9 minute read
HR at the Board table
Lynda Carroll, founder and CEO of Align Group Limited, and Melissa Clark-Reynolds, foresight practitioner and professional director, outline how HR has evolved to being a strategic business partner and, hence, how HR can add value at Board level.
Over recent years, the role of human resources within an organisation has moved from being the traditional personnel and training function to being a strategic business partner, if not holding a seat at the top table, then providing strategic advice to those who do.
How this shift came about was predominantly through the recognition of the critical role our people play in organisational success and the many drivers affecting what we need our people to do (think the introduction of AI); how our people are working (think AI; think values and behaviour; think remote working); and what attracts people to work in certain organisations (think value-driven and purpose-led workplaces).
This shift occurred within a similar timeframe as the recognition that organisational culture has a huge impact on long-term, sustainable business success. Because organisational culture is about the values, attitudes, mindsets and beliefs that determine how people behave in an organisation, this was firmly grasped by HR professionals as being within their accountability domain.
As it became possible to more easily gather data on peoplerelated performance metrics, this was used to provide strategic insights and make informed decisions that directly affect business success. This also came with an enhanced understanding of the critical people risks and impacts associated with poor talent management processes (which includes succession planning), poor or unethical leadership and the cost of employee disengagement and turnover, to name just a few.
Labour capacity and capability were seen as the biggest organisational risk for the past six or seven years.
One of the two final ingredients that firmly embedded the valueadd of HR was the uncertain environment within which businesses were operating. This required organisations to be more agile and to be able to effectively manage change, an important function of HR. The final ingredient was the fact that investors were no longer merely looking at profitability when making their investment decisions; they were also looking at broader organisational performance around environmental, social and governance performance. These areas are significantly affected by organisational culture and your people, translating to Boards seeking strategic advice from the HR professional.
What Governance Is And How Hr Adds Value
Many definitions of governance exist. One we particularly like is from the OECD.
Governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders … [G]overnance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. G20/OECD Principles of Corporate Governance (2015)
The reason we like this definition is the fact that it talks of relationships and structure. These are two areas that can make or break good governance practice and areas where workforce capability, capacity and competence and a number of your HR systems impact. Rather than merely taking our view, let’s turn to the Institute of Director’s (IoD’s) Sentiment Survey for 2023 and leading directors’ views.
“The biggest risk is that we aren’t being bold enough and we aren’t creating an environment for people to think outside of the box” (Margaret Devlin CFInstD). Creating the right environment is directly related to organisational culture.
Labour capacity and capability were seen as the biggest organisational risk for the past six or seven years (eclipsed only by COVID-19). Definitely an HR accountability.
Thirty-three per cent of directors saw workforce changing demographics as an important issue. Definitely an HR accountability.
There was a recognition that we increasingly have employees seeking valuedriven and purposeled workplaces. Again, value-driven is all about organisational culture.
We can then add to their voices the impact of one of the most significant changes in technology that every organisation is currently exploring, the evolution of AI. According to LinkedIn, applications for AI jobs have increased by 19 per cent in the United States of America since 2022, with a 428 per cent increase in C-suite roles over two years. As AI evolves, this demand for skilled staff will only increase. This shapes not only how companies operate, but also how they are structured and what skills they focus on developing. These are all areas that sit within the HR mandate of organisation structure, culture and development.
Finally, at an operational level, the Board will need support from its HR strategic advisor when establishing the performance agreement for your CEO. It is important that the Board uses the same or similar performance management system as that operating within the organisation. Hopefully, it is good practice and covers off both the ‘what’ and the ‘how’ of high performance. The Board will also need support in determining remuneration and incentive packages for the CEO, ensuring these are aligned with the organisation’s wider remuneration strategy.
Governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.
By implementing effective HR governance, organisations can ensure all people-related strategies are aligned to the purpose and strategy of the organisation, peoplerelated risks are identified and effectively managed and shareholder value is delivered. Several models are relevant to HR governance. We have noted a couple below.
5P’s Model: Based on five aspects: purpose, principles, processes, people and performance. Aligning these principles leads to company success.
Harvard Model: This model operates with five components: situational factors, stakeholder interests, HRM policies, HRM outcomes and long-term consequences.
