S47E12 - Environmental, Social and Governance Report, with Lynnette Heath

Thank you, John. Glad to be here. It is a pleasure to be with you.

I would just say I've also had the pleasure, as many of us in HR are able to do, to work in a variety of industries. I was with General Electric for a number of years before going to Entrust Data Card, which is Entrust today, working in financial. I was in healthcare before that with Medtronic and HBOC. And now really thrilled to be at nVent, which is in the electrical industrial space. One of the great things, as I mentioned earlier about HR, is that we're able to experience so much. Over my career, I've been able to bring all the learnings with me to where I am today, and that's just been a benefit which I'm really appreciative of.

Absolutely. Agree 100% with what you said.

Sure. I think I'll back up a little bit. You may or may not be aware about nVent and just who we are and how we formed. We're a fairly young company. We spun out of Pentair just over five years ago now. Thinking about that time when we were forming, it was really exciting, and that's what drew me here: being able to launch a new company but be set on a really solid foundation. We were able to then take a step back and say, 'Okay, we have wonderful foundational attributes, but who do we want to be? We're coming out with our own brand new name. Who do we really want to be as an organization?' We had some thoughtful discussions around that. Over the first couple of years, it was really just standing us up and making sure we can function and operate. But then having the opportunity to say, 'What's next? What's out there?' Knowing that ESG is really important, to your point, we hear from all of our constituents and key stakeholders that it matters. So what are we doing? We started with that first report just as a baseline and have put a really strong strategy behind it. I'm really thrilled to be able to be the people pillar owner and talk about what that means for the organization. You can look at the building blocks that we put in place since we spun. We have a Chief Inclusion and Diversity Officer. We didn't have that role when we spun. We didn't have any I&D, inclusion and diversity, in the organization when we spun. We weren't gathering on a regular basis that feedback from our employees in terms of surveys, hearing what's on their mind, making sure we have a robust program around that two-way communication, and a variety of other ways that we're focusing on our people and making sure that our people know they matter. We say they matter, but they're feeling it every day. After going out to our different locations, unsolicited, our people would tell us, 'We feel the focus on people here at nVent. We feel that people matter. It's more than something that's just said.' For me, that's so important, and that helps fuel really the leadership and the drive around that S tier point in ESG, although all of it matters of course. That helps bring back for me to the organization, not just to the HR team, but our executive leadership team and our people leaders who we bring together twice a year in a people leader call and talk about here's what matters, how are we showing up, what shadow are we casting for our people. It's really important that they all feel it all around the world, and we've established that. So it's been exciting. Here we are, we just celebrated our five-year anniversary May 1, which is a thrill, and hearing the feedback from our people and coming up on our third report.

Exactly. You mature every year in terms of what you're reporting, how you're reporting, the different stories. As you mature on what you're reporting externally, of course with that comes the internal development. Do we have the infrastructure in place to capture the data we want to report on? Are we making sure all of our people leaders and our people are focused because it matters? That comes with maturing, but I can tell you by having that external report, it drives an internal focus as well. There's really a dual benefit of not just educating the world on some of the great things that we're doing, but also making sure there is that focus internally because our people read it, they care about it, and they get excited and say, 'We could even do this next year or this the next year.' So it drives that internal excitement as well as accountability.

