Why more HR directors are taking on NED roles
Katie Jacobs, January 05, 2015
HR directors are quietly increasing their board presence and experience, with more and more taking on NED roles
The question of whether HR should have a seat at the boardroom table has been debated for so long it has almost become white noise. But there is a quieter revolution going on in boardrooms across the FTSE 350 and beyond. HR directors are indeed serving on boards in larger numbers, with more practitioners than ever before taking on non-executive director (NED) positions, often in addition to their executive day jobs.
In fact, data exclusively compiled for HR magazine by BoardEx and the Professional Boards Forum reveals that around 13% of NEDs on FTSE 350 boards have HR backgrounds or current HR experience. Anna Penfold, client partner at Korn Ferry, calls this a “steady trickle” – it’s a long way from a flood, but it is on the up. “Pre-recession, it would have been the absolute exception to the rule that you would be asked by boards to find people with HR experience, but in the past five years we’ve been seeing increasing interest,” she says, although she points out that it’s still only gone from “no appointments to those you can count on one hand”.
James Martin, who runs executive search firm Egon Zehnder’s HR practice, concurs, although he goes as far as to say chairmen asking for NEDs with HR experience is now a “reasonably common request”. “HR experience is becoming more valued,” he says. “Until three or four years ago, it was impossible to place HR people on boards, but the financial crash and public distrust means [chairmen] are suddenly more interested in HR.” He also points out that the drive for greater gender diversity at board level means chairmen see HR as a great way to find female directors.
HRDs and RemCo
It is unsurprising, given the increasing regulation around and public attitudes towards executive compensation, that remuneration and remuneration committee experience is proving more and more of a draw.
“The obvious area for HRDs to make an immediate impact is in RemCo matters,” believes Andrew Higginson, former finance director at Tesco and chairman at retailer N Brown. “[Remuneration] has become much more central to shareholder interests,” he adds. “The days of any director chairing the RemCo are behind us. Having those technical skills and being attuned to trends has become worth its weight in gold.”
Celia Baxter, group HR director of FTSE 100 distribution and outsourcing multinational Bunzl, joined manufacturing company Senior as an NED last September, and took on the additional role of RemCo chair at the end of 2013. While she agrees remuneration experience is useful, she doesn’t think “as an HR person you should hang your hat on talking about remuneration”. “[Boards] can buy in consultancy skills to get that,” she points out. “What I felt I was bringing was experience of working in decentralised organisations. Also, I have a lot of experience working in international businesses and businesses that do a lot of acquisitions. It’s a combination of all of those things, not purely an HR thing.”
This experience of complexity is echoed by Penfold, who says chairmen are also interested in those with experience leading large scale change initiatives, often involving people, such as volume recruitment, redundancies or upskilling programmes. “One major FTSE company we recently helped appoint an NED for was moving into a completely new market and needed a whole new set of skills,” she explains. “Drawing on someone whose experience was built around how to recruit and develop people was very appealing.”
Dixons Carphone group HR director Lynne Weedall is also an NED and RemCo chair at pub chain Greene King. She believes people management and strategy experience can really help an NED add value to a board. “At first you’re fixated on the numbers, but actually, when it comes to the crux of it, the biggest issue is always around things like succession and people,” she says. “The difference between things going well and not going well is largely related to those topics.”
Interest in sustainability
“Boards are becoming much more interested in talent at a granular level,” agrees Martin. “They want a systematic understanding of bench strength. There are also risks around CEO and senior director succession. Having someone on the boardwho can provide counsel in these areas is very helpful.”
According to Wendy Cartwright, director of corporate services at the University of East London and an NED on the Ministry of Defence’s people and training board, in the wake of the financial crisis organisations are increasingly focused on things beyond the bottom line, giving HR a chance to influence more widely. “Things have gone horribly wrong and organisations have taken a long, hard look at themselves and realised how much people and culture matter to the organisation and sustainable success,” she says.
Cartwright believes HR shouldn’t be afraid of seeing people issues, culture and values as “our special contribution in organisations”. “Sometimes, HR moves too far away from core people and culture issues,” she says. “If you’re a finance person, you wouldn’t think twice about challenging numbers, but some HR people shy away from people issues as they don’t want to be seen as fluffy.”
