Positioning the HR function as a value-creating function
How can a CHRO get across to the board that HR is a value-creating function rather than a cost centre?
A new article from the Harvard Law School Forum on Corporate Governance demonstrates that the pivotal factor is the impact that the CHRO has on the CEO and in the boardroom:
‘Sophisticated and business-savvy CHROs who are highly effective in both areas are “next generation, high-impact CHROs”—fully embedded in the C-Suite and the boardroom and positioned to shape enterprise strategy, advise on governance risks, and guide long-term talent and succession planning.
‘By contrast, CHROs with limited engagement on one or both axes remain constrained in their influence, whether isolated from board deliberations or underleveraged by the CEO.’
It’s interesting that this is from the point of view of governance, rather than of talent – where the CHRO’s voice needs to be even more articulate and influential. Most boards understand risk, while many don’t grasp how to release the potential of their talent.
There is an intellectual understanding that engagement drives productivity which drives profitability. However, granting budget to invest in interventions that leverage that potential, e.g. leadership development, culture or career paths can be frustratingly tough.
Ask for budget to invest in the HR function itself and that’s a whole other challenge.
Increase the cost of a central, support function? It’s counter-intuitive to boards. It demands a strong business case.
That’s the CHRO’s pivotal challenge – repositioning the function as a value creator. That can only be done by building these crucial top-level relationships so that debates about what drives performance can be both open and robust. That’s what opens the door to enabling the HR function to fulfil its potential and win investment to drive business value.
Contact us if you’d like to discuss how this is playing out for you.