I would say it's making sure that you're having those conversations internally where you're all coming to the conversation and, to your point, you're being real with what can we do. There's only so much you can do in a given year. When we're transparent, we're authentic. We're doing some great things, but we are on this journey. You talk about maturing. With our first report, we didn't come out with these big lofty goals. We said, 'Okay, we're going to start small and we're going to talk about what we know we can perform over time.' So not every pillar had a goal in there, and we continue to add and refine. You may find, as we did, if you look at our three reports now, we put a goal out there and said, 'Well, we ended up blowing it away the second year, little did we know, so we're going to reset.' That's wonderful. On the people side, fairly early on we were able to say we know we have goals in terms of representation where we want to grow, and we know we're going to have a safety goal, so let's put that out there. Then what were some of those internal mechanisms to help drive that? To your point, we were brand new. We started small with what we call our people leader goal. When we came out as an organization, we developed it because it was so important. As I said, our people really do matter. Every single people leader every year, as we cascade our goals, has what we call a people leader goal. In that goal, we talked about maybe what sounds pretty basic or fundamental: you're going to make sure you have your reviews on time, you're going to make sure that you set goals for people in a timely manner, and a number of other operational goals from a people perspective. Part of the reason we did that is because, again, as I went out and talked to people, maybe there were some people who said, 'Oh, I really haven't had goals per se set for a number of years. I haven't had a meaningful review, let alone midyear review, in a number of years.' We said that's not okay, so we're going to set this up. What we told our people is if our people leaders do not successfully complete this goal, we have a five-point rating scale and that middle is really achieving expectations. You can't possibly be above that if you're not doing these things from a people leader. So while the goal is weighted at 10%, you could get exceeding on those other 90% of your goals, but your overall rating won't be. That overall rating is going to impact my bonus, it's going to impact my merit increase. We also said you have to do all of those correctly, and in terms of my bonus, it impacts that personal component of my bonus. I will tell you, year one maybe there was a thought, 'Well, I know we said that, but...' I had a list of managers who hadn't completed one portion of it on time. Maybe a few of them came back and said, 'But you're not really gonna ding my rating, right?' Or their manager said, 'But they blew it out of the water here, here, and here.' I said, 'That's wonderful, but no, because leading our people is so important. Yes, we're going to impact that.' Here we are on year five. I can tell you I have less than this now of managers, but I had people come back and say, 'It wasn't my fault. I couldn't do their mid-year review. They went out on vacation.' I said, 'Really? For six weeks? Because we give you a pretty big window. You're telling me for six weeks?' 'Well, no.' I said, 'Then that's on you.' Every time they'd come back and they got, 'Okay, this is the real deal.' Then it just wasn't check the box. Have the conversation. Are you having a meaningful conversation? That's where HR professionals, the onus is on us to make sure we give the tools, so we build our capability. Are you thinking about how you develop them? We then created and added throughout these five years the individual development plan, or IDPs, that we're thoughtful about, that it leads to our leadership competencies. This year, when we talk, we keep evolving. That was on the front end of the review conversation. We use Workday, a great platform, but we automated. We want to make sure the very first thing you're doing is talking about that development. We found that if it's at the tail end, maybe it wasn't happening, and it's really important that our people understand, 'How are you going to develop me? How can I grow my career?' I would just say continue to evolve to make it better based on what we're hearing from our people. Great, you're talking about how you're going to develop me. You're making sure my leaders understand that they have tools at their disposal and they're coming in and having the right conversation with me throughout the course of the year. I will also tell you we've heard, 'Oh, maybe performance reviews are going away, or should we stop doing them or evolve them?' We continue to go back to our people. We'll conduct focus groups. We talk to our employees and we'll say, 'What is your experience? What would improve that experience?' I do a number of roundtables myself. I'm interested in the employee experience. How can we improve? What can we do better? I'll often tell them, 'If I'm changing everything, what is the one or two things you're going to say, but Lynnette, not this?' That's how we create our programs that we have in place, and we maybe evolve or update our approach. It's not about necessarily here's what's going on externally, here's a shiny new object or new approach. It's let's go back to our people, let's go back to our leaders, and let's find out what matters to them and what's going to have the most impact. That's how we have continued to either create new programs or evolve the programs that exist today.

Absolutely. I would agree 100% on that. It is the baby steps because you want to make sure that the organization can absorb it and it truly can become embedded. It is not a flavor of the month. It's not a check the box. It's not performative. It is this is really about who we are and how we operate. Our people are so important to us and matter. We make sure that that translates through everything we do and how we approach. It doesn't mean we're perfect, and we certainly continue to have areas that we can improve, but we always come back to it through the lens, I would say, with not just the HR function but how we develop our leaders. It's about that employee experience and how are we showing up for them.

