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Serving on a board of directors can help HR professionals become better leaders.
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Joanne McDonald knows how valuable it can be to have a human resource executive on a company’s board of directors: She has served in that role at her company, ENSCO Inc., for 16 years.
When ENSCO undertook a search for a new chief executive officer in 2010, McDonald, vice president of administration and human resources, served on the board’s search committee. “You bring particular talents to that activity as an HR executive,” she says. On the board, “You have to wear both the company management hat and the shareholders’ interest hat.” ENSCO is a privately held government technology contracting company with nearly 600 employees and $100 million in 2009 sales. McDonald is one of three inside directors; the other six are outside—independent—directors.
Sixteen years ago, McDonald was an anomaly. Even a board’s outside directors tended to be CEOs, chief operating officers and presidents of other companies. But that has changed amid growing recognition of the strategic importance of talent management. That function influences an organization’s ability to face corporate oversight by regulators and stakeholders—and thrive long term.
A chief human resource officer comes to the boardroom with a “perspective on the intersection of people and strategy, and more companies are recognizing that,” says Tom Kroeger, a member of the board of ACCO Brands. Kroeger, an executive recruiter and consultant, was chief human resource officer for Sherwin Williams, Office Depot and Invacare, all publicly traded companies, and now serves on the boards of ACCO Brands and a private equity firm. “We make sure management is developing the entire leadership team capable of executing the corporate strategy. With HR on the board, that type of discussion is being raised, not months in advance of management changes, but years in advance,” he says.
Kroeger is convinced that opportunities for HR executives to serve on corporate boards will increase. He says the financial reform bill passed in 2010 will have implications for the question of executive compensation and will magnify the need for that expertise on the board. He says boards’ HR and compensation committees are becoming “the new audit committee—a dreaded assignment because of the time commitment and the scrutiny of outside agencies.” At the same time, CEOs are serving on fewer outside boards. “We’ll begin to see an imbalance of supply and demand for board candidates,” he predicts. “The classic preferred profile for outside board members has been sitting CEOs. Increasingly they are saying, ‘No, thanks.’ ”
The addition of HR expertise to ACCO Brands’ board is welcomed by the CHRO, David Kaput. “The level of strategic business and HR planning has been enhanced,” he says. Kaput actively and directly engages with the board and its compensation committee, and views it as a logical career path. He sees it as a natural and necessary step in career progression to become a “more complete HR executive and business leader.”
Board Service as Career Path
McDonald had not considered serving on a board as a goal in her career, but found the experience has increased her value to the HR function at ENSCO. “It makes you a better HR person,” she says. “It enhanced what I already knew and then took it to a new level and applied it in a different way. It was really exciting and I really appreciated the opportunity.”
When she joined the board, McDonald had to learn her company’s business and competitive landscape in greater depth. “It’s a technical company, and our board traveled to sites for technical presentations. There was definitely a learning curve while the company educated its new board members on technology and strategy.”
Serving on a board is a realistic goal for savvy HR pros, according to Brian Kropp, managing director of The Corporate Executive Board’s Corporate Leadership Council. “Seventy percent of senior executives say engagement is a critical issue,” he says. “That’s really good news for HR professionals.” He noted that while the odds of making it onto the board of a Fortune 100 company are slim, there are thousands of smaller companies that have boards. “It’s certainly achievable,” he says. “Senior executives are yearning for HR counterparts who can talk the talk of business and think strategically.”
Sharpen Your Strategic Business Acumen
The Corporate Executive Board identifies five critical competencies that HR professionals must develop to become strategic business partners in their organizations:
Kropp estimates that only about 10 percent of HR executives already have the skills and capabilities they need to step into the role of a board member, but about 60 percent are close: “Most of what you need to know, you can learn on the job.”
How does an HR manager go about building those five competencies? Kropp says HR managers need to look at talent and staffing decisions in terms of broader organizational performance. “A good HR exec will say, ‘We need to have employees more engaged; then they’re less likely to turn over,’ ” Kropp says. He contrasts this with the HR executive who thinks like a board member: “Engaged employees are less likely to turn over, and then we see better customer relationships and then an increased revenue stream from those customers.” In the latter view, engagement equals driving a business outcome.
