The first article recognises that the Europe/UK context is different to the US and is undergoing a ‘paradigm shift’ at board level, with the board taking greater governance responsibility for key areas of the HR agenda that goes beyond the usual “people are our most important asset” statement.
As the HBR articles suggest, recognising the fundamental business context of companies is important and provides the backdrop for analysing the potential role HR can play in an organisation at any point in time.
Europe and the UK are experiencing a quicker and more focused engagement with a broader range of stakeholders, beyond a financial interest viewpoint, into longer-term sustainability as part of the governance debate:
- Companies are driving customer stakeholder engagement at the board level for both business (the impact of social media) and governance (regulatory) reasons
- Big sustainability and diversity issues around the long-term leadership of companies are emerging
- Reputational risks are engaging boards, often driven by the prevailing culture and values of the organisation
- Remuneration and reward continues as a big focus for boards
Clearly, these are all strongly linked to the HR agenda.
The series of HBR articles give insights into what may be missing in the current approach to HR at the highest levels, focusing attention on providing a more strategic engagement beyond the transactional view of HR. The articles also reinforce our current perceptions that HR needs to significantly enhance its financial viewpoint beyond management accounts and budgeting into an overall business, strategic financial investment focus.
The articles focus us on the triumvirate at the apex of organisations (the CEO/CFO/CHRO) as shapers of the strategic business plan. It is, however, rare that CHRO's achieve this position and they are often relegated to a lesser role.
CFOs typically have a balanced relationship with the board. They have a significant advantage of a position that creates a natural visibility. However, the board will often be looking for the CFO to be their own person and a good commercial partner to the CEO, not in their pocket.
The CHRO needs to target this same mentality. As a potential member of the triumvirate the CHRO should seek to drive the HR agenda through business strategy and financial analysis, not a fashionable initiative. And while the CEO and CFO are also susceptible to fads, the CHRO needs to understand their motivation for engaging with these ideas, and have the analytical power to match their understanding of the bottom line outcomes desired.
The HR profession needs to look at its ability to run efficient, effective and economic core HR services as qualifying criteria to join the ‘Board Game’. It must look at:
- Compensation and reward
- Talent development
- Employee relations (legal)
- Change management
- Efficient and effective work systems
- Efficient and effective HR administration
What makes a difference is the ability to engage beyond these areas with the fundamental leverage points of the business strategy. This includes relating all of the above to the CEO’s and board’s strategy in an integrated way.
Of particular importance is understanding the organisation’s strengths and weaknesses and how these impact on the bottom line, with the ability to call out the financial implications of strategic options on the HR environment – within the context of creating a sustainable competitive advantage.
So if the efficient running of the qualifying criteria gets you in the game, what makes a difference at the strategic level? I would say:
- Understanding the fundamental commerciality of a company and the financial engineering this entails
- Being confident in modelling financial outcomes and the impact of initiatives, policies and decisions
- Being able to position yourself as the expert on the areas discussed above at a strategic level
- Getting data analytics under your belt
- Financial leadership of people – usually the most expensive asset of the business and the most potentially impactful on growth and profits
- Finally, networking, influencing and alliance-building with colleagues to achieve business outcomes
Helen Pitcher is chair of Advanced Boardroom Excellence, a consultancy that focuses on individual and collective director effectiveness
