Board Structure: Tapping The Potential Of HR Professionals

Updated: Oct 19 2002, 05:30am hrs
Its popular for corporate executives to say that human resources are a top priority and represent significant corporate governance issues. The time has come to effectively address these issues at the board level by drawing on senior human resources executive talent for directorships. Good corporate governance requires appointment of directors who bring special competencies and business acumen. Over the years, chairmen, chief executive officers (CEOs), presidents, senior executives in finance, marketing or technology, academics, and former government officials, have filled directorships typically. Yet most boards have not updated their directors expertise to recognise the shift and the importance of a broad variety of critical people issues.

Domestic and global competitiveness create a business environment in which key success factors revolve around people issues, intellectual capital, effective management processes, and cultures. The greatest challenge facing Indian boards in five years are to remain independent, with diversity. But not just for the sake of diversity. We need to have a broad range of expertise. We also need to maintaining a long-term view, taking into account all constituenciescustomers, employees, and shareholders. It is important to understand the business, its mission, strategies, and core competencies, and able to assess management and corporate performance and take actions as necessary. Our experience indicates that in todays dynamic and competitive environment, people issues provide a stream of agenda items for board consideration. Key issues that involve continuing board participation include senior executive recruitment, selection, compensation packages and board strength.

There are also education/ training inve-stments to consider. Todays boards often look for operational and financial experience when recruiting new directors because of their fiduciary responsibility, but theres also a responsibility with respect to human resource issues such as people development and executive development that affect corporate viability. A human resources person has the experience to participate and contribute on a corporate board. Compen-sation and benefits are very sensitive areas in todays environment. They underscore the value-added resource HR executives provide for directorships. Boards must grapple with the tension between the upward-sloping wage profile of experienced, longtime employees and the expense of turnover. When companies rely on structured compensation backloading to enhance current profits, directors must consider the long- term impact and some unintentional consequences that could potentially jeopardise the company image and reputation. A seasoned HR executive can provide board leadership to navigate through executive incentive, pensions, and health care plans with all their related advantages, costs, and legalities.

People strategies, including succession/retention plans and their implementation, are the gateway to success in any major corporate restructuring whether it is mergers, acquisitions, divestitures, downsizing, or joint ventures. When boards must act on major changes, they benefit from having board members who truly understand corporate cultures, employee values and attitudes and who, therefore, can help determine how the anticipated change must be handled to minimise disruption. Senior HR executives also bring with them a wealth of knowledge of global HR issues and effective means to address them.

Annual corporate strategic plans reviewed by the board are today focusing more on skill shortages and competition for topflight executives. There-fore, its not surprising to see the number of people issues before the board increasing. The size of the work force and how it is organised are paramount decisions for corporations today. Boards could significantly benefit from the expertise of a human resources executive when charting a course for the future.

The good news is that that talent is available. There is an excellent cadre of senior human resources executives who can make valuable contributions on boards of directors, bringing beneficial insight on people issues and strategies to corporate governance.

A Partnership Role
One way, human resource professionals can make a difference is by becoming more strategic at all levels to help their organisations develop future leadership and deal more effectively with ongoing change. Like it or not, change is the only constant in todays environment; so the flexibility to handle it is critical. Things will only get more challenging as business becomes more global and competitive. Change can paralyse an organisation or energise it - the difference lies in the attitude of top leadership and the tone it sets for the entire organisation.

By embracing change and remaining flexible, top leadership infuses the entire organisation with a positive attitude towards change. By adopting a more strategic role and actually partnering with the CEO and the companys executive staff, human resources acts as a change agent-replacing resistance with resolve, planning with results and fear of change with excitement about its possibilities. At the same time, however, workers struggling to do more with less must believe human resources is their voice, their advocate and their representative in management decisions. Human resources also play the vital strategic role of helping the organisation attract and retain the best and brightest high performers. The shortage of high-quality talent increases the importance of human resources. Knowledge management and developing intellectual capital - two primary human resources functions-are critical functions that provide direct competitive advantages for corporations, irrespective of industry. Human resources can take these functions to a strategic level in three key areas.

First, by championing developing talent, staying abreast of desired skills and abilities and continuing to work with top corporate leadership to ensure availability of opportunities and growth paths to challenge developing talent.

Second, by creating balanced plans of recruitment and internal resource development for future executive leadership positions. Successful companies will be those that attract, develop and retain individuals who can drive a global organisation that is responsive to both its customers and the burgeoning opportunities of technology.

Third, by taking the lead in identifying and proposing flexible - and in some cases superior - reward programs for high performers that reinforce desired behaviours and abilities with higher compensation.

Redef-ining Human Resource mobilisation
It sounds easy enough, but is it To operate successfully, human resources executives must be as flexible as the business environment is dynamic and complex.

That means human resource executives should possess cross-functional experience and operational strength. The human resources organisation should provide value-added processes. These processes should further the organisations strategic plan by increasing efficiency and delivering results, while fitting into the context of the organisations unique corporate culture, goals and organisational structure. The human resources organisation that delivers at the same level as corporate leadership sets the standard for professional development and performance.

More complex than honing personal proficiencies and industry knowledge is the task of redefining human resources in the eyes of the CEO, the companys board and other corporate officers. Human resources purpose must reflect its strategic role if it is to take on these demanding, vital functions. This, of course, requires the full, informed support of senior management. To secure that support, encourage open dialogue with senior management to create a new culture in which human resources can actively participate in strategic planning, corporate development and implementation activities.

First, there is the need to define and clarify the concept of culture change. Then, articulate why the change in culture is central to business success. Next, define a process for assessing the current culture, the desired new culture and measure the gap between the two. Last, identify alternative approaches to creating culture change.

Defining and supporting culture change is one thing. Implementing it is a whole different ball game. It is important to define deliverables, measure them and reward their realisation. To reach its full contribution capability, human resources must prove it is an integral part of the leadership function and then deliver results.

High performance intellectual capital and organisational capability are invaluable to senior executives. Human resources can help them get both by moving beyond traditional roles and by demonstrating its full potential. Todays human resources stars do play an active strategic role with the CEOs office, corporate board and officers. They act as agents of change and have strong, cross-functional experience. They can sell the need for development programs to upper management and then deliver programs that meet organisational needs.

They perform at the highest level and employ best practices to all their challenges. They enhance customer satisfaction and stakeholder expectations, while building trust between corporation and employee. In todays environment, human resources have the ability and the opportunity to help its organisation succeed. Thats an opportunity not to be missed.

(The author is managing director, 3P Consultants Private Limited)