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The Reality of Talent Risk

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I will always recall a particular meeting with a corporate CEO. After describing an upcoming merger plan, the CEO said, “I hope we have the talent to pull this off.” I thought, after a merger, a company might arguably have more talent than needed. The CEO clarified, “It is never about the quantity of talent, it is always about the quality.”

As a lifelong HR executive, and now an executive search professional specializing in human resources talent, the priority of talent quality is well known to me. But this CEO was recognizing the challenge of talent risk as well. And this recognition of talent risk—and the many other human capital priorities that are strategic to businesses—has always made me wonder why so few boards include HR leaders as directors?

In 2015, a colleague and I conducted a small study in collaboration with the National Academy of Human Resources. Our goal was to determine what propelled certain CHROs to board seats when so few others found their way into the boardroom. What attributes made these HR leaders board-ready? 

Among the findings of the study, we learned that companies going through significant transformation were most likely to add a human capital expert to the board. These business transformations might include bankruptcy restructurings, spin-offs, private to-public transitions, acquisitions, significant business expansions, or business crises. Clearly, amid this business transformation, boards recognized that a human capital expert would be a valuable resource, including by helping to lead board discussions on organizational culture and talent management strategies. 

In essence, business transformation had moved talent risk to the forefront for these particular boards, making them more likely to add a CHRO to the board. Yet talent risk is always present, perhaps most importantly when company leadership is not keenly focused on it. 

As boards work toward greater diversity in all aspects, including the skillsets of board members, CHROs have much to bring to the boardroom. Consider the potential contribution to be made by a CHRO board member regarding two major board responsibilities: executive compensation and succession planning.

My colleague Mike Bergen, the HR Global Practice Leader at Allegis Partners, says, “Too often, boards discuss succession planning without anyone with content expertise in the room. Let’s say that in the discussion, the board is feeling that the company is not effectively identifying high-potential talent in midcareer. With an HR expert on the board, the discussion could continue a half-mile deep with additional information— but without that HR expert present, you can only go six inches deep. The same is true when discussing the strategies and mechanics of executive compensation. The company’s executive CHRO will make the presentations, but you want an independent HR expert in the boardroom for the discussions that will follow.” 

Board responsibilities with a significant human capital element also include executive development, CEO and board assessment, board composition planning, and the nomination of directors. Of the “Top 10 Topics for Directors in 2016,” as outlined by Attorneys Akin Gump Strauss Hauer & Feld, six relate to human capital. Effective executive compensation as well as board composition and succession rely directly upon HR expertise; cybersecurity and social media are largely recruiting and talent management matters; and risk management and long-term corporate strategy should both include a thoughtful assessment of talent risk issues. In my experience, that rarely happens.

 I have participated in many board meetings where directors will ask company leadership if they have the right “resources” to accomplish their goals, but this is almost always interpreted as every form of “capital” other than human. 

Beyond their functional skills, CHROs also can bring other leadership attributes to the boardroom. Their role has given them a broad “helicopter” view of inter-related issues across the breadth of a company. They tend to have strong interpersonal skills and lead by influence, which can make them valuable boardroom facilitators. Additionally, they are skilled at evaluating the tangible and intangible qualities of talent, which is also valuable in fulfilling board responsibilities. 

Boardrooms need to become more diverse, including with the addition of directors from various business disciplines, such as HR. The gripe that historically, some HR leaders have been “lightweights” has some credibility. But that was yesterday. Plenty of today’s CHROs are well rounded, experienced business executives who more than qualified for board leadership. Boards can and should benefit from their talents.


This article originally appeared on Hunt Scanlon's Adapting to Change: Trends in Talent Acquisition 2016.

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