We have now conducted a repeat survey, based on the FTSE-100 of 19 June 2001, and the magic figure is little changed at 18. Worse still, there is no sign of an immediate improvement. For, as we went to press, the troubled Marconi, complete with HR board-member Rob Meakin, was about to be ejected from the 100 club to join the other company that has dropped out of our HR-on-the-board list since 1999 Asda.
Granada, meanwhile, another 1999 entry, is still going strong, but with the doyenne of HR directors Stephanie Monk now retired, it has conspicuously failed to make a board-level appointment to replace her. Likewise, Marks & Spencer has not placed Helena Feltham on the board in a straight replacement of Clara Freeman.
But perhaps the worst news for the profession is that the board-level HR director at the highest-ranked FTSE-100 company, John Lee at the Halifax the most powerful HR director in the UK under these criteria is set to retire at the end of the year, following his companys merger with the Bank of Scotland. The HR director for the new banking monolith, HBoS, will be the Bank of Scotlands divisional chief executive, group HR Peter Cabrelli, but despite this grandiose title, his will not be a board-level appointment.
So, with the number of HR directors on the board much the same as it was two years ago and falling shouldnt we be up in arms over the status of the profession? That the likes of HBoS, Granada and M&S have chosen not to have their HR directors on their boards is arguably a sign that the biggest and best companies in the UK have little appreciation for the skills of the HR director in the boardroom.
Why is this? Why isnt it accepted that people issues are just as important as money issues. After all, according to Pricewaterhouse-Coopers in the US, 70% of Fortune 1000 companies cite lack of trained employees as their number-one barrier to sustained growth, and the figure cant be too different for the FTSE-100.
Director of people David Bell sits on the main board at Pearson plc. He cant understand why so few HR directors are in his position. I dont really know why, he says. Companies have gone a long way to understanding how important their people are, but why not make it explicit by having someone responsible for them on the board? If you have a finance director responsible for the money, then why not have an HR director responsible for the people.
It makes a big difference when youre in a war for talent and you say, We take people matters seriously when you can point to an HR director on the board and say, Here is the proof.
The Halifaxs Lee also ponders the question of whether HR should have a guaranteed place on the board or not. He builds a convincing case for why it should. If you position the HR role as being the link between the ambitions of the business and the ambitions of the people employed by the business then clearly it helps if the person holding the HR portfolio is a director who sits alongside his business colleagues.
To achieve real alignment between the business objectives and the people policies, it is best to discuss things as part of the debate about the business objectives. There is a strong underlying case for that particularly today, when what differentiates companies is the performance of its people.
Lee then spells it out, There is the risk that if the HR director is not on the plc board, he/she is not there at the critical moments in debates where alignment of people and business crops up. Nor do you have the same degree of weight and understanding with the non-executive directors if youre not on the board.
However, in practice Lee believes there are a number of factors which explain why many companies do not have a board-level HR director. It can never be aligned totally for three reasons, he says. First, it is the business leaders who have primary responsibility for running the business in a way that delivers the required outcome.
Second, provided senior HR figures are effective members of the business teams, its perfectly possible for the business to take the view that the alignment of business issues/people be addressed around various executive tables. And third, at the end of the day, each individual has to justify his place on the board. Its a case of who is capable, not because they are in a certain role.
Lee has been on the board of the Halifax since 1994 and HR had not had representation on the board prior to his appointment. Hes also been through a lot with the company notably its transition to a plc and recent merger. He says that most of the influence of his role is in the normal day-to-day transactions of business actual board meetings take up a very small amount of his time therefore he makes a major contribution away from the board table. The biggest criteria for being on the board is how senior HR is regarded by its executive colleagues, he says, and how the HR director carves out the role of personnel adviser to the CEO.
Lee explains that the HBoS business model is going to be based on the business leaders being on the board, with the HR function supporting the businesses. James Crosbie, the CEO of HBoS, attaches great importance to the business leaders grasping people issues, says Lee. He also places a great reliance on the personnel director regardless of whether they are on the board or not. So I think Peter Cabrelli will have a good platform to work from.
