Four Challenges Your Boardroom Will Handle Better with an HR Executive on the Board
Louis Montgomery Jr. | July 20, 2021
Recruiting a new member to fill a vacant position on your board of directors is literally a matter of perspective. In theory, your board should select a leader with the experience, insight, and wisdom to improve the organization’s ability to surmount challenges and drive better shareholder value.
Yet, boardrooms tend to fill openings with known entities, meaning CEOs and CFOs often end up approaching other CEOs and CFOs from their networks to join the fold. As a result, certain viewpoints gain disproportionate representation, hampering the decision-making process and even financial returns. So, what makes an effective board of directors from a hiring standpoint?
To obtain a broader perspective, the boardroom needs to shake off any complacency and expand their perspective beyond engrained mindsets. A Chief People Officer (CPO) or other HR executive may be the most valuable choice for your next open boardroom position.
More than just shaking up norms, boardrooms that bring executives with a human resources background to the table are better at addressing modern enterprise challenges. Here are four considerations for your board.
Executive transitions are one area in which the board of directors cannot afford to fumble the ball. Shareholder confidence and smooth operations are directly tied to stable succession and knowledge transfer. Though CEOs are equipped to understand the operational impact and CFOs grasp the financial implications, there also needs to be a talent risk perspective brought into the discussion.
In the typical hiring scenario, human resources ensures that your organization identifies, builds relationships with, and acquires the right talent that aligns with the core tenets and principles built into your culture. Why should the next addition to your board of directors or upper management team be any different?
A HR executive is not only more familiar with evaluating the criteria by which leaders are measured, but they can provide realistic input into the current talent market. This is essential because so much of succession planning is not a one-for-one replacement. Your board of directors needs to identify people who can be mentored or trained for not only your present situation but your future (it’s the old adage of “what got you here won’t get you there”).
HR involvement at the boardroom level in everything from the planning and consideration to onboarding of new leadership helps to ensure a smoother and more satisfying transition. Plus, their perspective helps avoid any missteps in the process that could jeopardize an already delicate process.
Mergers & Acquisition
Research shows that 70% to 90% of mergers and acquisitions fail, meaning most M&A attempts miss the mark and fall short of the initial goal: greater profitability, improved economies of scale, further market expansion, increased technical capabilities, etc. Often, according to this HBR article, the reason behind the inadequate results is that when people aren’t supported, achieving those goals becomes infinitely more difficult.
A CPO comprehends the art and science of bringing together separate cultures during M&As. It already takes intention to develop and maintain a healthy organizational composition and culture, but there’s even more work that goes into merging the two separate ways of doing business. With an HR leader on the board, it’s less likely that these types of interpersonal considerations will go overlooked.
Diversity, Equity, and Inclusion
Diversity, equity, and inclusion (DEI) are front of mind in today’s business landscape. The ongoing McKinsey & Company studies show the heightened profitability that companies with greater diversity have over their less diverse counterparts. Moreover, the increased attention our culture has paid to social justice issues shows that organizations cannot just sit ringside. We need to go the distance and take part in progress. There is no better perspective to shape the conversation and your approach to DEI than an HR executive as a boardroom member.
DEI initiatives require commitment from the top down. An HR leader who has experience in building effective strategies for organizational diversity can help your board of directors identify and develop plans that befit your brand and culture. They not only shape DEI-conscious recruitment on the front lines but can also help drive the diversification of voices and perspectives represented within the board itself. The importance of HR and diversity cannot be overstated.
Executive Compensation and Total Rewards
One of the major responsibilities of a Board is to assure that the compensation and total rewards programs at their organizations are both equitable and market competitive. This assures their ability to attract, develop, and retain the talent they need to achieve their business objectives. Human Resource leaders excel in this regard.
The area of executive compensation has come under great scrutiny in recent years in part because executive salaries in some organizations are not in line with the business results; and the multiples between executives and front-line employees has grown exponentially. Achieving both marketplace competitiveness and internal equity can be a tricky balance to maintain, especially in tight labor markets. The perspective of Board members who have worked to assure market competitive programs for employees at all levels is critical, more so than CEOs and CFOs who tend to provide insight into peer-level compensation programs.
Choosing an HR Executive for Your Board
There is no doubt that including HR leadership on your board of directors provides a balm for these and other difficult to navigate processes. It can be challenging for a company’s leadership to make time to effectively find, vet, and acquire new board members. Taking that time to conduct a rigorous search while dealing with all of the other immediate concerns facing your board diverts your attention away from enhancing operations, advocating for shareholders, and boosting profitability.
To stay on target and still reap the rewards of an HR perspective, many organizations are turning to executive search firms like JM Search to find the next addition to their board of directors. With a team consisting of former Corporate Human Resources and Operations Executives, DEI Practitioners, we have a proven track record for understanding the challenges and goals of the clients who retain us to fill open positions. Our ability to navigate the market helps organizations like yours expand your perspective in ways that can transform the way you do business.