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The value of HR expertise on a board of directors

October 8, 2021, 2:31 PM UTC
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Many forces are changing the makeup of corporate boards, including regulation, moral or social imperatives, and the need for diverse viewpoints and skill sets. One of the most important and fast-growing skill sets boards are looking for is workforce strategy.

Research from the National Association of Corporate Directors says that the presence of new board members with HR backgrounds has nearly doubled over the last three years, from 6% to 11%. Adam Grant, professor at the University of Pennsylvania Wharton School of Business and an organizational psychology expert who consults for the NBA, Department of Defense, Dow Chemical, and others, advocates for boards to have a committee focused on culture and talent strategy.

It also makes financial sense. PwC estimates up to 85% of a major company’s expenses can be tied up in talent—it’s the largest investment a company makes, just about every year, by far.

“Will you be able to sustain competitive advantage and survive, and have the financial returns to your stakeholders and shareholders because you’ve been able to retain and re-skill your talent?” Naveen Bhateja, chief human resources officer at Medidata, asked Fortune, posing the key question to board leaders around the globe.

The rising strategic importance of this arena, sometimes called human capital management or people operations, has been going on for some time. Before the pandemic, Gartner’s head of HR research Brian Kropp noted the “rise of talent as a CEO issue” over the past decade.

“It’s been in the works for several years, but it’s really accelerated since the pandemic, for sure,” Lisa Baird, partner, global human resources officer practice leader at Heidrick & Struggles, told Fortune. “The complexity of managing the talent agenda has grown dramatically in recent years for a number of reasons.”

Additionally, the scrutiny and regulatory environment around labor practices, including union busting, wage theft, and dangerous working conditions, is getting stronger and stricter. The SEC, Nasdaq, and institutional investors are calling for more accountability on metrics related to human capital and diversity.

HR leaders are also tasked with setting up a more advanced function. The need for strong data judgement, for example, and experience developing an HR analytics department, is increasingly important, Baird said.

“Organizations are increasingly holding themselves accountable for providing transparent data around HR across a number of dimensions,” Baird said. “Some of that is to support their talent brand. Some of that is to support their culture and engage with their employees, and some of it is to support external stakeholders. I think we’ll see more of that in the future.”

Beyond the operational implications, the push for smarter workforce strategy is about making a shift in mindset.

“One of the biggest changes that we’ve seen in management over the past 10 years is, it’s no longer command and control, where you make people do what you want,” Eric Mosley, CEO of Workhuman, said. “It’s more of a realization that great work gets done by teams, not individuals.”

This mindset shift is important as companies embark on rewriting all of their business strategy and operations playbooks for the remote/hybrid, climate-conscious, socially-responsible future.

“All of what you used to do in terms of annual appraisals and creating incentives for people… you have to flip the script on that,” Mosley said. “You need to start from a team foundation and start to look at your incentives, your bonus structures, and your performance and talent review processes,” to lead an organization through these times.

Ultimately, workforce strategy will be a major determinant of winners and losers during “The Great Resignation.”

“The companies that are aggressive and invest in those teams will do extremely well,” Mosley said. “The strong will get stronger and the weak will get weaker.”

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