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Top table influence - bringing human resources to the board

For human resources directors to earn a place on the board, they must acquire a broader knowledge of the company’s objectives and the wider business environment

Board roomWhen human resources (HR) academic and thought leader David Ulrich first introduced the HR 'business partner' model in 1997, the idea was seen as the way forward for the profession; the breakthrough needed for HR to win its place in the executive suite. Today, no one doubts the link between excellent human capital management and competitive advantage. Why, then, don't more companies have board-level HR representation?

Progressive companies recognise the importance of having HR on their executive boards. Indeed, this is mandatory for all listed companies in Germany. But proponents of business partnering see it as the chance to go further than just representation for HR. For them, it is viewed as a way to put HR on an equal footing with other functions; the chance to step up and prove its true strategic value.

However, more than a decade later, progress has been painfully slow. Some companies have tried and rejected the business partner model, others adopted the job titles but changed little else, while many more remain unconvinced of its merits. 

For these and other reasons, HR's progression to the top has not happened anywhere near as fast as people in the profession hoped it would. Many HR directors still find themselves caught in a vicious circle: they want board representation and influence, but cannot get there. They are locked out of strategic debate so cannot demonstrate the role HR should play in this and show genuine strategic value for HR activities. Those with board aspirations often lack the required business acumen and leadership qualities, but continued exclusion prevents this happening.

So what can be done to change this situation? Here are three ideas.

1. Business discovery
Evidence, based on hundreds of retained search assignments for HR executives over more than two decades, shows that once an HR director arrives at board level, leadership and solid commercial exposure are more important than technical HR expertise. This finding has been strikingly consistent and leaves no doubt that senior HR people with board aspirations need to find ways to broaden their own exposure, and those rising quickly through the ranks below them, to the wider business.

This is about developing an appetite for discovery; a desire to understand not just how financial value is created in the business, but also about how other important factors contribute to that. An HR executive is operating at a distinct disadvantage if he or she has little or no knowledge about what customers value, how products and services are developed, manufactured and sold, what competitors are doing and the nuances of different countries/markets.

By broadening their commercial acumen in this way and gaining knowledge of the key components of the business, they will increase their chances of commanding board-level respect. A good example of someone who recognised and acted on this is Roland Polte, chief HR officer at Siemens Healthcare. Polte fostered and developed his career by seeking a number of leadership roles across Siemens, including a posting in China and working across functions in his HR capacity.

2. Demonstrate value
From conversations with chief executives and leaders in the 'C-Suite' it is clear that these business leaders are, more than ever before, looking for clear evidence to guide their decision-making or support those decisions as they manifest into strategy. Whether it is finance, marketing, information technology, R&D, operations or HR, they rightly expect to see compelling evidence that any function's activities contribute clear, distinct value aligned to business strategy. So it follows that another way for HR directors to command board-level respect and attention is to offer this.

It is accepted that for many organisations it is difficult to measure the true business value of HR initiatives and programmes. Questions such as: 'What is the ROI of training?' and 'Which screening techniques yield the best performing recruits?' or 'What target-setting approach will best motivate performance?' are often met with imprecise answers. Fortunately there are more tools and methods than ever to help demonstrate the links between people practices and business performance. Various enterprise resource planning (ERP) solutions (such as PeopleSoft) are also available for HR administration, including such things as personal management, training and education, employee seminars, employee assessment and, of course, talent acquisition. Solutions like these, however, will be of limited use if they are not correlated and measured against business Key Performance Indicators and financial parameters.

And, although the promised efficiencies and cost savings are compelling, many users have found from experience that they are not direct replacements for existing practices. Executive recruitment is a case in point. Well-known names in the sector, including AstraZeneca, Pfizer, Roche and Novartis, have all gone through various business cycles and models to seek HR efficiencies by establishing in-house executive search capabilities, only to discover that cost still outweighs the expected added value.  

3. Partnering or matrix management
It is not uncommon to find companies operating either HR business partner models or matrix management systems and sometimes both. But the value of HR partnering with the business is not always fully exploited. HR professionals need to be able to 'walk in the shoes' of both the business colleague they are supporting and, in the case of talent acquisition, the ideal candidates they hope to hire. All too often, HR either has not pushed enough or been challenged enough to operate completely in this way. From a recruitment perspective, one outcome is that the full potential of newcomers can often go unrealised. Companies where line management and HR work closely together to drive an integrated approach with new hires will experience increased employee engagement; the new executive is integrated more quickly, becoming a more effective leader. Molnlycke Health Care, Smith & Nephew and Elan Pharmaceuticals are all good examples of where this has been put in practice.

Pitfalls
In a bid to bring more focus and cost-efficiency, matrix management structures have become the norm in many companies. Here too, the true value fails to materialise in reality. Despite best intentions, synergies present in the previous organisation structure can be lost. Managers who are supposed to be aligned often find themselves in conflict and ambiguity can take hold. For these and other reasons, the consequences of getting matrix management wrong can be huge.

At the outset, this presents an opportunity for HR to show leadership and ways to mitigate risks. To reduce ambiguity and unclear lines of responsibility the HR director is a key catalyst in driving alignment in a highly-matrixed structure. The broader that person's cross-functional experience and insight of the business is, the more likely it is that the matrix will deliver the right results.

So, to summarise, HR directors are probably limiting their chances of board level succession if:

  1. Personal development plans for them and their HR managers omit cross-functional line management and leadership experience in key aspects of the business.
  2. Technology or methodologies to demonstrate clear links between people practices and business performance are missing or under-utilised.
  3. They are not working at full capacity to ensure real value is achieved from HR business partnering and matrix management structures.


By concentrating on these three areas, they should find companies are more willing to elevate HR to the executive suite, where more focus can be directed towards strategic people issues, such as succession, retention, engagement, leadership, skills and talent acquisition. When this happens, HR departments tend to have fewer generalists and more specialists; discrete domain expertise comes into its own.

Clear communication
The same applies to executive search firms. By working closely with a specialist search consultancy companies can improve their chances of hiring people who can excel in the aforementioned environments. One of the keys to getting this right is clear communication about the employer at the hiring stage to ensure rapid, sustainable integration of the incoming executive. To be able to do that, the chosen search firm must, in turn, fully understand a company's culture, business drivers and market dynamics.

Thomas Schleimer - Euromedica
The Author
Thomas Schleimer
is a principal consultant at the London headquarters of Euromedica

31st May 2012

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