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An increasing number of boards realise they need a more sophisticated understanding of the talent agenda. In many cases, this involves redefining their relationship with HR as they seek fact-based insights on leadership development, succession, diversity and culture.

David Garman, Non-executive Director at logistics company John Menzies and former CEO of TDG, comments: “The contributions made by the HRD are not valued as much as they should be by boards. It would be fair to say that, in my experience across a range of companies, the analytical intelligence of the board runs stronger than their interest in behavioural issues."
 
Traditionally, the clearest link between the HRD and the board was via the remuneration committee (Remco). While that remains important, chairmen and NEDs now require greater clarity on whether an organisation has the talent to deliver short, medium and long-term objectives. The question is, how are HRDs responding to this need for hard information? 
 
Devyani Vaishampayan, founder of HR TECH Partnership and former Group HRD at BSI Group, comments: “Leadership capability can be viewed as a soft area. It is important to present the board with data that considers the trends and implications for the business. This will entail analysing the demographics of the top 100 to 500 leaders in an organisation. How are they split by age, gender and nationality, and how much time have they spent in their particular role should also be considered?”
 
The next step, she explains, is to assess actual leadership capability. “A lot of organisations today use psychometric tools, but they probably don’t do enough work around analysing the whole group of senior leaders. This involves looking at the feedback from performance appraisals and engagement surveys. The important thing is to create a whole picture and not to look at bits of data separately.
 
“If done systematically, they begin to understand what leadership capability they currently have, but more importantly, they will see gaps that will need to be filled in two to three years’ time.”
 
Nicky Pattimore, HRD for technology and investment services company Equiniti, works closely with both the remuneration committee and the nominations committee. “The board is primarily interested in talking to me about culture, talent succession, leadership development, diversity and inclusion," she says. 
 
The approach Nicky takes to evaluating leadership within an organisation is similar to the path described by Devyani. “The board wants me to inform them about which people have high potential, how we are looking to develop them, and where the capability gaps lie,” she explains. 
 
“A lot of this is about engaging with the talent population and then pulling information together to go back to the board in a simple and clear fashion. It is a very ‘action’ based approach, [underpinned by] assessment and analysis.”
 
From a diversity and inclusion perspective, Nicky notes that more numeric data is now available. This can be collated and analysed, especially with regards to the gender pay gap. “I’d like to get to a point where we are able to look at trends and then benchmark our data against other organisations, moving towards more predictive analytics,” she adds. 
 
HRDs that are providing support and insight to their boards should take an integrated approach to the information they collate on the composition of the workforce, showing a mix of skills and productivity levels. According to David, this is the right direction of travel as boards do not want to simply be presented with what he describes as the “HR agenda”.

Explaining the standard agenda, he says: “This would involve the HRD presenting to the board and using a lot of conceptual material and jargon around learning and development programmes, culture change programmes and leadership initiatives. 
 
“But if they are only presented in terms of those subjects in isolation and in a vacuum, they’re never as well received as when they’re connected to goals in the overall business strategy and actions that are practical and grounded.”

Openness and trust 

Leadership capability and succession can be something of a minefield for HRDs, as success depends on the full backing of the CEO and board. The difficulty lies in understanding the relationships between the various players and their underlying agendas.

“There needs to be a certain openness when discussing leadership capability on the part of the CEO and the board because only then does it become real,” comments Devyani. “At first, it’s definitely a case of testing how open the board is to such discussions and only then making the agenda a fuller one.”

Succession planning, for example, may involve some difficult discussions with the top team. “For succession to be successful, the status quo must be challenged, and there has to be an understanding of what the same role is going to need in two to three years’ time,” Devyani adds.

“For me, it has to be about shifting the dial to get the board to reflect on the challenges of those roles and the required leadership capability, [rather than just] identifying key roles and creating a list of names.” 

An HRD must understand how far they can go when suggesting changes. Charlie Wagstaff, Managing Director at Criticaleye and former Director for Operations and HR at CDC Capital Partners, comments: “When discussing the ability of a HRD to influence a board, the focus is usually on having a commercial, strategic mindset. I do think that is absolutely vital, but it’s easy to underestimate the importance of relationship building, particularly with the CEO, Chairman and Remco Chair.

“The dynamics between those different parties can be difficult to navigate, so time and effort needs to be put into building up trust and HRDs must understand broader strategic goals while also knowing when to retain their independence and making a stand.” 

For Nicky, this gets to the heart of what it is to be effective in the role. “As a HRD, you should think about relationships and how you engage with people. So, if you are looking at succession, I do think some of it will depend on a chief executive’s style of leadership, combined with their relationship with the board, chairman and exec team. 

“The HRD must have a level of independence between the execs, the business and the board; you have to be able to challenge them. When I am in that space, I always think of myself as the custodian and ambassador for the culture of the business.”
 

By Marc Barber, Managing Editor, Criticaleye
 
These thoughts were shared during Criticaleye’s recent Conference Call on The Relationship between the HRD and the Board.

For further insights on leadership capability and succession, watch our interviews from the HRD Retreat 2017