Charlie Tharp on Regulatory Developments and Talent Strategy

In a new Harvard Business Review piece, the Center’s Charlie Tharp highlights hot topics in U.S. employment regulation that may have broad implications for employers’ talent strategies. From a proposed ban on non-compete agreements and pending human capital management disclosure rules to recent pay transparency legislation, CHROs are rightly concerned about the impact of policy changes on talent. However, Dr. Tharp suggests, leaders can consider “viewing the coming changes as an opportunity to think deeply about their talent strategy and turn these regulatory developments to their advantage.”

• Earlier this year, the FTC proposed a blanket ban on the use of noncompete clauses, which have traditionally been a way for employers to protect their investments in developing critical skills and talent and retaining those who possess trade secrets and sensitive knowledge of the company’s business strategies. Dr. Tharp notes that “with the increased risk of employees being recruited away by competitors, companies may be more selective as to the types of non-public information that is shared broadly with employees…leaders should reinforce how employees in high-value roles connect to the overall mission and strategy of the company.”
  
  
• While the plethora of state and local pay transparency rules are new and the long-term impact on wage growth is unknown, “there are signs that pay transparency is already stoking internal tensions.” Employers should take a fresh look at their compensation structures and ensure long tenured employees are paid competitively in relation to new employees. Tharp suggests “Yes, that means increased human capital costs, but retaining a skilled, motivated employee is far less expensive than searching for a replacement and suffering the opportunity cost to the company of a key position that goes unfilled for a long period of time.” Employee education on compensation philosophies and a review of other rewards practices and career development programs could be helpful in retaining top talent.
  
  
• Finally, the SEC has announced it will be proposing long-awaited human capital metrics disclosure rules next week (see story above). Depending on how prescribed these disclosures are, “companies should review their current approach to tracking of employee information and begin to prepare for the possibility that additional data will need to be collected and audited for the annual financial disclosure.” Given that the new disclosures will be added to the 10-K, auditing procedures and board oversight will need to be considered.

Tharp closes with some advice for HR leaders: “Because these three developments will apply equally to all companies, leaders may be tempted to relegate them to the compliance team. That would be a mistake. Company culture and providing purposeful work in support of a compelling mission is what really creates competitive advantage…forward-thinking leaders will devote increased attention to these aspects of the employee experience that are hard for competitors to replicate.”