Boards and business leaders in Australian organisations are under increased scrutiny. With Boards being responsible for setting and monitoring culture and behaviour, what is HR’s role in shaping, reinforcing and changing corporate culture?
This was the question deliberatepractice put to Michael Smith, Chairman 7-Eleven Stores, Starbucks Australia, the Lionel Samson Sadleirs Group and Pioneer Credit who was the Keynote Speaker at deliberatepractice’s HR Director Event “Focus on Culture. A Board’s Perspective: HR’s Evolving Role”.
The key messages from Michael’s presentation were:
- The systems and process of HR (engagement surveys, remuneration practices, development and succession planning) are well embedded in organisations. Most failings have some root back to culture and human behaviour, so HR needs to lead discussions within the organisation asking “why did that happen?” to really understand the root cause issues.
- Leadership is like Wi-Fi, in that you don’t have to get very far away from it for it to lose its effectiveness. A great leader without the assistance of HR will have limited success leading a group larger than 20 with much effect. This is because the signal deteriorates by the time you get to the edge of the organisation.
- The HR Director’s relationship with the CEO is the most important relationship. To be effective, part of the role is technician and the other part is coach and provider of feedback. Coaching a CEO on understanding human emotion to meet the potential of the people and achieve business outcomes is critical. The conversation should answer “How do I get the best return on our investment in people? How do I understand it? How do I appreciate what its potential is, and how do I get the best return on it?”
- HR Directors need to be an effective member of the Executive and should contribute more broadly than their subject matter expertise. This role also requires expertise in helping the executive team work best as a group and to provide feedback to executives that may not want feedback, but who need it the most.
So practically, how does HR “evolve” into improving their impact on business performance and supporting organisations deal with the increased scrutiny? Building influence – relevance, credibility, relationship and trust is one way.
First and foremost, as foundational or a “ticket to the game”, HR professionals need build their credibility and here are some very practical steps to do this:
- Understand the business that you are a leader in – learn what the business drivers are, spend time in the core of the business. Ask lots of questions. Ask what keeps key people awake at night? Understand the performance measures of the CEO and Executive team. What are the key organisational KPIs? Read the financial papers, know your competitors key strategies and how you are seeking to differentiate yourself. Read sector insights published by various consulting firms and financial organisations.
- Change your mindset from business partner, or supporting “the business” to that of being part of the business that you are a leader in. Frame everything in terms of business impacts on outcomes such as customer NPS, profit per customer, EBITDA, whatever the main metrics are.
- Deliver on promises and commitments you make, this includes executing HR projects well (scope, budget, risk and resources). You do not build credibility and trust if you miss deadlines and milestones.
Once these foundational practices are well established, HR needs to:
- Provide insights to data that leads to a conversation about what is occurring. For example a conversation about the sales performance of a team/area and link it to HR data such as engagement, turnover, unplanned absenteeism. Aim to have the type of insight that IBM have – employee engagement explains two-thirds of their client experience score. If they can increase client satisfaction by five points on account, they see an extra 20% in revenue. Look at the ER statistics – complaints, incidents and cases and look at what they mean. Are there any trends that need to be discussed and debated? Use case studies to highlight the good as well as the bad. Using actual example helps to focus the conversation and bring it to life.
- Be a confidant and trusted advisor which means that you need to be courageous in your advice and observations. Keeping confidences and providing feedback in private is key. Bring both quantitative and qualitative data to the discussion to ensure the conversation is rigorous, but don’t let is become only fact based so the key nuances become lost. Leading a crucial conversation is not easy and it requires skill that can be developed.
- Show personal leadership of the desired culture. People will look to HR for the example to follow. That means expecting a higher standard of behaviour of the HR team so that they are beyond reproach.
- Align the HR systems to the desired culture. If your board is putting an equal balance on behaviours and financial outcomes to determine executive remuneration, what supporting mechanisms will be needed to govern this? How will this be captured so it can be explained/defended?
With the increased scrutiny, HR has a huge opportunity to really stand up and take a lead role in a significant issue facing all businesses. This takes both courage and skill. It means finding opportunities to be involved in key discussions. Don’t always wait to be asked. It means not using business metrics to justify an HR initiative – find solutions to real business problems. Move from a business partner to a business leader. Seize the opportunity!
Bruce McCowan is a Director of deliberatepractice and supports organisations to achieve business outcomes through their people. With experience as an HR Director in a range of industry sectors, Bruce provides unique insights into business and HR strategy to improve organisational performance.