An experienced Chair and non-executive director outlines the strategic impact HR leaders can have on a business when they join a company’s board.
I have encountered first-hand the reluctance within organisations to fully leverage the strategic value of HR professionals in boardroom deliberations.
Despite the undeniable significance of human capital-related issues in shaping organisational success, the lack of HR expertise at the board level remains a prevalent challenge.
Korn Ferry’s 2019 findings revealed that a mere three per cent of Fortune 1000 board members have a background as senior HR executives.
Global human capital expert and Professor of Practice at UNSW Dr Juliet Bourke, who will be speaking at AHRI’s National Convention and Exhibition in August, says the resistance towards appointing board directors with human capital backgrounds is often explained as the board needing ‘generalist’ rather than ‘specialist’ skillsets. She says that represents a misunderstanding about the breadth, complexity and strategic thinking chief people officers require.I agree with her. Here’s why.
How HR leaders can demonstrate board legitimacy
In Australia, Generation Z (born 1995-2009) will comprise almost a third of the workforce (27 per cent) by 2025, according to Gartner. Baby Boomers (born 1946-64), who currently hold the lion’s share of senior executive positions, comprise a quarter of today’s workforce (25 per cent), but as they are reaching their retirement years, they will account for just eight per cent of the workforce by 2025.
This represents not just a change in percentages, but a radical change in the human capital landscape, and it implies that a future-fit board must have currency in, and legitimacy with, the changing workforce.
One of the primary obstacles I see lies in a misunderstanding about what an HR professional does; their remit is certainly not confined to traditional personnel matters. This narrow and outdated perception disregards the strategic acumen and operational agility that HR leaders bring to the table, perpetuating misconceptions about their suitability for board roles.
“HR professionals offer a nuanced understanding of organisational dynamics and human capital imperatives that is indispensable in guiding strategic decisions.” – Samantha Martin-Williams, Chair and Non-Executive Director
As a champion of contemporary, inclusive governance, I recognise the importance of challenging these entrenched perceptions and advocating for the transformative potential of HR expertise within the boardroom.
Organisational dynamics and external factors also contribute to the reluctance to fully embrace HR representation on boards. Traditional paradigms of corporate governance, dominated by individuals with finance and operational backgrounds, often overlook the critical expertise that HR brings to strategic decision-making.
Despite the undeniable importance of human capital-related issues, some chairs persist in overlooking the invaluable insights that HR professionals offer, leading to missed opportunities for sustainable organisational relevance and overall success.
To overcome these challenges, it’s imperative to foster a deeper understanding of the strategic work of HR and advocate for the transformative impact of the people profession’s expertise in the boardroom.
By championing contemporary, inclusive governance and challenging entrenched perceptions, organisations can harness the full potential of HR to drive organisational excellence and sustainable growth.
How HR leaders can navigate the complexities of board dynamics
I’ve witnessed first-hand the invaluable contributions HR leaders make to boardroom deliberations. Beyond their traditional remit, they possess a wealth of experience that uniquely qualifies them to navigate the complexities of board-level governance.
As a Chair of People, Culture and Remuneration Board Committees, I have witnessed the critical role of HR expertise in managing risk – such as those related to talent attraction and retention, upskilling and reskilling – and the impact this can have on organisational culture.
HR specialists bring clarity to complex issues, ensuring that the human element isn’t overlooked in risk management strategies.
“I’ve witnessed first-hand the invaluable contributions HR leaders make to boardroom deliberations.” – Samantha Martin-Williams, Chair and Non-Executive Director
For example, most board packs include a dashboard-style report or reports. The dashboard combines financial and non-financial metrics as a means of managing risk appetite. I believe the true health of an organisation lies in non-financial metrics, such as key person risk, talent pool attrition, engagement and sentiment scores.
Human capital specialists bring a unique ability to interpret these metrics, providing a deeper understanding of the human side of the business. This nuanced interpretation goes beyond the purview of generalists, offering a comprehensive view of how the workforce is adapting to changes and areas of concern.
In my interactions with non-executive directors, I have emphasised the holistic perspective that HR professionals offer, transcending functional boundaries to inform strategic decision-making.
By leveraging their extensive repertoire of skills honed through change initiatives, merger and acquisition activity, remuneration negotiations, and compliance imperatives, HR professionals offer a nuanced understanding of organisational dynamics and human capital imperatives that is indispensable in guiding strategic decisions.
Want to learn more about how to develop executive presence to enhance your HR leadership? Sign up for AHRI’s webinar on this topic on 1st of May. Free for AHRI members.
HR’s board impact underscored
According to research, companies with diverse executive boards enjoy a 36 per cent higher return on equity and a 25 per cent higher likelihood of financial outperformance, underscoring the business impact of HR representation.
Through mentorship programs, cross-functional collaboration and continuous learning initiatives, HR can enhance their efficacy as strategic advisors and champions of organisational excellence.
My own journey as a non-executive director with a deep skill set in human capital has been characterised by a steadfast commitment to inclusive governance and transformative leadership.
I was very encouraged to see the 30% Club Australia and Deloitte Australia take up this cause via the publication of its recent report Green Shoots of Change in the Boardroom (March 2024). This report identifies the importance of boards broadening their composition to be more future-fit, and profiles examples of directors from human capital, customer/marketing and digital backgrounds.
Disappointingly, as Bourke observed, “There were far fewer appointments of directors from human capital backgrounds even though the talent pool is full.” She added, “Changing the status quo requires energy and persistence. It also requires impetus and inspiration.”
The report is definitely worth a read, and my hope is that it will help turn the tide so that having boards with human capital skillsets will soon be the convention.
A version of this article originally appeared in the April/May 2024 edition of HRM Magazine.
Samantha Martin-Williams FAICD FGIA is an experienced non-executive director and Chair, and a former CEO and commercial lawyer. She is the Deputy Chair at Newcastle Airport and Vice Chair of the Supply Chain and Logistics Association of Australia Board. She is Chair of the People, Culture and Remuneration Committee at NGM Group Australia and a Director at Fishburners, Australia’s largest startup innovation and entrepreneurial community.