Effective governance a “massive HR challenge”, says leading academic
Katie Jacobs, February 07, 2017
Corporate failures and changing leadership models mean HRDs need to step up in board governance
Effective board governance presents a “massive challenge” that HR directors need to step up to and address, according to Andrew Kakabadse, professor of governance and leadership at Henley Business School.
Kakabadse, who has extensively researched board governance globally, made the comments at a breakfast event held by the HR Guild, exclusively attended by HR magazine. He said that leadership of the board is becoming more important, with the role of chair eclipsing that of the CEO, which he said was “morphing into the COO role”, becoming more transactional and detail-focused.
This means board chairmen and directors must become accustomed to being challenged and getting feedback, he said, adding that HR has a big role to play in helping them adjust to this.
“HR is the number one function,” Kakabadse said. “But I’m not finding that many HRDs are trusted by CEOs and chairmen as business brains.”
He added that too many people are appointed to boards on competency-based frameworks, whereas they should be appointed on capabilities. “Capabilities are a contextual concern,” he explained. “How capable are you of making a difference here? What do we need on this board right now?
“I’m not seeing a sufficient capability way of thinking in HR,” he added. “Until HR has the business language of the reality of governance and translated that into capabilities we will have HR on the back foot.”
In Kakabadse’s research of more than 19,000 organisations across 34 countries he found board stewardship was “abysmally low”, whereas “protocol and tick box [was] at its maximum”. This is what leads to corporate collapse and scandals, he said, explaining that the board may be paralysed and unwilling to speak out, even though they know something isn’t right within the organisation.
“Every corporate collapse I’ve seen, every M&A deal that’s gone wrong, every bribery case – the board knew,” he said, adding that while board members and senior executives often know what’s going on, more than 66% of his sample “would not dare raise that critical issue”.
“It’s not bad strategy or bad governance that’s responsible for some of our ailments today,” he added. “It’s the fact there’s no stewardship. Quite deliberately board members and executives are allowing circumstances to continue because of the discomfort of raising an uncomfortable issue. We are in desperate need of stewardship.”
Annette Andrews, HR director at Lloyds Bank, said values and behaviours have to be central in fixing governance issues in organisations. “It relates to the values and behaviours of the people you are appointing,” she said. “You want individuals who are brave, courageous and able to look at things differently.
“HR has to understand the business, but the other role for the HRD is to be the challenger,” she added. “It’s more than being a coach. It’s asking: ‘how does this fit with our values and mission?’ That’s something we need to look at in how we educate and develop HR professionals, because I think we’ve lost a bit of that.”
Kakabadse agreed that mission-led organisations – where the values are stronger than the vision of a “hero CEO” – tend to have a stronger sense of stewardship in their governance. However, he added that only 18% of those corporations he has studied had a strong sense of mission. “The rest were driven by something else,” he said. “Mission was sacrificed and so was stewardship.”
With corporate failings continuing to hit the headlines Kakabadse warned that “governance will not go away”. “Governance more than leadership will be the order of the day,” he said. “Increased complexity means governance is fundamental.”