An understanding of the ‘softer’ side of things can be a distinct advantage when dealing with tricky boardroom dynamics, believes Weedall. “So much of NED work is around the team dynamic and the relationships you build,” she says. “It’s about understanding those dynamics and what’s playing out around the table. It’s knowing how to best influence, facilitate, when to go in hard, when to pull back, when to be the coach, when to be the critical friend and when to say no.”
Penfold agrees this relational expertise can be key. “The HR profession spends a lot of its time dealing with sensitive issues, creating links between people and facilitating them,” she says. “That ability to get things done, to sensitively and tactfully create cohesiveness in the boardroom hasn’t gone unnoticed.” Higginson is a case in point. “Good HRDs are usually good judges of people, and NEDs are constantly assessing the strengths and weaknesses of the executive team,” he says.
Supply exceeds demand
But despite what Penfold calls the “steady trickle of HR towards the board”, supply still far exceeds demand, with many more HRDs searching for that elusive first NED position than there are roles available, at least to those from HR backgrounds. Gill Crowther, HRD at internet domain provider Nominet, has been looking for an NED position for a number of years. “Financial experience is still swaying it,” she says. “There is a trickle of HR opportunities but it’s certainly not balanced yet. It would be great to drive more organisations to get excited about what an HR person could bring to the board.”
Crowther adds that the “bigger challenge is not having an NED position already”. Egon Zehnder’s Martin says he is trying to encourage boards to choose people based on potential rather than past experience, and believes the message may be getting across. “There’s a general appetite for going beyond candidates who have been on the merry-go-round of other boards,” he says. “We’ve seen spectacular failures and it’s a good moment for people to raise their hands and for boards to select on diversity of experience.” Cartwright agrees today’s focus on diversity goes beyond gender, with chairmen looking for different skills and experience “so [boards] don’t get caught in groupthink”.
To make yourself more attractive, Martin recommends “quasi board positions to boost your credibility”, such as charity trusteeships and school governorships. Crowther is a governor of two schools and a business mentor for charities. “These will be really valuable for my development if I’m going to be an NED,” she believes. Penfold adds that a third or public sector NED role can be a good way of getting your foot on the ladder as they are “often seen as a soft landing”.
The value of NED roles
When applying for roles, Baxter advises creating a totally different CV to the one you would use to apply for HR roles, emphasising what wider experience you can bring to a board. For Weedall, the most powerful skill is networking. “What events is it useful for you to be at? What are the articles it’s useful for you to have written?” she asks. “If someone does a Google search on you, what comes up? It’s no accident I widened my brief [at Dixons Carphone] and picked up strategy. I took on a wider remit so I had more skills to bring. You have to get clear about what you bring over and above everyone else.”
As for what an NED position can bring to your career, Weedall finds that it is “incredibly helpful to see things through a different lens, and through the lens of the investor community, rather than as management being in the here and now”. Martin sees an NED role as a fantastic development opportunity: “It helps stretch you in every respect.”
However, Penfold warns that the “hype and hyperbole” around board roles doesn’t mean you should accept an NED job blindly. “You could potentially make a move that shuts a door in another direction,” she says. “But on the whole, a well thought-out and considered board role where you can make a measurable difference to the organisation, and that draws on your skills and widens your horizons without stretching you too far in your day job is a valuable asset.”
The support of your CEO is of course critical before accepting a role, and Baxter, Cartwright and Weedall all say their CEO sees the value in them taking on a non-exec position. But it is not a job to take on lightly. “There’s no such thing as a holiday for an NED,” says Weedall. “If you’re on holiday and get a phone call saying you have to come back, are you prepared to do that?” She adds becoming an NED can be “reputationally risky” and that she carefully chose a “well run and stable” company.
As for whether the number of HR directors becoming NEDs will continue to rise, Penfold believes it is a “virtuous circle”. “The more HR professionals join boards, and the more those skills are lauded and applauded, then the more board compositions are studied by chairpeople and considered,” she says.
According to Weedall, ultimately it’s about couching it in the right terms. “If you talk about people who are strong at relationships, know how to get their point across without alienating the CEO, know how to ensure organisations have got the right capability for the future, and can make sure reward is commensurate with business strategy, [chairmen] absolutely get it,” she says. But, she adds: “Whether they equate that with HR is another matter.”