Editorial
There's a reason Harvard Business Review has started to resemble an HR publication: most business challenges today are people challenges. The link between employee engagement and business performance is clear. However, for all the talk of people being an organization’s greatest asset, the numbers paint a sobering picture: only about one-third of employees feel engaged at work, costing the U.S. economy an estimated $1.9 trillion annually in lost productivity. In short, organizations are leaving tremendous value on the table.
One way to tap into this value is to bring the talent agenda into the boardroom. However, most directors lack the in-depth expertise to evaluate organizational performance against its people and culture objectives. In fact, only 28% of executives feel their boards have the right skills and expertise to align a firm’s business strategy with its talent strategy.
This gap highlights a critical opportunity in board composition — one that could be bridged by the inclusion of seasoned Chief Human Resources Officers (CHROs).
As architects of talent strategies and champions of culture, CHROs bring a unique and increasingly essential perspective to the boardroom. Let’s explore why boards should consider adding CHROs and how doing so could unlock untapped value for organizations.
Talent Strategy Meets Business Strategy
To win in the marketplace, businesses must first win in the workplace. Yet, many boards lack in-depth human capital expertise. CHROs are uniquely positioned to close this gap. With a CHRO at the table, boards gain access to expertise in strategic workforce planning, succession planning and organizational design — all critical areas to drive profitable and sustainable growth in the long-term.
Moreover, with their expertise in navigating changing worker expectations, CHROs can bring an employee experience lens into the boardroom — a point of view that is currently missing. Employee experience will become increasingly critical in gaining and retaining a competitive edge. In fact, research by Willis Towers Watson reveals that organizations with an exceptional employee experience achieve three times the revenue growth and 11 times the profit margins of their peers.
CHROs are experts at designing employee experience journeys that attract and retain top talent. Moreover, they are intimately familiar with the common points of failure in the employee experience journey and how to prevent and close those gaps. CHROs also know that a great employee experience is designed with the end user (the employee) in mind. Just as product leaders gather VOC (voice of the customer) when designing products, CHROs are skilled at gathering VOE (voice of the employee) when designing the employee experience.
Related Article: Aligning Talent Strategy With Business Priorities Is Hard. HR Business Partners Can Help
Navigating the Era of Perpetual Change
Change management is no longer sporadic; it’s a year-round exercise. Organizations are in a perpetual state of transformation, adapting to shifting market dynamics, technological advancements and evolving customer demands. Yet, nearly 70% of business transformations fail, often due to insufficient attention to change management and communication.
CHROs excel in these areas, having honed the ability to rally teams, build coalitions and sustain momentum through periods of disruption. Their insights into workforce dynamics can help boards anticipate and address the human factors that can derail transformation efforts.
For example, culture clashes — a common area of board oversight — are a leading cause of M&A failure. An experienced CHRO can guide both the business and the people aspects of integration, leading to a higher likelihood of success. With a CHRO on the board, management gains access to an in-house change expert and executive coach who can advise them on complex enterprise-wide change and help them avoid common pitfalls.
Related Article: Corporate Culture Matters. Just Ask Your Board of Directors
Preparing for AI Disruption
With jobs being disrupted or augmented by AI, the skills required to do our jobs are expected to change by a staggering 65% by 2030. The implication for businesses is that becoming a talent maker (in addition to being a talent taker) will be critical to gain and retain a competitive edge in the future. This will necessitate large scale reskilling and upskilling of workforces. Organizations that fail to proactively address this shift risk falling behind.
CHROs have already managed digital transformations, navigated a global pandemic and handled the rise of flexible work. In short, they are adept at preparing their organizations for the future. Their expertise will be even more critical as AI disrupts traditional roles and creates demand for new capabilities and skills. In the age of AI, CHROs will become power players in the C-Suite.
Beyond skills, AI raises profound ethical and strategic considerations. Boards must now address questions about fairness, bias and the role of humans in an increasingly automated workplace. CHROs can offer a balanced perspective grounded in both human and business interests to help navigate these complexities.
Related Article: HR Leaders: With Great AI Power Comes Great Responsibility
Rethinking Board Composition
If boards are to meet the challenges of the future, they must proactively address gaps in expertise. Here are three steps to incorporate human capital expertise into board governance:
- Conduct a Skills Assessment: When a board seat vacates, conduct a skills assessment to create a thorough inventory of the current directors’ skills. Map this inventory against the company’s strategic priorities and identify gaps. If talent and culture expertise are lacking, prioritize candidates with a strong HR background.
- Engage HR Advisors: Directors needn’t wait for vacancies to benefit from engaging HR leaders in an advisory capacity. Advisory engagements provide an opportunity to test the value of HR expertise and vet various advisors for future board succession.
- Learn from Peers: Benchmark against organizations that have successfully appointed CHROs to their boards. Understand what challenges they aimed to address and how these appointments contributed to business outcomes and enhanced board effectiveness.
Related Article: Toxic Cultures Can Succeed, But at a High Cost
Expanding Board Responsibility
Appointing CHROs is only part of the solution. Boards must also broaden their approach to workforce and culture matters. According to Ernst & Young research, most boards now discuss workforce topics at least quarterly. To make these discussions more impactful, boards should:
- Upskill Directors: Engage human capital experts to deepen directors’ understanding of the changing nature of work and the workplace to ensure they can provide meaningful guidance to management.
- Revisit Committee Charters: Expand the remit of the compensation committee to include talent strategy oversight. A broader “people and compensation committee” could anticipate people challenges that might hinder business performance, address key people gaps, and prepare the business for the future of work.
- Listen to Employees: With only a third of employees saying they trust management in their company, boards must bridge the employer-employee trust gap. Reviewing employee sentiment data is a start, but directors should also engage directly with employees to gain on-the-ground insights.
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The Future Belongs to People-First Organizations
The tone for culture is set at the top. To build a people-first organization, you need a people-first board. Boards that fail to prioritize human capital expertise risk being blindsided by the complexities of talent management in a rapidly changing world of work.
By bringing the voice of talent into the boardroom, organizations can future-proof themselves against disruption, unlock new value and ensure their greatest asset – their people – truly becomes their greatest strength. Consequently, adding CHROs to boards is both a business imperative and a strategic advantage.
But the opportunity goes beyond individual appointments. Boards must rethink their role in talent strategy, broaden their purview and embrace a people-first approach to governance. The future belongs to organizations that can harness the full potential of their human capital, and boards play a pivotal role in guiding this journey. By acting now, boards can position the organizations they serve for sustainable and profitable growth in an era defined by talent, transformation and technological disruption.
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