Volume 2 Issue 7 - 2009
HR in the Boardroom | Boards Focus on their CEOs | Paying the Family | Increasing Board Effectiveness 

HR In The Boardroom

How HR Can Meet The Needs of the Board

Na Boon Chong 

“HR needs to have a seat in the Boardroom” is a frequently heard refrain voiced by HR professionals in Asia. Many argue that the critical importance of HR to business success requires that HR management concepts be integrated into strategic decision-making alongside financial, marketing, and operational considerations.

But isn’t it true that HR issues already are a board priority for most companies? Careful consideration of HR issues permeates strategic decision-making. Companies study the talent pool availability and quality, relative to the costs of acquiring them, before deciding to acquire a company or enter a new market. Consumer businesses increasingly realize the need to align their internal employment brand with their external marketing brand and value proposition. More and more manufacturers focus on developing their employees’ capability in order to support their movement up the business value chain. HR is clearly a priority at the strategic level.

Not only is HR a strategic priority, it is also widely understood that the only way to sustain the changes that boards frequently demand is through HR processes and systems. The board of directors has limited bandwidth: the board can only set the right culture and tone, and the rules of engagement for management and employees. Creating the right culture is more than just exhortation, communication, role modeling, or good leadership, It is also about selecting the right people, developing them in the right way, assessing them not just on operational results but also how they behave (especially when no one is watching over them!), and rewarding them for doing the right things. A desired culture change can only be sustained if it is built into corporate HR systems and programs.

Why isn’t HR in the Boardroom?

If HR is a strategic priority and if the board needs HR in order to implement its strategy, why do we not find more HR professionals playing a key role in the boardroom?

Ong Ye Kung, former CEO of Singapore Workforce Development Agency, provides some insight into this quandary¹. He said, “… The central challenge is not about giving HR strategic treatment, and moving HR into the boardroom. The fact is that strategic issues have already moved into the boardroom. Boards are discussing strategic people challenges such as how to better develop talent and planning for leadership succession. The challenge is whether HR executives are moving into the boardroom together with these key issues and challenges…”

Mr. Ong went on to say, “The HR profession will need to step up its game and build on high-level competencies to earn its place in the boardroom; otherwise, the same discussions as well as strategy formulation and execution will be conducted without its input and involvement.”

Our experience consulting with clients underscores Mr. Ong’s observations: the most effective way to increase the contribution of HR in the boardroom is by improving HR’s professional skills in communication, strategic thinking and other high-level competencies required in the boardroom.

The three variables of HR best practices

A place in the boardroom will take more than just HR competence.

A board’s priorities differ across three variables - organization ownership, its life-cycle stage, and its geographic span. Similarly, effective HR practices differ along the same lines. The conventional wisdom addresses this challenge by placing the burden on the HR practitioners, and says that they need to partner with the businesses in order to understand their priorities and then add value accordingly.

Our real-world experience tells us that sometimes it is not easy for the HR practitioners to break through, even if they are professionally competent. The reason, we believe, lies in a lack of understanding of how effective practices vary based on the situation. In a sense, “situational HR” is needed.

Many HR practitioners operate with “best practices” in mind. At the same time, many boards address HR issues in an intuitive and ad hoc manner, within the confine of their specific context. Due to this different outlook, both parties can talk pass each other in a problem-solving discussion. The difficulty is that there are no “best HR practices” that apply to all contexts. Some HR professionals have, unfortunately, discovered this the hard way – there are plenty of examples of a Head of HR who was very successful in a Western MNC but failed miserably in a state-owned or family-owned company (or vice versa).

While best practices and standards are converging due to globalization, different types of company ownership structures in Asia pose different types of challenges in HR management. For instance, many family-owned Asian businesses operate without formal and systemic HR practices. Yet, they are able to engender loyalty and commitment from their employees by developing close relationships with the employees. On the other hand, many MNCs operating in Asia are grappling with the lack of close affinity due to the frequent movement of employees, and thus they rely more on processes and practices.

Another example of the importance of ownership structure is that of a state-owned enterprise vs. a publicly-listed company. A state-owned company usually has different considerations in managing leadership succession and staff deployment, and may not be as nimble in workforce planning as their more commercially oriented competitors (e.g., any layoff would generate disproportionate adverse publicity). Even within the private sector, managing HR in an entrepreneurial start-up is very different from managing HR in a mature and publicly-listed company.

Creating clarity

Providing clarity on “Situational HR” will drive HR to the Asian boardroom

HR practitioners need greater clarity as to what the board expects from HR and what practices are most effective for different types of ownership structures, life-cycle stages, and geographic span. Research into these issues anchored on Asian companies, where many are evolving very rapidly in a fast-changing environment, would provide integrative learning and insightful lessons for both the developing and developed economies.

The Aon Global Research Center’s research through the Singapore Board of Directors survey is a small first step towards creating this understanding of the boardroom’s perspective (see Boards Focus On Their CEOs). The Research Center plans to build upon this first study in order to determine how best to meet the needs of the board of directors in establishing HR best practices based on each company’s unique situational HR requirements. By so doing, our goal is to ensure that highly competent HR professionals are able to find more seats in Asia’s corporate boardrooms.

Contact

Na Boon Chong is Director, Southeast Asia Consulting for Aon Consulting based in Singapore. Boon specializes in corporate governance-related services for Aon Consulting across Asia. He can be reached at boon_chong_na@aon-asia.com.

Note:

1 Ong, Ye Kung. “Sea Change for HR Personnel.” The Business Times, Singapore 20 Oct. 2008: http://www.asiaone.com/Business/Office/Learn/Story/A1Story20081020-95002.html