‘The biggest value is going to come from people’: It’s time to give HR an executive voice

Research shows that organisations are severely lacking HR representation in the decision-making process. However, more are beginning to realise the potential it can bring.

According to The value of people expertise on corporate boards report by CIPD, in the UK, 99 per cent of companies have a chief financial officer or a finance director among their board members, but just 2 per cent have an HR director.

This figure is even worse in Australia, with reports claiming that less than 0.5 per cent of all ASX 300 directors have a background in HR.

HR is meant to serve as a voice for the people, and without representation, culture can take a back seat.

One chair member said in the CIPD report: “Finance used to be the limiting factor for strategy; now the limiting factor is people. It is no good coming up with a great strategy on paper if you can’t then hire the people to deliver it. I am really seeing that issue in the boards I sit on.”

Organisations need to understand the merit that HR can bring into the decision-making process. According to CIPD, the top challenges faced by businesses at the moment relate to talent attraction and retention, diversity, equity, and inclusion (DEI), hybrid working, skills gaps, and mental health.

All of these issues fall under the expertise of the HR department. So why are organisations not giving these professionals a voice and listening to the needs of the people?

Some are realising the potential, with one investor in the CIPD report saying: “I’ve only recently grasped the idea that the workforce is the company. The workforce is your asset – intellectual property, skills and capabilities. If moving in and out over time, it’s a key indicator.”

With attitudes slowly changing, the role of the HR director, or chief HR officer (CHRO), could see increased focus. With ongoing talent and skills shortages plaguing just about everyone at the moment, there has never been a better time to invest in the people.

“Six years ago, we probably had about five investor calls. Last year, we did 27 calls with investors wanting to have discussions about people – what we’re doing with talent, the diversity piece … more and more of the investors want to see you linking rewards, long and short term, to ESG (environmental, social, and corporate governance),” explained a chief people officer (CPO).

Another CPO agreed with these sentiments: “I can’t believe it’s taken this long, but I think people have realised that, in terms of sustainable wealth creation, which is what boards are trying to achieve, the biggest value is going to come from people.”

“You can have a great product. You can have some great tech. All those things are important, but what’s going to make the biggest difference to realising wealth are the people.”

CIPD listed seven benefits of including HR in the decision-making process:

1. Understanding remuneration
2. Succession planning
3. Understanding people data
4. Expertise in diversity, equity, and inclusion
5. Expertise in organisational change
6. Expertise in team dynamics
7. General leadership and strategic accountability

With this in mind, it may be time for leaders to shake up the traditional executive structure and give the people a seat at the table. A CHRO or CPO can help to achieve this and help to enrich the representation of employees, which could increase retention, attraction, DEI, and wellbeing.