Talent management is gaining a new prominence on corporate boards. It’s evolved from being an agenda item under succession planning or compensation to driving strategic decisions about fostering innovation, growth and the ability to outperform the competition. After all, for an increasing number of companies today, talent is the only true competitive advantage. If your rivals can unleash and focus their people’s energy faster and better, they win.
Companies that fail to place talent oversight front and center at the board level are taking risks, in the form of failing to align the best talent with the greatest value potential or through reputational damage—like gender-pay issues, lack of diversity or dysfunctional cultures, among others—that can rock the media (and stock price) if not addressed immediately.
The need is clear, but the way forward isn’t. There are three trends that are helping integrate HR and talent agendas into the board agenda, with CHROs leading the way.
Talent Finds a Place on the Board Agenda
For CHROs to have the open communication, they need to mitigate risk, talent deserves a place on the board agenda. Traditional boards couldn’t, or wouldn’t, accommodate talent oversight. But given today’s heightened awareness, that’s changing. I’ve seen boards that have expanded the scope of their compensation committee to include talent and management development. Others opt to place it within nominating or governance committees.
One multinational corporation recently expanded the responsibilities of the nominating/governance committee to include additional human-capital oversight, adding “management development” to its title. Beyond the name change, the committee collaborates with HR executives to gain insights into workforce trends, employee engagement and development. Now, the company’s board proactively seeks out more information on people issues, including metrics around inclusion and diversity and succession planning for key roles within the company.
This evolution in talent oversight has ultimately led some companies to consider the role of CHRO on par with the CFO. Progressive companies expect the CEO, CFO and CHRO to continually work together, weaving together strategy, financial-capital deployment and human-capital deployment.
Data Creates a Common Language
HR leaders can leverage abundant new sources of data and provide more data-driven insights, thereby tying workforce-related decisions to tangible business outcomes to recommend actions, the way a CFO would use financial data to make management decisions. HR leaders can up their game by identifying talent risks and pinpointing precisely why an organization might not be performing due to people or cultural issues.
Culture scans for ethics-related issues like financial fraud, safety risks or other hot buttons are “table stakes” for boards at this point. The most progressive companies use anonymous engagement surveys or scans to track how employees perceive critical areas of work—by geography—to determine if any area of the world is underperforming when it comes to engagement. Reported to the board, these surveys or scans are a barometer of a company’s culture and can head off potential risks by identifying pressure points.
In Independence We Trust
Addressing risk at the board level requires establishing independent lines of communication between the CHRO and the board. In my own case, gaining Section 16 status in my former CHRO role helped ensure independence. A Section 16 officer is an executive in charge of a business unit or division who shapes policy for an organization. CHROs designated with Section 16 have a higher status, and therefore more authority and accountability to go to the board with issues, independent of management.
My colleague, Ellyn Shook, Accenture’s chief leadership and human resources officer, says boards need to be more demanding of HR and open information flows to enable more direct interactions. Ellyn is walking the walk: Accenture announced a 2025 goal of a gender-balanced workforce, and she regularly reports to the company’s compensation committee about progress.
Another best practice: Establish a dotted-line relationship for the CHRO to report to the compensation committee chair. In my former role as a CHRO, I had the chairperson preview the presentation and express any concerns that could come up at the meeting before I presented it to the board.
While the practice of applying talent oversight to board-level strategy is still evolving, it’s already translating into deeper partnerships between CHROs and board committees, making HR leaders more critical than ever to mitigating risk and enhancing the competitive capability of today’s corporations.
Article originally feautred in HR Executive. Click here to view original article.