HR takes up the challenge to bring diversity to the boardroom
Neil Hodge, November 18, 2011
Over the past decade, organisations have increasingly trumpeted their policies to try to entice people from different backgrounds to join their ranks.
But there is still one last bastion of male, white, middle-aged and middle-class dominance that has seemingly fended off all attempts to make it as diverse as the rest of the organisation - the boardroom.
The EC, institutional investors and business groups such as the Confederation of British Industry (CBI) have all voiced their support for more diverse boardrooms, but progress is slow. And the fact that executive recruitment remains largely in the hands of the board, rather than HRDs, suggests change is unlikely to come soon.
Several HR professionals say they have been involved in the initial stages of executive recruitment, such as screening candidates' CVs and psychometric testing. With regards to selecting non-executive directors (NEDs), some say their role was largely to ensure compliance with anti-discrimination policies, so the process could be seen to be fair. But few say they have participated at the interview stage of executive appointments, and of those that have, most have only been present as note-takers and have not led the process or even been required - or allowed - to ask questions. Estelle James, a director at professional staffing services firm Robert Half, says HR is only usually involved in the interview process "by invitation of the CEO".
HR professionals are unanimous in their claims the function should be heavily involved in the process, but most accept the reality is very different. Andrew Timlin, business director at executive recruitment firm Hays Executive, explains: "HR directors should be involved in the executive recruitment process, but they need to engage much more strongly with the chairman and CEO to make that happen."
But Nikki Watkins, programme director of the HR academy at leadership training company, European Leaders, says HR has to prove its worth before it can get more involved in executive appointments. "HR has a reputation for not being very business-savvy, focusing on the operational side rather than financial and strategic aspects. That isn't really going to get them an invitation into the C-suite," she adds.
Rob Meakin, non-executive director at Leamington Spa-based HR consultancy, Independent, is a former HR director himself who has sat on the board of companies such as GEC Marconi and British Nuclear Group. He believes it is a natural extension of HR's role to help put together a more diverse board, but says the function's skills are not being put to good use for two reasons: a reluctance by the board itself to open its arms to more challenging individuals; and, on the other side, a failure by many in the HR profession to assert themselves, so they are involved in the selection process from start to finish.
"HR professionals have the necessary skills to identify the personal attributes that will make a winning executive team, but these crucial appointments largely remain in the hands of the chair and the nominations committee. HR has to begin to question why this is so," he says.
While HR may feel aggrieved it cannot get a seat at the top table or lead executive recruitment, practitioners believe there is still plenty of scope for HR to make its mark. Rachel Stone, director of people management at accountants Smith & Williamson, says HR directors can be involved in several ways. For example, they can help define the requirements for the new role and what skills, experience, qualities, and background the suitable candidate should have. HRDs can also coach the board how to interview potential candidates and assess responses, so they are not dismissive of people with contrasting views.
"Executives tend to believe they can read people well, but in reality they can only read people who have the same attributes," says Stone. "When interviewing people, they look for common ground, rather than what motivates them. This leads to appointing people with the same outlook, so the board misses out on the benefits of diversity."
Tara Daynes, a freelance HR consultant, believes the function should be involved in the selection process from the beginning, by ensuring the post is widely advertised and is not appointed "over drinks at the club". HR should then be involved in screening CVs, and should also draw up a set of criteria for the skills, experience and qualities needed.
Daynes adds that HR needs to make sure the selection process is not just confined to interviews, but uses more objective methods: psychometric testing, occupational personality questionnaires, for instance. Crucially, she says the HR director must ensure he or she is on the interview panel, so the processes are structured, consistent and fair. "Even if his or her role is just to observe, their presence at the panel puts their stamp on the process and makes the board aware of what role HR can play in executive recruitment," she says.
Hannah McNamara, CEO at executive coaching company, HRM Global, says if HR cannot be involved in the appointment process, the function can facilitate coaching support for newly-appointed executive and non-executive directors, "so skills and experience gaps can be narrowed and they can be brought up to speed with unfamiliar operational issues, legal and regulatory compliance risks and so on".
Other experts believe HR must change the executives' perception that previous experience is a key attribute of future success - which leads to companies head-hunting directors from rival firms, paying too much for them, and sourcing executives from a diminishing pool of talent. "Boards fall into the trap of over-rating previous experience. It has been found to be the worst predictor of future performance," says Gareth Jones, marketing director at online recruiters, HireMatch.me.
Roger Philby, founder and CEO of recruiter, Chemistry Group, agrees. "Boards need to realise that just because someone was successful at another company, it does not mean they will be successful at yours. Instead of looking at experience, boards should look at the attributes and behaviours of potential directors, which means they will be tapping into a much bigger pool of talent," he says.
But not all organisations have such blinkered views. Experts tend to agree the public sector has a much better record of HR involvement in executive recruitment, with HR ensuring posts are advertised widely and diversity encouraged.
"There seems to be generally much greater openness in public sector executive appointments, as public money brings public accountability," says Robert Half's James. "There is also a willingness to consider candidates from very different backgrounds - public sector organisations have moved away from the idea they need board members who have spent their lives in local government."
Wider business experience gives HRDs their board credibility
Tracey Ashworth-Davies, HR director at brewers Molson Coors (UK and Ireland) is the first ever woman to have been appointed to the company's board for the UK and Ireland, joining in July 2010.
Ashworth-Davies says it is "crucial" for HR to be involved in the recruitment of the executive team and the board's non-executive directors. She has worked with CEOs in appointing board members and with company chairs in appointing non-executives.
"The HR director must be responsible for the management of the executive recruitment process," she says. "Alongside the CEO, the HR director is the person who most understands the culture of the organisation. And as the tone of the business is set from the top, it is vital HR ensures the executive team has the right mix of skills, experience and behaviour to drive the business forward," she adds.
Ashworth-Davies believes her acceptance into the boardroom has been due to a number of factors: she has a proven track record of recruiting executive talent in her previous positions, and she has worked hard to ensure she has regular communication with the CEO and the chairman of the board, and that HR is regarded as a valuable resource in executive and non-executive recruitment.
But she also believes it is her experience outside of HR that has helped to grab boardroom attention. "Previously, I have set up a financial services company - Bright Grey - which sold life insurance and critical illness cover. I was its chief executive and I had a strong input into its sales and marketing strategy and its financial management. This clearly demonstrates I have wider business experience and I think other HR directors could benefit from spending some time outside of the function to get a different perspective on how businesses are run."
Boards could do better, says European Commission
The European Commission (EC) is urging companies to acknowledge the importance of identifying complementary profiles in selecting board members.
As part of its consultation on corporate governance codes across the EU, the Commission found 48% of European boards have no director with a sales or marketing profile and 37% of audit committees do not include a current or former CFO.
Nearly three-quarters (71%) of directors of Europe's largest companies are of the same nationality as the company they head. One in four large European listed companies has no foreign directors on its board, despite the fact these businesses operate overseas and are hoping to expand into developing markets.
The number of female executives is also too low, with women just taking 12% of boardroom jobs on average.
Another finding is that companies are continuing to appoint non-executive directors who already have numerous other roles.
To address these issues, the Commission recommends companies employ recruitment policies that identify the precise skills needed by the board, to help increase its ability to monitor the company effectively. It also suggests the regular use (such as every third year) of an external facilitator could improve board evaluations, by bringing an objective perspective and sharing best practices from other companies.