Some boards do encourage their members to visit company facilities and talk to employees. Although this is certainly a step in the right direction, it is not a good substitute for rigorous analytic information. Nor is it a good substitute for having the board review an organization’s succession plans and assess the quality of its management talent. One way boards can accomplish the latter is by asking managers to make presentations to the board; another is to have managers participate in board meetings.
In short, most corporate boards simply do not have the expertise or information they need to set a strategic direction for recruiting, developing, and assessing their company’s talent.
Inadequate HR Departments
In any organization that believes human capital is its most important asset, it follows logically that the HR department should be its most important staff group. This means that HR should contain some of the top talent in the company, along with the best information technology resources, and HR should be a valued expert resource when it comes to strategy development, change management, organization design, and talent management.
The HR function should be staffed with individuals who understand the business — and who know the intricacies of human capital strategy and management systems. The department shouldn’t be staffed only with individuals who are planning on a career in HR. To be sure, some professionals will devote their careers to human resources, and they should have advanced degrees and in-depth expertise; however, the HR department should also be seen as an important career stepping-stone for anyone who aspires to a senior management position — just as experience in operations and finance are seen as critical in organizations that treat financial capital as their most important asset.
HR department leaders need to be involved in business strategy discussions. Sometimes this requirement is expressed as HR’s need to be at the table when key business strategy decisions are made, but a seat at the strategy table is not enough. If human capital really is an organization’s most important asset, human resources should “set the table” for strategy discussions by framing the issues in terms of the current condition of the organization’s human capital and what talent is available in the market. This can illuminate strategic opportunities that might not otherwise be seen, and can make it clear when strategies are not feasible.
There is a great deal of evidence to suggest that the HR departments in most major corporations are far less involved in strategy than they should be. With a few exceptions, HR departments get neither the talent, nor the resources, nor the access to the knowledge they need to be an expert resource on strategy, change management, organization design, and talent management. Even the best HR departments rarely reach this standard.
The best people coming out of business schools typically do not choose careers in HR. The field pays lower salaries and is not seen as a great starting point for the career of any would-be senior executive (except, of course, for HR executives). As a result, human resources is not a preferred concentration in most MBA programs. Almost none of today’s top executives have ever worked in an HR department. (A couple of exceptions are Anne Mulcahy at Xerox and John Hofmeister at Shell Oil.)
In most organizations, the HR function itself is staffed with competent professionals, but few have had middle or senior management jobs outside HR. As a result, they don’t have the experience that helps them think of their work in the context of the larger business and its priorities. This in turn means that they often have difficulty providing the kind of strategic direction and advice that is needed. PepsiCo, General Electric, and IBM are often cited as leaders in the deployment of HR, but even these companies do not systematically rotate their top management talent into the HR department. (They do, however, recruit top talent into the HR department.)