financial value in this way lays the groundwork for a growing talent pool at all levels within the organization.
9. Variable compensation schemes were suggested as a means of addressing the issue of attracting and retaining experienced talent. Specifically, compensation structures that align the interests of staff, management, Boards and investors would contribute to the scalability and sustainability of these organizations. Additional research on performance linked compensation and reward systemsis needed. The recent GIIN case studies on aligning compensation and impact investment goals is a first step in this direction (Case Study:_Impact Based Incentive Structures).
The results of this pilot research provide insights for thoughtful reflection and future action. There was widespread recognition that more needs to be accomplished vis-à-vis the organization’s human capital and its own abilities to develop and grow sustainably. More creative and innovative thinking could be used to address these challenges. Financial performance is often discussed, but enhanced human and organizational performance are also critical for healthy growth of the impact investment industry.
The complete White Paper can be found under the “One Planet Presentations & Publications” Tab. Please feel free to comment here, or directly to K.C. (firstname.lastname@example.org). If others are working on these issues, please let us know – perhaps we can collaborate and amp up the industry-level discussion!
Lauren Burnhill – @LaurenOPV