Why an HR director is make or break

Does the HR director deserve to be a member of the executive team and a trusted advisor to the chief executive officer?

On the face of it this seems a trite question. Most HR Directors will say "yes”, and argue their case on the financial and strategic importance of people for an organisation's success. The case that is frequently asserted is based on facts such as:

– Approximately 75-80 per cent of the value of an organisation resides in intangible assets (human capital and everything else that relies on employees – brand, IP, culture etc).

– The costs associated with replacing a contributing employee range between 0.5 and 1.5 times annual salary depending on level and complexity of the role and that this can account for millions of dollars in savings over the course of a year, and finally

– As Australian organisations rely more on knowledge and service members, a firm's primary source of high performance and competitive advantage rests in these people, their effectiveness and commitment.

The espoused response from many CEOs is "people are our most important asset” and it would be difficult to find a CEO who would say publically that their HR director was not a strategic partner, and their opinion not valued. In fact, CEOs openly recognise the importance of a key element of HR – talent management, with talent being rated as the second most critical challenge faced by CEOs – following growth.

Despite all this, many HR directors are still peripheral to the key decision making forums in their organisations; and in the current economic context many HR initiatives, such as leadership development, are the first to be cut back in cost reduction drives.

So why is there this disconnect between espoused priorities and reality?

There are at least two primary factors that explain these circumstances. One of the main reasons is that the link between HR contributions and firm performance and sustainability are not clearly established. A second consideration relates to the prior experiences of both CEOs and HR directors. On the one hand HR directors who have had prior line, profit centre or cross functional experience are rare. On the other hand, most CEOs and board directors come from finance, legal, operations management, marketing or engineering backgrounds without any significant exposure to HR.

Yet it is recognised increasingly that organisational performance and renewal issues are multi or inter disciplinary and deeply systemic in nature. These developments require a more holistic approach to problem solving and decision making which in turn requires better integration between a CEO and his or her executive team: the requirement for strong collective management and leadership.

So what might be some steps that would advance this cause? There are a series of actions HR directors could take to promote themselves to their CEO.

These include:

– Show an interest in and appreciation of their work – get to know their values, interests and strengths

– Ensure your advice or involvement is being sought before rushing in with answers – have a point of view ready, but wait until the CEO indicates readiness to hear it

– Be willing to ask for help or feedback

That's one side of the coin.

From the CEO's perspective there are a number of things that can be done to help realise the value that an effective HR director can bring to the table:

– Ensure you hire and grow an HR director who is capable of developing an intimate understanding of your strategy, business model and performance drivers. A strategic HR practitioner will be able to link business issues with the implications for people. Don't hire an administrator if you want an advisor and top team contributor!

– Allocate a dedicated block of time (30 to 60 minutes) to spend with your HR director each week and listen to what they have to say. This not only allows you to stay connected with your direct report but also to understand, via them, the main issues facing your workforce. It also provides a forum to assess the capabilities of the individual and help develop them as required. Test yourselves on the assumptions that you each have about how people are most effective.

– Insist on having HR create a scorecard to be held accountable against – not only to you, but also to the board.

– Create a platform at board meetings for them to undertake a strategic talent review and share performance against key metrics at least once a quarter. Since talent is such a critical resource, the board should be aware not only of the pipeline, but also how you are developing and retaining this talent.

In sum, an organisation's workforce can be not only a source of high performance, but also a source of competitive advantage. To achieve these outcomes there needs to be a true partnership between a CEO and his or her HR director and subsequently the executive team and the board. This article has identified some stepping stones. Ideas and suggestions are so often the easy step. What is really challenging and required is serious commitment to execution.

Dr Roger Collins is chairman of the Octant Foundation Steering Committee Established by the Australian Institute of Management NSW & ACT. The Octant Foundation is a not-for-profit human capital development organisation focused on developing senior leaders.