At British Airways, director for people Mervyn Walker is not on the plc board, but he makes the case that his position would not be strengthened to any significant degree by being on it. Its not important, he maintains. I report to the chief executive and am a member of the leadership team responsible for the day-to-day direction of the business.
He continues, The issue of board membership is a red herring. In some cases, main boards have significant numbers of executives and play a very active role in the direction of the company day-to-day. In other cases (like BA) the board is largely non-executive and, while it acts as an overseer, leaves the principal executive responsibility for direction of the business to the chief executive and their senior team. The real question is therefore whether the HR function plays a key role in whatever body (whether board or executive team) is really driving the business. In some cases this will be the board, in others it will not.
Norman Mitchinson, the director of group HR at Lloyds TSB, agrees: I report to the deputy group chief executive, who is a member of the board. I regularly attend meetings of the executive committee and chairmans committee, for HR matters; I have monthly meetings with the chairman and the group chief executive; and I attend the board sessions involving HR matters including an annual comprehensive report on HR.
Like Walker, Mitchinson feels he can dictate policy without being on the plc board, but only because there are certain things in place for him there. First, that HR reports directly to a chief executive or deputy who is well briefed in HR matters; second, that there are adequate opportunities for the HR director to address the board directly on HR issues; and third that the board is aware of HR issues and committed to them, so that it will expect to be continually briefed and consulted. Clearly not every HR director will be in this fortunate position.
At BT, group personnel director John Steele is the longest-serving member of the executive committee reporting to the CEO. Its obviously important to be on the board, he agrees, but stresses, There is life without it. However, as with Mitchinson, there is a proviso, and it is: Providing that you have the right position, but more importantly the influence to contribute to the companys strategic direction.
But is this displaying a lack of ambition among members of the profession? If you ask Cadbury Schweppes board-level HR director Robert Stack about the difference being on the board has made to his effectiveness, its clear that the most senior position can only help in terms of experience and long-term contribution to a company.
The difference for me when I joined the main board was in making decisions, says Stack. You really feel the pressure even though youre used to making decisions at a sub-board level. The single biggest factor for you on the plc board is in the external impact you have on the shareholders you are their elected representative.
Its a different dimension that Id not really been faced with before. Its a clich, but the buck stops with the board and thats huge. Im not sure that everyone perceives that and its always at the front of your mind on every decision you take but I guess its why directors are paid what they are paid.
So how does an HR director ensure that he/she is considered for a board-level position? If you ask Lee for advice on what skills a HR director needs to be considered for the board, he says that they are still the same ones the really good ones have always had to display its never changed. He argues that the most successful HR directors are the ones that are outstanding partners to their business colleagues.
They have the ability to understand the business issues and are reading issues both from the mind of the business and from the minds of the people that work in it. Its being a partner and adding a distinctive voice to the debate what I call HR with attitude the model hasnt changed.
Lees main complaint about the profession is that too often the HR world has allowed itself to be typecast as a provider of services and as the deliverer of solutions to difficult issues. Its not enough, he says. He cites his experience outside HR as giving him a cutting edge in business.
Im eternally grateful to ICI, he says, for giving me the opportunity to spend much of the middle part of my career as a businessman in a variety of roles including international ones and not just as a straightforward HR person that helped me to understand the contribution HR can make with some useful perspective.
Pearsons Bell has come up a similar non-HR route: originally a journalist, then a manager of journalists before becoming managing director of the Financial Times, he says he has found his range of line experience very, very helpful when dealing with other managers. And as he says, If you are a board-level HR director, it not only means something within the company, but all kinds of issues are discussed at senior levels and it means you can have a very positive impact on the decisions that are taken there.
We want your views
Why arent there more HR board members at the countrys top plcs? We want to know what you think, and what action the profession should take to remedy the situation. Send your thoughts to human.resources@haynet.com
