Thinking Beyond the C-Suite: HR’s Role in Board Leadership
By Sunil Puri, APAC Director – Research, Innovation, and Product Development, Center for Creative Leadership (CCL).
Heads of HR, often considered custodians of talent, have traditionally shied away from active roles on boards. The feelings are mutual from the board standpoint – while chief finance officers (CFOs) are routinely called upon to inform and even advise boards on financial matters, chief human resources officers (CHROs) often play on the sidelines.
But that was back then. Things are changing rapidly in progressive Asian companies. People and talent issues, at the center of key governance issues and corporate failures in the last decade, have triggered this change in mindset.
The last few years have witnessed boards in Asia appreciating that talent or people are the ‘new currency’ to future-proof organizations. Center for Creative Leadership’s (CCL) latest research study BOLD 3.0: Future Fluent Board Leadership in Asia notes that one of the key emerging leadership roles of Asian boards is to help develop top-notch talent in the organization, not only ensuring CEO succession, but also ensuring adequate focus on talent development across the enterprise. And therefore, CHROs are finding themselves spending more time with boards and board leaders.
Exemplar boards view the CHRO role no less than a CFO role since they both are accountable for two of the most critical resources in any enterprise. CHROs are expected to report critical human resource issues, and advise boards on talent and related themes, basis their expertise in compensation, succession, talent, performance management, and leadership development, etc. CHROs may also play a key role in the remuneration or human capital committees in scrutinizing executive compensation, examining linkages of talent and performance, focusing especially on CEO succession, and also on the broad talent agenda.
Here are five roles the HR function in general and CHROs in particular must play directly and indirectly in order to help boards future proof organizations:
People Metric Reporter: Boards rely on people metrics and data to gauge organizational health and make sound judgements on future strategy, often leaning on HR as trusted people metric reporter. Board members in fact may expect HR to not only share people metrics, but also speak their mind on related talent issues. For instance, while engagement surveys are valuable as a dip-stick evaluation of people engagement, HR can provide much more color on motivation levels, and the level of connectedness people feel with the organization’s mission, vision and values.
Strategy Influencer: Strategy is often a shared responsibility of the management and the board. While management drives strategy formulation and rollout, boards often bring in the outside-in perspective and act as trusted and dependable sounding boards. Boards also often expect management to produce people strategy that supports the business strategy. This responsibility sits with the HR, and HR functions in progressive organizations often play a strategy influencer role. An important piece in there is HR’s role in driving the diversity and inclusion (D&I) agenda. While D&I initiatives do not and should not squarely be HR’s responsibility, the HR department (in partnership with the CEO) is often the mouth-piece for communicating the D&I agenda.
Critical Committee Resource: HR also plays advisor to various committees at the board level. HR usually is linked with compensation committees, but there are opportunities with other committees as well, including governance, nominations, and even audit committees. As a critical committee resource, the CHRO has the twin responsibility of representing people in the organization, irrespective of their level, and the management, accountable for organization performance.
Enterprise Culture Champion: While culture is too critical an area to leave it to one function, HR does play a key role in implementing culture and related initiatives. As the organization culture champion, the CHRO (and his/her team) defines, co-creates, and drives (almost always in partnership with the CEO) the appropriate values and behaviors. The executive leadership team (including the CHRO) have a shared responsibility in creating and driving a culture that is linked strongly with business strategy. While it is crucial for boards to define cultural changes needed to successfully pursue and accelerate any shift in strategy, HR plays an important role in measuring, analyzing and communicating culture in the wider business. For instance, HR can provide the data that allows the board to see not only how the existing culture aligns with strategy but also what progress is being made in building the strategy that the organization aspires to.
Board Culture Advisor: Finally, HR also wears the board culture advisor hat, in case the board needs help with its own culture! Board culture often pivots around five key elements: collaboration, commitment, candor, challenge, and trust. Being people experts, HR leaders can advise the board on how to drive the right behaviors to help the board lead as a cohesive team.
While HR undoubtedly is a critical resource for boards as they shape future-fluent organizations, it stays an underutilized resource in most instances. There is an opportunity on the table for boards to use HR as a key lever to future-proof enterprises, and for HR to think ‘beyond the C-suite’ as it aspires and prepares to be a trusted consigliere to boards in Asia.