Putting people first

IoD Council President Jackie Lloyd CFInstD sees great value in having a strong, experienced and professional head of Human Resources/people and culture who understands the role of governance to support the board.

She says this could be providing confidential advice on chief executive and senior executive employment and remuneration matters, succession and talent management, sensitive cases, or more broadly on the people elements of strategy, culture, business performance and execution.

Lloyd also says including ‘governs’ as a key element in the Human Resources New Zealand (HRNZ) Capability Framework acknowledges the importance of the profession in enabling businesses and their people to thrive.

That capability framework has recently been reviewed with company directors being a key stakeholder group during the project. The research was valuable in informing us about the important capabilities but also provided insights into how forward-thinking directors seek to engage in relation to people issues in their organisations.

There is an increasing importance for boards in monitoring people-related metrics and issues as part of best-practice governance. Health and safety risks have been on the radar for most boards for some time. The scope continues to increase with new legal precedents emerging in respect of employer obligations for their employee’s mental health and wellbeing.

Organisations are increasingly finding the availability of talent to be a constraint on business growth and so boards need to understand approaches to talent management and retention.

The issue of organisational culture is another frequent topic for boardroom discussions. Culture can be a significant enabler or constraint for implementing long-term strategic change so an understanding of an organisation’s culture is imperative when considering the veracity of long-term plans.

Another simple reality is that people costs are often a significant proportion of any organisations operating expenses so understanding the main drivers of employee costs and liabilities is critical.

Boards need to be well served in terms of reporting about the people issues within their respective organisations and ensure they are asking the right questions of executives. It is because of these and other people issues that we were keen to ensure a governance perspective was included in what makes an effective HR leader in modern organisations.

Speaking to directors with perspectives from the private, NFP and public sectors, it was no surprise to find they were less concerned about the technical skills of HR leaders – what we call the ‘Domains of Knowledge’ – and instead focused on other attributes needed for success when working with the board.

The areas identified by directors and chief executives as being most important are captured within the new framework in six core capabilities. These are:

• Knowledge of te ao Maori
• Understands and values people
• Reads a room or situation
• Brings people on the journey
• Solves workplace problems
• Sees and mitigates risk

These capabilities reflect an expectation by boards that HR leaders will bring a broad perspective to their thinking about organisational priorities, including having a commercial lens, will be innovative in their approach to problem- solving, and will provide courageous leadership at all levels.

The capability framework includes descriptions of each of the core capabilities for HR professionals when operating at a governance level. There was no suggestion that technical knowledge isn’t necessary but more an expectation that this is a given for anyone in an HR leadership role. The ability to demonstrate the core capabilities differentiates the effective HR leaders.

Another learning from our research has been the interaction between the board and the senior HR leader is highly variable. Where leadership of the HR function in an organisation sits below executive level, directors can be denied the opportunity to delve deeper into significant people issues in the business.

This problem can be exacerbated where there is no HR capability or experience around the board table. HRNZ was fortunate to speak with directors that had direct experience of an HR function.

Boards with established people committees, including the presence of the senior HR leader, are the best positioned to navigate the increasing people issues facing their organisations.

There is a clear trend for people committees to extend their remit beyond the traditional focus on CEO performance and executive remuneration. Regular engagements with the CPO/CHRO enable the subcommittee to dig a little deeper into overall people strategies and cultural issues.

It is also a useful risk assurance step for boards to understand the extent of professional accreditation within the HR function. Gone are the days when people issues can be managed by a competent administrator.

Successful organisations will assemble a team of proven human resource professionals with a commitment to the continuing professional development needed to stay abreast of an increasingly demanding and critical business function.

Through the development of the capability framework and the alignment of this with professional accreditation standards, HRNZ has created a valuable tool for ensuring human resource teams are able to serve all of their various stakeholders including at a governance level.

It is evident people issues can be a significant blind spot for boards and an area where underlying organisational culture problems can be creating business risks that are difficult to see. It has therefore been heartening to see there is a growing awareness within the professional director community of the need to strengthen governance oversight in this area. 

For more information on ‘The Path’ visit hrnz.org.nz/professional- accreditation/the-path-the-new- capability-framework