September 9, 2019 – A CHRO brings a unique skill-set to any board. With deep knowledge of executive succession and the ability to maintain and engage individuals who execute business strategy, they are an invaluable asset to corporate boards. Yet only 28 active CHROs currently serve on boards of Fortune 1000 companies.
Much like a chief financial officer might have to report on revenue or a chief marketing officer on market penetration, CHROs should report to the board on specific, quantifiable metrics to show the value of their role and its impact, according to a new report by Mike Magsig of DHR International. The report sheds light on three quantifiable metrics that show the big impact top-notch chief HR officers can have on an organization’s board.
Bridging the Diversity Gap on Boards
A stubborn paradox exists within boardrooms across America. Companies are appointing more women to board seats than ever before, yet the overall share of women directors is barely budging. While business leaders have gotten the clear message that diversity matters in the workplace, it is equally clear that current methods of sourcing and selecting candidates is falling short.
Peggy Alford, a senior executive with PayPal who was just elected as the first African American woman to join the nine-member board of social media giant Facebook, joins Hunt Scanlon Media in New York on Nov. 6 to examine the disconnect between the business community’s intent to achieve greater equality on their boards and the realization of attaining that goal. She will explore why every company needs to cultivate a culture of inclusiveness and she will outline steps for companies and recruiters to take to boost diversification at a faster rate.
Join Peggy at Next-Gen Leaders: Advancing Women to the C-Suite! Women business leaders are looking for fresh pathways to the top . . . to help them get there we will draw on her expertise as well as top HR, talent, recruitment, and C-suite leaders from other blue-chip brands, including IBM, The New York Times, Littlejohn, LinkedIn, Avaya, WarnerMedia Entertainment, Pfizer, PepsiCo, The Philadelphia Flyers, PayPal, Facebook and a host of others.
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Three Key Metrics
1. Diversity & Inclusion: A commitment to diversity and inclusion (D&I) is apparent at most institutions today. Across North America, about 74 percent of corporate respondents in a recent PwC survey reported D&I as a value or priority within their organizations. Yet, to make serious progress, the drive for D&I must be underpinned commercially and financially by the board.
“Numerous studies by strategic consulting firms consistently demonstrate that heterogeneous boards and leadership teams outperform homogeneous groups in value creation,” said Mr. Magsig. “For D&I to be truly embraced, companies must look to the old adage that strategy drives structure. This change must come from the top and be diffused throughout the company. It is essential that the CHRO coordinate with the CEO to ensure that cross-functional project teams have diverse representation. A lack of quality D&I can represent a reputational risk to an enterprise,” he said.
High-performing companies generally expect D&I progress and enterprise goals to be a regular board topic and for the board to hold the CEO, the CHRO and other senior executives accountable for the personal development of high potential diverse talent, Mr. Magsig said. “Executive leadership should also be familiar with the development tactics of diverse talent at outside companies to round out the company’s succession strategy. The CHRO and the CEO should keep the board informed of external, potential talent from diverse backgrounds while also ensuring that its own talent development process is commensurate with the enterprise’s needs — and competitive with others’ programs.”
“Another way to ensure the progress of a company’s D&I objectives is for the compensation committee to consider including personal incentive objectives, tying executive compensation to the achievement of diversity goals,” he said. “When looking at how best to measure the success of D&I initiatives, consider sharing with stakeholders statistics that display the growth of high potential diverse executives in the succession pipeline and the number of senior executives mentoring diverse junior executives.”
2. Culture: As Lou Gerstner states in his book, Who Says Elephants Can’t Dance?, “Culture is not the most important thing, it’s the only thing.”
Mike Magsig is considered a top thought leader in executive search, working with clients to place their transformative C-level executives and board directors. He is also astute at succession plan creation. During his career, he has filled more than 300 C-suite positions at companies including Swiss Re, Broadway Bank, Horace Mann Educators, CNO Financial and NCCI.
“While CEOs must serve as chief culture officers, the CHRO needs to serve as the steward of cultural direction,” said Mr. Magsig. “Corporate culture must complement the organization’s vision and its strategic direction. Any disconnect will seriously jeopardize the prospects for future success of the business.”
“As the culture steward, the CHRO can direct staff to conduct various audits to determine if the desired culture is being consistently embraced and followed,” he said. “These audits may take the form of individual performance reviews, random interviews with employees at various levels, or employee surveys to determine which behaviors are being rewarded and how these behaviors align with the desired cultural transformation.”
The CEO must require senior executives to reinforce cultural goals among their employees and call on HR for support in embedding the messaging in company culture, said DHR. Both the CEO and CHRO must have mechanisms in place to report to the board on cultural development. That said, culture change is not a quick fix. Milestones must be set and understood widely to ensure appropriate progress is being made. An example of a milestone to evaluate would be the percentage change in annual revenue three years after the introduction of a culture change.
3. Ethics: Today, as never before, corporate values and ethics have become major risk management considerations and require steadfast attention and monitoring.
“Recently, the business world has seen the loss of significant shareholder value stemming from sexual harassment claims, from lack of equal pay for equal work practices, and from improper management of consumer protection and rights — and the list goes on and on,” Mr. Magsig said. “The intersection of corporate values and the executive team’s individual actions is of paramount importance. As with culture, senior executives must be the standard bearers of the stated corporate values, consistently modeling and monitoring the enterprise’s values and ethics. They may do this through small group meals or meetings with wide ranges of employees.”
Driving Diversity and Inclusion from the Top
Despite the well-documented benefits, many companies still lag behind when it comes to creating a diverse workforce. In speaking with 60 top leaders, Russell Reynold Associates found that those at the top are pivotal to delivering change.
A vibrant culture is closely tied to the enterprise’s values and ethics. “Any significant misalignment risks the erosion of shareholder value through the loss of talent, constituency confusion and inappropriate behavior,” Mr. Magsig said. “What the organization truly honors and rewards plays out in its day-to-day behavior. The desired values and ethics must be lived daily from the boardroom on down consistently with the desired culture. Otherwise, the culture will break down and employees and constituents will become confused and disillusioned,” he noted.
A CHRO may also consider using employee surveys or setting up an outside service platform for employees to air concerns about breaks with the company’s stated ethics and values. The board as a whole could receive periodic reports from this service and provide feedback on matters requiring immediate attention.
“Critical matters such as D&I, culture, values and ethics, in addition to talent development, need to be receiving more board-level attention,” said Mr. Magsig. “The CHRO can be invaluable in making that happen by serving up specific metrics that highlight where a company stands — and where they need to go. Board engagement on these issues is not only good corporate citizenship, but also serves the best interests of shareholders and corporate longevity.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media