Vice Chair, Australasia
Leadership
Why Australian Boards Need Members with HR Expertise
More Australian companies are bringing HR expertise into their boardroom. Here are three good reasons to make your next appointment a former CHRO.
August 01, 2024
3 Reasons to Give HR a Seat at the Boardroom Table
Talent is essential to the most successful companies' growth strategies. So it would make sense to have HR’s expertise and diversity of perspective at the boardroom table. Yet strategic HR experience is still a rare commodity at a corporate governance level. Fewer than one in ten S&P 500 boards includes a current or former CHRO.
In Australia, the proportion is likely even lower, according to Governance Australia’s Board Diversity index. Just 1% of board directors in 2024 had an HR or change management background, compared with the 40% coming from accounting, banking, or financial services fields.
“The tone comes from the top,” says Alexandra Goodfellow, Vice Chair Korn Ferry Australasia, who has been told that one reason HR leaders may not make the consideration set is their apparent lack of experience running a P&L sheet.
“If someone has run an HR function in a large and complex organisation that has been through a major transition, I would regard their capabilities as equivalent to running a P&L,” she counters.
Goodfellow believes non-executive directors with a background in HR can bring people-led perspectives to many of the key issues facing Australian organisations (and their boards) today.
“Their executive experience in HR brings strength to the board table across strategic organisational goals—including leadership development, pay transparency, and succession planning,” she says.
The Tenure Challenge
There is no doubt the composition of boards in Australia and New Zealand is changing. There has been positive progress in rebalancing gender diversity, with women holding 36% of board positions in 2024—up from 35% the previous year.
But fixed terms of service for board directors can make it harder to drive significant changes to board composition, says Goodfellow. A third of non-executive directors in Australia’s 300 largest publicly listed companies have held their position for more than 20 years.
“In the main, boards are embracing change and taking on a more contemporary lens. But the Chair of a nomination and remuneration committee is typically set for three-year terms. If they’re doing a decent job, they’ll be voted back in.”
In other words, it’s not as simple as deciding to add more HR capability to the Board. It takes a conscious decision to re-think the skills required when the next vacancy is on the horizon.
Here are three good reasons to take that step when the opportunity arises.
1 HR Leaders Understand Talent Risks
Board reports combine financial and non-financial metrics, with the latter covering diverse risks across issues like cyber, sustainability, and, of course, people.
But people-based compliance is not always clear-cut. Codes of conduct or employee workload practices can be open to interpretation. And they can make or break an organisation’s reputation, as well as the reputation of board members.
It’s no wonder diverse workforce challenges, including leadership pipeline, AI upskilling, and new regulatory requirements, have become a focus for executive leaders and board committees.
Goodfellow says non-executive directors with HR expertise can strengthen a board’s risk and compliance oversight across Fair Work Act regulatory requirements including unlawful workplace discrimination, workplace sexual harassment, closing the gender pay gap, and the recent right to disconnect clause.
It's important to have someone on that board who can ask the right questions, such as:
- Growth strategy—how do we build future capability across the organisation, including AI and cyber risks?
- Change management—are we ready for future disruption?
- Succession planning—who’s in our leadership pipeline?
- Psychosocial safety—how are we reporting on wellbeing?
“Board members need to have the courage to ask difficult questions. If something doesn’t feel or smell right, they should ask and keep asking until they are satisfied,” says Goodfellow.
2 HR Leaders Bring a Human Perspective to Strategic Moves
The board is responsible for governance and strategy, but the leadership team is ultimately accountable for execution. Having a talent lens across strategic reporting and decision-making can help them avoid some potholes in their strategic roadmap.
“Companies with HR expertise on the board can have more enlightened conversations about culture,” says Goodfellow. “Implementing culture change takes more than putting values up on a board. A board member may be able to mentor a strategic HR leader on these issues— and that leader will be the eyes and ears of what is actually happening in the workplace.”
The starting point for board-ready CHROs is often the nomination and remuneration committee. Strategic HR leaders can play a crucial and active role in investor relations, such as mitigating the risk of remuneration protest votes, or pushback from shareholders and proxy advisors on long-term and short-term incentives.
Experienced HR strategists can also play a critical role in the success of a merger or acquisition by knowing how to ensure people feel they are a priority in the blending of two different cultures. They are also often involved in CEO succession planning, and can take responsibility for onboarding and guiding the new CEO.
3 HR Leaders Often Add Diversity
The CHRO is the one C-Suite role more likely to be held by a woman. Bringing a former CHRO onto the board could fast-track progress towards gender balance—as well as a greater diversity of skills and backgrounds.
Our survey of board members found overwhelming agreement on the benefits of diversity and inclusion for the board.
A more diverse board may mean drawing on a broader pool of talent—beyond former CEOs and CFOs. It’s important to take a data-based view of the gaps in your current mix. Goodfellow says this is where Korn Ferry’s holistic focus on human capital, across every aspect of the organization, can add value.
Business Transformation
Build the mindset, skills, structure and culture to transform your organization
People-First Governance
It makes sense to bring on a board director who can draw on deep expertise as a strategic partner in building future business capability.
“One of our clients told me that when he was CEO, he believed the most crucial element of any business was ‘90% around people’,” says Goodfellow. “Now that he is a Chair, he says it’s ‘100% about people’.”
Yet she’s still often told the head of HR does not even sit on the leadership team. If you want to align your business strategy with your people and gain greater understanding and oversight of the true talent risks at the heart of your strategy, it may be time to look towards your CHRO as a future board member.
Learn more about how Korn Ferry’s Board and CEO services can help you shape the future of your board.
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