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Success Story

Why Telefónica believes that people strategy and sustainability go hand in hand

August 31, 2022

Cristina Martin, senior director, Work & Rewards, WTW speaks to Marta Machicot, chief people officer, Telefónica about why HR is such an exciting area, the importance of disconnecting from technology, and how to embed ESG into business goals.
ESG and Sustainability|Work Transformation|Executive Compensation|Compensation Strategy & Design
ESG In Sight

We strongly believe in sustainability as a key pillar which enhances our long-term value to shareholders.”

Marta Machicot | Chief People Officer, Telefónica

Cristina Martin (CM): Marta, thank you very much for speaking to me today. You've been in the Telefónica group for over 20 years. In your current role as chief people officer and as a member of the executive committee, you have the overall vision of a highly complex company with over 100,000 employees operating in 12 countries in two continents. As chief people officer, what are the most pressing challenges and opportunities at the current time?

Marta Machicot (MM): The main challenges and opportunities we face in the human capital arena come from the transformation we are immersed in. The technological revolution we are living in requires new capabilities and every organisation must ensure they have those. It has become a huge challenge because there's an enormous gap in the market. 50% of current jobs require digital skills and only 30% of the workforce have those, and therefore the war for talent is increasing day by day. But the other side of the coin is that the dynamic digital environment is opening great opportunities to all of us. Careers have has moved from being vertical and stable to being more flexible and open and it's multiplying our current options, even giving us the opportunity to reinvent our careers several times.

The second change is that digitalization is diluting geographical barriers and allowing us access to talent across the world. Our main agenda is trying to retain highly qualified professionals and continuing to develop in house the skills we will need for the future.

That's the reason why our people strategy is based on two pillars: empowering teams and having a growth mindset. We are aiming to change the way we work, creating a much more dynamic and flexible company. We are also seeking to change the way we think and continue developing that continuous learning mindset, to support our people in these new more flexible careers that we are going to go into.

CM: How are you bringing these two pillars to life?

MM: We have been busy in many areas, but to give you some colour, we have extended our approach to workforce planning, moving from a head count approach to a skills-based approach. We have also evolved our learning and development models. We are also working on reducing the complexity in the organisation, making it leaner and implementing other ways of working. Although I must recognise that it is maybe the hardest piece. We are working with WTW on evolving the employee value proposition, with more personalised and flexible schemes. And of course, data utilisation and analytics has been one of the key enablers we have had in all these areas.

We are implementing hybrid and flexible models, which is a movement that has been accelerated by the pandemic. We are convinced that we are on the right path, although we know that there's still a long way to go and that we have a lot of opportunities ahead.

I will highlight one of the things that we believe shows we are in the on the right path. Our EMPS [employer satisfaction score] is 67. Over 40 is considered excellent.

CM: I understand that Telefónica began its ESG journey two decades ago. How has it evolved, particularly in the context of its people strategy?

MM: In the world we are living in, sustainability is increasingly relevant to all aspects of life and indeed, I think that it is impossible to talk about people strategy without linking it to sustainability. As a company, we know that we could not lead the digital revolution without ensuring that all our people, without exception, are provided with an inclusive work environment and have equal opportunities to develop new capabilities.

We always say that we don't want to leave anyone behind. This is something that is critical to our strategy. Work on those aspects has a massive impact for our workforce, but also for our customers. It allows us to understand our customers much better and reflect diversity in our commercial value proposition. It also helps us to have a positive impact in society.

Our company mission is to make our world more human by connecting people’s lives. This mission becomes more relevant than ever in the digital war for talent, but it has been part of our history. This year we have reached 98 years old. When we started the company, our mission was to have operators connecting people directly to each other, manually. Maybe it's one of the reasons why in Telefónica, it is so natural to have ESG at our core, because it's part of our essence.

More specifically in terms of how we are managing it: we have a public ESG commitment with ambitious goals. We're increasing executive positions to 33% in 2024 and 40% in 2030. We are aiming to reach a zero gender pay gap by 2050. Those are very challenging goals regarding diversity and inclusion.

We will continue to pioneer flexible working models. We aim to have 100% of our workforce able to opt for hybrid working in 2024 (we are currently on 70%).

In addition, we are committed to the physical and emotional wellbeing of our people. We are paying specific attention to disconnection. We signed in 2019, with our trade unions, the first digital disconnection agreement, which states our belief that workers should be able to disconnect when necessary and create healthy work/life balances. This was a very positive step, and it has helped us to derive a lot of initiatives internally. We are also promoting voluntary activities. We are proud to have 60,000 employees who are active volunteers, and this number is increasing year by year.

50% of current jobs require digital skills and only 30% of the workforce have those, and therefore the war for talent is increasing day by day.”

Marta Machicot | Chief People Officer, Telefónica

CM: If we focus on reward for a moment, you also mention pay equity. Telefónica has been linking variable pay to (for example) customer satisfaction for a long time. I believe that it was in 2018, when you stepped in as chief people officer, that the full spectrum of ESG priorities became embedded within variable pay, from climate change to gender diversity. Could you walk us through the process of how and why these ESG metrics were selected?

MM: Well, let me take a moment to thank you and the WTW team for your support so far, because your help has been important in helping us to achieve these advances. So yes, as you said, we have started including ESG criteria in remuneration. We had interesting debates internally as to whether we should include long term or short-term criteria, and we decided to include both.

We measure the health of Telefónica in terms of its relationship with customers. We analyse social trust through reputation monitoring. We have targets for female managers, because it's something that is very aligned to the plan we have internally.

We have included ESG metrics in our remuneration model for two reasons. First, we strongly believe in sustainability as a key pillar which enhances our long-term value to shareholders. Second, we believe that remuneration is a very powerful communication tool, which communicates values and expected behaviours. Looking ahead, I'm sure that ESG criteria will continue to have a presence in our variable remuneration. I'm sure that we’ll continue evolving our indicators to measure ESG implementation.

CM: Thank you very much for all your insights. It's been really interesting and inspiring.

MM: Thank you very much for inviting me.


Cristina Martin
Senior Director, Work & Rewards
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