Accelerating Outcomes With Human Capital Expertise on the Board

In today's dynamic corporate landscape where transformation is a growth driver, an aligned human capital strategy is a business differentiator, and shareholders are demanding greater accountability, the presence of a chief human resources officer (CHRO) on the board is no longer a mere suggestion—it's a strategic imperative. Below are four ways an expert in human capital can accelerate business outcomes.

Transformation: Driving Value

Conversations about transformation are abundant in the boardroom, yet the vast majority of acquisitions fail, and there is little data to prove the success of other large-scale initiatives.  The background of CHROs allows them to contribute unique perspectives about risks, opportunities, talent trends, and culture when included in the boardroom. Adding this expertise will ensure that the board brings a robust view of transformation efforts to support management in maximizing value.

For instance, during the merger and acquisition process, a CHRO board member can provide strategic insights on employee adaptation to the ownership changes. After the board helps management uncover internal risks that could erode deal value, management can respond by crafting a risk mitigation plan to prioritize talent retention that results in value preservation.

Strategy: People Make It Happen

Strategy and governance are inextricably linked to the people responsible for execution and risk management. When the board deliberates on decisions, factors such as leadership, talent alignment, and the ability to execute come to the forefront. CHRO board members are uniquely positioned to elevate these topics to ensure that human capital is part of every board discussion.

For example, if the board is engaged in a dialogue about integrating cutting-edge technologies into work processes, the conversation can extend beyond financial gains to also encompass the impact on employee experience, with valuable input from the CHRO board member. After weighing the employee benefits, such as streamlining disparate platforms and improving retention, the board can make an informed decision on priorities to best drive business outcomes.

Culture: The Cornerstone of Business Success

Discussions about a company’s strategy should intersect with culture, which is the bedrock for success. In the 2017 NACD Report of the Blue Ribbon Commission on Culture as a Corporate Asset, the commissioners agreed that organizational cultures and the factors that influence them are complex systems. CHRO board members, drawing from their distinctive expertise, enhance transparency in the boardroom by asking thought-provoking questions to uncover strengths in culture and any potential risks.

For instance, some companies have faced adverse consequences due to misaligned pay practices, inadequate safety protocols, data breaches, layoffs, and other risks. An experienced CHRO on the board proactively helps management establish proper governance practices to avoid these issues, and when challenges do arise, they can ensure that in-depth discussions occur and that improvements are actioned. Having a seasoned CHRO on the board not only helps mitigate reputational risks and enriches discussions, but also helps foster forward thinking about organizational culture to drive high performance. 

Talent: A Strategic Game

Ensuring that the right talent serves in key roles is both a board and management concern. In the NACD 2024 Board Trends and Priorities Survey, 65 percent of respondents indicated that it was “important” or “very important” that their boards improve oversight of human capital. Moreover, in the 2024 Deloitte Global Frontier survey report, Time to Rethink Talent in the Boardroom, many believe their boards need to spend more time on human capital issues with only 36 percent of respondents noting that their conversations regarding the talent agenda during meetings are sufficient. Just as organizations benefit from financial experts on the board, including a member who is immersed in human capital provides valuable insights for actionable impact. A key contribution of the board is helping management understand macro trends such as generative artificial intelligence, automation, and return-to-office dynamics, which thereby prompts tangible actions related to talent, skill requirements, and developing the mind-set required for future success. The CHRO board member enhances these critical conversations that impact a company’s future direction.

In an era in which there is fierce competition for talent and the talent agenda is the number one priority for investors, according to EY’s What Directors Need to Know About the 2024 Proxy Season, the CHRO's voice on the board is a strategic imperative. Their human capital expertise aligns to the core objectives of an organization and its stakeholders and supports shareholder value creation. Without a robust corporate culture and a strong foundation of engaged employees, even the most brilliant business strategies will falter. An immeasurable benefit also lies in reaffirming the company’s commitment to being people centric. Let us embrace the growth, innovation, and excellence that CHROs bring by recruiting them into the boardroom.  

Shelie Gustafson, NACD.DC, is the chief people officer at Jacobs Solutions.