HOW TO ESTABLISH A BOARD’S PEOPLE AND CULTURE COMMITTEE
How To Establish A People And Culture Committee
As noted above, the HR function may report through a committee to the Board. Once a Board has determined there would be benefit in establishing a people and culture committee, it is a straightforward process to establish one.
How To Engage With Directors
Finally, if we go back to our definition of governance from the OECD, the two main points of effective governance were relationships and structure. This provides us with a good steer on how we can effectively engage with company directors. Work with your CEO to provide a structured approach to building strong relationships with the Board, and ensure you are clear on what information they wish to receive and how they wish to receive it.
How to Establish a People and Culture Committee
Develop a Committee Charter for Board approval. This would include the following.
a. Purpose, objectives and responsibilities of the committee.
b. Membership: The number on the committee. This is usually two or three, depending on the number on the Board itself. The decision needs to be taken as to whether membership is limited to Board members only or whether an external expert may be appointed to support the committee. While not a member, it would be common for the organisation’s General Manager People and Culture to attend committee meetings in a non-decision-making role.
c. Meetings: Frequency; quorum; notice of meetings; agenda and who this is circulated to; minutes of meetings; decision-making process, nowadays this is usually by consensus.
d. Authority: Usually the committee does not make decisions. It makes recommendations to the Board.
e. Reporting procedures: How the committee reports back to the Board.
f. Frequency of self-review of the committee.
g. The annual work plan for the committee.
Appoint members: Usually those with expertise and an interest in human resources are appointed.
At the first meeting of the committee, a Chair would be elected.
Further Tips For Engaging With Company Directors
When new directors join a Board, it is common for members of the senior management team to participate in their induction. When this opportunity arises, make sure you present how your team contributes to the business purpose and strategy. Articulate how you currently report to the Board and check to see if there are any improvements or amendments this new director may like to see. Make it clear that you always welcome feedback.
It is common for a Board to meet informally for dinner or perhaps breakfast before a Board meeting, to build and maintain strong relationships around the Board table. Work with your CEO to gain agreement that the senior leadership team should attend these events at least a couple of times a year. This enables you and directors to get to know each other outside of the formal business meeting; this helps build trusting relationships.
In many organisations, individual directors provide a ‘headsup’ to the Chair and the CEO, if they are wanting to contact members of the management team. It is important you are aware of the Board protocols in place in your organisation and that you adhere to these.
It is common for senior managers to work with the Board in developing the organisation’s strategy, and this includes ensuring the culture remains appropriate. Before such a session, ensure you are aware of the expectations of the Board and the process that is going to be used because this is your opportunity to show the value-add of HR.
When attending a Board meeting as a strategic advisor, ensure that your contribution remains at the strategic level rather than dipping into the detail of operations.
Where there is the opportunity, undertake governance development to help you in getting into the head of what matters to directors and what drives HR success in their world.
If health, safety and wellbeing sit within your accountability domain, and where appropriate for your business, offer to take directors on site visits and facilitate the opportunity for them to have conversations with staff on critical health, safety and wellbeing risks and performance measures.
Lynda Carroll is the founder and CEO of Align Group Limited, a small Wellington-based consultancy helping organisations to align strategy, governance, culture and performance. She started her career as an HR professional and has held various general manager, people and culture roles before moving into management consulting. Lynda is a Chartered Fellow of the Institute of Directors, an accredited foresight practitioner through the Institute for the Future, California, and has over 30 years’ consulting experience working across the private, public and nonprofit sectors in New Zealand and internationally. Lynda can be found on LinkedIn and at www.aligngroup.co.nz.
Melissa Clark-Reynolds ONZM works as a foresight practitioner and professional director, with over 25 years’ experience as an entrepreneur and strategist. She has been founder and CEO of a number of technology companies, along the way earning three Fast50s and several Asia Pacific Fast 500s. She has an eclectic academic background, including anthropology, epidemiology and waste management. In 2015 she was named Officer of the New Zealand Order of Merit (ONZM) in recognition for her services to technology. Melissa currently chairs Alpine Energy and sits on the Boards of Atkins Ranch, AoFrio Ltd and Wētā Workshop.
