Why more HR directors should be on boards

Boards are having to consider people agendas as never before, creating many reasons to allow HRDs to play a governance role.

The pandemic has shone the spotlight on the HR function, which has often played second fiddle to finance, sales and product development, reminding boards of the importance of their people to overall business success.

In addition to helping to furlough people and deliver bad news on pay cuts and redundancies, HR Directors (HRDs) have played an essential role when it comes to safeguarding the physical and mental health of employees and delivering the business transformation needed to deliver services in new ways and enable entire workforces to work from home.

With people policies now driving business success, and metrics on employee wellbeing and engagement featuring on most boardroom KPIs, this month’s blog focuses on three reasons to allow your HRD to play a more active role on the board – and the argument why there should be more HRDs appointed as NEDs.

Three reasons to allow HRDs to play a governance role

1. It’s a governance requirement

The first time the boards role in oversight of people was mentioned was by Higgs in his 2003 review into the role of effectiveness of NEDs. Since then oversight of people has gone onto become part of the corporate governance code. Yet just 5% of NEDs have people or HR experience.

Given the increasing demands of boards to deliver effective people oversight, the representation of people with HR experience simply doesn’t tally. The number of nomination and renumeration committees being chaired by the chair of the board is too high.

Although some people might argue that you don’t have to have explicit experience of the subject matter to be an effective committee chair, my experience is that HR directors appointed into these roles bring a wealth of understanding of people, reward and recognition. Their ability to deal with informal, versus formal, information, on things like culture and engagement, is incredibly powerful and would help to transform nomination and remuneration committee effectiveness. Prompting the question, why wouldn’t you want to utilise this experience?

2. People policies drive business success

With study after study highlighting the impact of employee engagement on everything from the ability of companies to attract and retain the right people, to productivity and customer engagement and ultimately sales, boards can’t afford to be unskilled when it comes to knowking how to create a culture where employees can thrive.

The digitisation of work is now happening at such a pace that working environments are being thrown into the cloud, to enable people to work remotely, without any consideration of the human elements needed to unlock the full value of this transformation. For example, how best to ensure people continue to share knowledge, collaborate and innovate remotely.

As artificial intelligence and smart machines start to enter the workplace and make decisions on our behalf, it’s essential that HR professionals are involved in thinking about how best to ensure the future of work continues to enhance the employee experience. As well as how best to use the powerful ROI data that can now be generated on the extent to which investment in reskilling, recruitment and employee wellbeing are impacting on business performance. All of which will help the board to refine its people governance policies further.

3. HRDs can help to progress ESG agendas

When directors get given responsibility for Diversity & Inclusion agendas, they often quit after a couple of years because they feel like they weren’t getting enough airtime or traction with the board. Similarly, a number of ‘clean energy’ executives recently quit working for Shell, because they felt the company’s transition towards greener fuels wasn’t happening fast enough.

As people experts with an understanding of the impact of values, such as ‘fairness’ and ‘meaning’, on the desire of employees and customers to stay loyal to a company, HR Directors are ideally placed to help boards understand the impact of their ‘corporate purpose’ – or lack of corporate purpose.

HRDs can also help cascade the boards ‘corporate purpose’ down throughout the company, to create a situation where everyone feels connected to the company’s mission. In much the same way that a NASA cleaner once stated he was ‘helping to send a rocket to the moon’ when asked what his job was.

By allowing HR directors to bring this expertise to the board, you can more easily make everyone feel passionate and engaged with the company’s direction, to create the sort of competitive advantage that only a deeper insight of what really matters to the people working for you can bring.

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