He recommends that HR managers proactively seek opportunities to expand their knowledge and contributions. Development strategies that The Corporate Executive Board research found effective include:
Kroeger sees such strategies as a great way to develop what’s now called domain expertise—deep industry knowledge that is invaluable on a board of directors. “Become a master of your profession and a student of your business,” he advises. “Be the voice in the room that speaks with authority on talent and compensation issues. But you also need to be a voice in the room who can credibly weigh in on business and strategy.”
ENSCO helps board members—including McDonald—by providing membership in the National Association of Corporate Directors. “It’s a great organization really dedicated to director education and keeping members informed on issues that impact directors and companies,” McDonald says. She said the courses and certifications offered by organizations like the association and the Society for Human Resource Management are helpful, even if they never lead to a board appointment.
“They go over everything: red flags in financial statements, corporate governance, ethical issues, blue-ribbon committees on best practices,” she says.
Elevating HR’s Role
Daniel Kaplan, a partner at executive recruiting firm CTPartners in New York and head of its human resources practice, says the economic downturn has helped elevate the profile of HR leadership, with talent management taking center stage as companies navigate the stormy economy. In CTPartners’ surveys of directors, the absence of HR expertise is frequently cited as a shortcoming.
Kaplan says CEOs and chief financial officers generally do not understand how to drive a succession plan at the level and depth of a world-class CHRO, and they don’t know how to ask probing questions about the talent bench.
You can make a very credible argument that a CHRO who reports to a CEO and is a member of the leadership team can have significant impact,” Kaplan says, noting that the impact is magnified when there is an HR executive on the board. “The fundamental value of HR is around the talent portfolio. Having an outside HR person on the board adds a whole lot of value, and it is an important elevation of the function.”
That recognition led his firm to hold its first Board of Directors Institute on Human Resources conference in March.
“There is a great deal of frustration on the part of chief human resource officers who feel blocked, conflicted or lacking in the training or access necessary for them to help corporations achieve their goals and potential,” Kaplan told attendees. “Meanwhile, directors want more. To fulfill their roles and responsibilities more effectively, they need the kinds of insights that the highest quality human resource professionals can deliver.”
Kaplan’s assessment rings true to ENSCO’s McDonald. “Many of the business issues that come up on the board revolve around things HR is really good at,” she says, citing compensation and reward strategy; culture management, especially in mergers; talent management; succession planning; risk management; and communications.
“All of that is HR’s bailiwick. All are issues that boards are dealing with today,” she concludes.
Earning Bona Fides
Many HR practitioners find that serving on the board of a nonprofit organization is a great way to get some business bona fides.
“Not-for-profit boards are a great development experience for HR managers,” explains Ann Rhoades, who serves on the boards for restaurant group P.F. Chang’s in Scottsdale, Ariz., and HireVue, a privately held video-interviewing company in Draper, Utah. The former chief human resource officer at JetBlue Airways says not-for-profits are “easier to get on initially, and it gives you invaluable experience.
“You learn how to run an organization.”
Rhoades’ own experience on the board of a very large YMCA was an object lesson. “We went through all the things a board typically goes through: people to let go, financial issues, having the right team in place, fundraising.”
But not all nonprofit board experience is equal. Kropp says HR executives seeking developmental experience should be choosy. “Simply being on a nonprofit board doesn’t do anything,” he says. Find “one where you have to make tough decisions, make trade-offs, launch new products, change the direction of the organization.”
Both recommended HR executives work with organizations they feel passionate about, but that are approaching or facing challenges they can help solve.
Kaplan points out another good reason to seek nonprofit board appointments: networking. “It’s a way to demonstrate that when you take on these outside activities, you’re going to do it in a real way and invest yourself,” he says. “You are building your reference base.”
The author is a freelance writer based in Arlington, Va.
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