· 2 min read · Features

The Salz report: A shot in the arm for HR?

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This month’s £15 million report by lawyer Anthony Salz into a near-miss at a bank with £1.5 trillion assets and 140,000 employees (‘Barclays survived … as an independent institution, but it was close) appears to give the HR function a powerful boost.

The alarming consequences of HR not having a seat at the group executive committee, with similar lack of strategic regard permeating the organisation's business units, are laid bare. Lack of investment in HR systems and the erosion of face-to-face learning are shown to be dangerous.

A ground-breaking proposal is made, for 'the appointment and removal of the Group Head of HR by a major Board committee'.

Salz sees HR as more than a business partner instead, it's critical to the board's strategic responsibilities, not least stewarding organisational culture. Without strong HR, a major failing of the Barclays board was culture-blindness: 'Without being aware of it, Barclays allowed a drift in its cultures…It was a lack of self-awareness that contributed to the deeply disappointing chapter in Barclays long and proud story'.

So is this the shot in the arm, which the HR function has long awaited, casting envious eyes at the institutional clout held by finance? Possibly; or Salz might mark the moment when HR proved itself unworthy once and for all - the beginning of the end, rather than the end of the beginning.

I count myself part of the function, having joined 25 years ago from a temple of finance. A highly regarded businessman told me, as I hovered on the verge of decision, that the move to HR was the right one, because people are what make every business. He was right about the second part; a Salz report is an expensive way to re-learn that lesson. And HR has grown dynamically, contributing to better business in many ways, perhaps rising particularly well to the challenges of globalisation.

But looking at the bigger picture, HR has underperformed. The 25 years has seen limited progress into boardrooms and executive committees, but - as important as these formal trappings are - the function is still not seen as either a seed-bed or an essential proving ground for future top talent.

As management academics Sharon Bolton and Maeve Houlihan wrote in 2007: 'a growing literature bears testament to the fact that Human Resource Management (HRM) has failed to deliver on many of its early promises and been unsuccessful in its attempts to achieve status as either a strategic partner or an employee champion' .

A critical marker that will signify whether the Salz report proves a shot in the function's arm or a bullet to its head is whether we collectively take ownership of woeful judgments that lie at our door, instead of blaming others for (or treating Barclays as an outlier example of) our lack of impact. For example, reward was unquestionably important at Barclays, yet: 'Although we would have hoped to find some common principles, we could find no evidence … of a consistently implemented Group-wide 'philosophy' and approach to pay'.

Entrenching the position of group heads of HR might alter some power balances. But the function is particularly well-placed to know this cannot deliver the impact Salz intends, unless the function grows dramatically more group heads who can, and will, call time on powerful CEOs - and yet are sufficiently admired by CEOs for their business acumen to be appointed to those roles despite that willingness.

Here's Salz's wake-up call. Business models are dangerously frayed or broken. Licenses to operate are under threat. Boards reaching out (if they do) to entrench the position of group heads of HR are not awesome sources of power scattering some HR's way, but groups of the worried reaching out for help. Boards are unsure how to manage risk, stay ethical, keep domineering barons under control and beat the competition. For society's sake, HR needs to rise to that challenge.

Dr Douglas Board is a senior visiting fellow at Cass Business School