In the wake of recent corporate governance crises, HR has a real opportunity to make a difference at the board level. But, as Tom Brown asks, will HR step up to the plate and seize the opportunity?
In the wake of recent corporate governance crises, HR has a real opportunity to make a difference at the board level. But, as Tom Brown asks, will HR step up to the plate and seize the opportunity?
First came the governance crisis of Enron (and its resultant knockout blow to Arthur Andersen, WorldCom, Tyco and others). The very embodiment of executive greed, excess and mismanagement was exposed for all to see. The response was swift and, typically, overcooked – Sarbanes Oxley in the United States, the Higgs Report in the UK, CLERP9 and others here in Australia.
The response to these countermeasures from audiences around the world varied from acclaim to condemnation depending on which side of the governance divide they stood. From boardrooms, executive suites and finance departments came sharp expulsions of air, like a boxer caught unexpectedly by a severe blow to the body. From the perspective of many, these were the worst of times.
Yet, in these darkest of times for some, lies opportunity for others. For human resources, it is the chance to forge a lasting and influential partnership at the board level. Until the governance crisis, this had always seemed like the impossible dream.
For much of corporate history up to this point, a lot has been written about boardrooms being the hotbeds of cronyism, nepotism and the good old boy syndrome – a private club, less interested in shareholders than with the social standing which came with being ‘one of the boys’. Words like selection, assessment, performance management, competencies, capabilities, role clarity and accountability were never uttered.
The Enron, WorldCom and other debacles have ensured that those practices have no place in the new world of governance. You only need to look at some of the recommendations contained in one of these retributive reactions, the Higgs report in the UK, to see how. Among these were:
• Review the competencies, skills and attributes of non-executive directors.
• Conduct rigorous and fair open recruitment processes.
• Ensure orderly succession planning through the nomination committee.
• Recommend programs to train and develop current and future directors.
• Recognise the benefits of diversity.
• Evaluate the performance of the board and its members at least once a year.
This should be music to our ears. Recruitment, selection, assessment, training, performance management, succession and diversity are the very essence of our trade. These are our core skill areas where we provide service to the organisation at large. This could be the function’s ‘yellow brick road’ to credibility and respectability.
But will we step up to the plate and seize the opportunity, or will we yet again cede the opportunity to the legions of consultants only too ready to beat us to the punch?
I fear the answer is that in many, if not most, instances, this is exactly what will happen. All too often HR has remained hidden under its cloak of process and program secrecy, defending its territory against all who try to see what might lie beneath, protecting its power base and refusing to demonstrate the value which undoubtedly it can add as a business partner. Is it little wonder that HR has never gained the respect and credibility it so desperately craves?
To migrate these skills from the organisation to the boardroom, we need to have a proven track record of success in the former. We need to have shown beyond all doubt that we can add value, make transparent what we do and demonstrate the improvements in the intelligence available to the business and to its bottom line.
All is not lost. There are some proactive and opportunistic HR leaders out there who have seen and seized the opportunity presented. They have already been successful in that first step of proving the value added by the function. They have amply demonstrated that they are business people first and HR people next. They have become invaluable members of the executive suite and the next step is well within their grasp.
That next step – the ultimate prize –is not just long sought after credibility. Nor is it only the respect of the management team or the board. While all of the above are certainly desirable and necessary precursors, the real prize is not in being invited to be a partner of the board, but to be a member.
The invitation, when it arrives, comes not because we have successfully infiltrated ‘the club’ but because the core competence and capability we have demonstrated at the organisational level is finally seen to have relevance to the shareholder and the future sustainability of the enterprise.
We will have been tested against and met our own rigorous process of assessment and selection. We will have shown we add a critical piece to the capability and diversity jigsaw required at the board level in today’s complex and challenging business environment.
All that will remain will be to show by our performance that we have earned the right. Carpe diem!
Tom Brown is senior vice president, human resources for Brambles Industries and a member of Human Resources magazine’s editorial board. Email: [email protected].