Absolutely. One of the things that I mentioned earlier, we had this wonderful foundation that we've been able to build upon. One of that was we brought our company values over, and we call them our WinRight values. That just tells you a little bit about the organization. We're about winning but doing it in the right way. You speak of accountability. We have accountability for performance and our values, and we talk a lot about that. Even we have culture sessions, so when people join the organization, they are able to attend a culture orientation. They understand what our culture is all about. It is in our culture to talk about accountability. Are you using victim terminology like, 'It's not my fault, it's this, it's that, here's the why I couldn't do X, Y, or Z'? Or are you taking accountability for what you do, how you show up, whether it's how you're treating one another, whether you're hitting a goal or not hitting a goal? Let's talk about it. Let's be accountable. Certainly things come up over time that we don't necessarily plan for, but let's be accountable and talk it through and make sure that we can move forward. That's part of the culture that I love. All of our values, our WinRight values, really are a part of who we are and how we show up every day. Talking about our culture and just how we formed the big S of the ESG, we added into our performance rating process. It's not just the what, meaning our goals and how do you achieve them, but it's the how. So we do rate on the values as well. How are you demonstrating the values? That can impact your overall rating, which again impacts your compensation. We make sure people really understand it's so important how you're showing up every single day and how you're living the values, which hopefully you're doing, versus not living the values. I understand we all can have an off day, but it really matters. Are you really approaching things from a positive perspective because positive energy matters? Are you treating people with respect and teamwork? These things matter. They're more than just words on a wallet at nVent. That's what I tend to hear over and over, and I do think that's a differentiator for us. Our culture is wonderful, and I really like all this conversation.

Well, selfishly I'm going to focus on the people pillar. I think there's a lot of great things in the entire report, and some of it's on planet, which I won't go into, and our product, our other two pillars. But for me, it's all about that people pillar. One thing, as I mentioned, we established goals pretty early on. What was really important to us were some representation goals. So we focused on gender in professional roles as well as in the US, racial diversity in management roles. We found we put the focus in place. We then translated that focus internally. We have in our management incentive plan what we call an ESG scorecard, and that's a 15% of the calculation. In there, we focus on ESG initiatives, and we talk about diverse slates. We hadn't necessarily talked about that before becoming our own company, and how important it is. Obviously you can't hire diverse individuals if you don't have a diverse slate. That's really key. So now we're showing metrics and we're talking about it. At our recent Global Leadership Team meeting this year in January, I had a people breakout session. We have smaller groups and we're talking about it. This is where it's so exciting for me to see peers of different management level individuals asking one another, 'How are you achieving this? I think we all know how challenging it is, how competitive it is in the talent labor market today. How are you finding it? It's taking us so long to get that slate of individuals of candidates, and then maybe it takes a little longer to get that diverse slate. What are you doing?' They're sharing best practices, they're sharing information. We've had a focus on it, and we increased it. We said, 'No, we're going to increase the focus on this because what we have found is when we bring diverse candidates to this slate, often time guess what? They're the best hire. We're all about making us better.' There's a lot of internal dialogue around that. The outcome is we've improved our representation in both categories. If you look at our financial results, we have fantastic financial results. Our investors love our focus on this because it translates through, as research shows it will. Bringing the diversity of experiences, background, diversity of thought is simply making us a better organization. So I would say that's been very successful. Also, our focus on safety is something else that we called out, and that really matters. Our safety approach is making us better internally and making sure that we're being really thoughtful. We strongly believe that every single person around the world in every plant and every office has the right to leave work in the same shape that they showed up. It matters to us. Those are conversations and focus areas and discussions that we're having every day. I think that by calling those out in the survey, it just makes you focus more internally as well as externally on those points. We're seeing great performance there in terms of safety of our people. I would say we're best in class, but we always strive to be even better, and that's what we're seeing in terms of outcomes.

Thank you so much, John. It's been a real pleasure. I would say feel free to look me up on LinkedIn at Lynnette Heath. I'm with nVent. You can certainly go to our company website as well. I encourage you to do that. You'll find our most recent as well as previous ESG reports. We're really proud of everything we're doing, of the progress we're making. I will tell you I'm really, really proud to work at nVent, to be part of this team. I'm incredibly proud and thankful, quite frankly, for my HR team. I think they are fantastic. We continue to grow, to be innovative in our approach, to think differently. What are we doing today? At spin five years ago, we had no ERGs, employee resource groups. Today we have nine. We have over a thousand members around the world. You think about how that changes your culture. We had some people who said, 'What? I don't even know what an ERG is. What does that mean? What are we doing?' How we've globally launched an employee relief fund because that matters. We have an nVent Foundation. We're talking globally about our EAP, and previously we only had that in the US, an employee assistance program. We continue to try to show up in ways that our employees know you matter, we care, we're here for you. That's an organization I'm proud to be a part of. I can tell you I just had some key interviews last week, and the candidate said, 'We see a lot about performance with the heart.' That is true, and that's who we are. We're all about results but with caring. That's a culture we're going to continue to foster, to continue to cultivate, and that will continue to be a differentiator for us at nVent. So I encourage people, please feel free to reach out to me directly, but go check out our website or connect with me on LinkedIn.