In the fall of 2017, IBM CEO Ginni Rometty gathered 100 CEOs from 17 industries representing $2 trillion in revenues to examine the big issues they were facing. Alan Murray, Time Inc.’s chief content officer and president of Fortune, attended the session and reported that, as expected, much of the discussion focused on technology-related issues. But, the significant “ah-ha” Murray reported was that technology was not the major problem identified; rather, “…creating a culture that can embrace and adapt to technological change. Culture is the No. 1 impediment.”
The National Association of Corporate Directors (NACD) called on boards to elevate the dialogue on corporate culture in their October 4, 2017 “Report of the NACD Blue Ribbon Commission on Culture as a Corporate Asset.” The report underscores the rationale: organizations with strong positive cultures outperform peer companies and those without one exacerbate their overall risk profile.
If culture is so critical to success, why is it so rare to find a talent and culture voice on the Board? An organization wouldn’t think to leave out a Finance or Marketing expert. Many qualified, accomplished board members take a “common sense” view of talent & culture – “we know it when we see it”, but that’s an insufficient commitment in a competitive environment where everyone agrees on its worth. Too few companies take a rational, purposeful approach to understanding and building their culture. The NACD report also exposes the lack of board-level attention on culture: “… less than half of directors reported that their boards assess the alignment between the company’s purpose and values and its strategy, and only 50 percent say they understand the ‘buzz at the bottom’—the collective behaviors, norms, and values at the front lines of their organizations, among the rank-and-file employees.”
Another recent NACD report, “2017-2018 Public Company Governance Survey,” concludes that boards lack visibility into culture. “Eighty-seven percent of directors said they had a good understanding of their companies’ tone at the top, but only 35% of directors said they had a good understanding of ‘the mood in the middle,’ and just 18% of them indicated they had a good grasp of the health of the culture at lower levels of the organization.” With the recognition that the culture of an organization is a primary driver of its success, Boards need shift more of their effort to ensuring a constructive culture is being built and lead throughout an organization.
If workforce-related concerns are paramount to business success, then why are CHROs so scarcely represented on corporate boards? It’s ironic that HR executives, the primary custodians and drivers culture are not in high demand on corporate boards. This is at a time when investors are increasingly questioning CEOs about culture due to its recognized impact on the bottom line and the scandal-driven risks related to toxic cultures create. Both these points are shared in the CEB/Gartner article, “Director Survey: Boards Lack Visibility into Culture.”
As if all these data points aren’t enough reason for HR to gain a board seat, Harvard Business Review’s “What Makes Great Boards Great” article outlines another reason HR should be valued as board member. The author explains, “The key [to good boards] isn’t structural, it’s social… What distinguishes exemplary boards is that they are robust, effective social systems.” It’s perplexing that the professionals charged with helping managers create high-performing teams are not in demand to apply those same skills and talents as part of the governing team called the Board of Directors.
In fact, mention of the HR function is absent from the Financial Times’ description of the composition of a solid board of directors: “… a board that consists of directors with a diverse set of functional expertise (marketing, engineering, finance, etc.), industry experiences, educational qualifications, ethnic and gender mix might be better equipped to deal with a wide range of issues facing the firm and provide executives with advice and consultation form multiple perspectives.”
Culture is still too-often dismissed as a soft issue and therefore, HR executives not considered critical members of corporate boards. Helene Gayle, CEO of the McKinsey Social Initiative and director of the Coca-Cola Co. and Colgate-Palmolive, addresses that issue head-on: “The fact is, it’s [culture] concrete and has real business impacts, so as directors we need to bring more clarity and rigor to our discussion with management about culture. It’s time to move beyond an ad hoc or compliance-focused approach to one that is much more proactive, and based on the notion that culture is core competitive asset.”
HR leaders are the logical professionals to guide board decisions at the intersection of business strategy, culture and talent. While an increasing number of HR executives joining large corporations’ boards or getting closer to a seat at the table by engaging in professional director’s training (such as with the National Association of Corporate Directors), they acknowledge that CHROs are not typical on Fortune 1000 boards.
Is there an HR leader on your company’s board? If not, it’s time to put this critical function at the board table.