What boards really want

Kirsten Patterson (KP), Chief Executive of the Institute of Directors, shares her thoughts on how HR professionals can ‘step up their influence’. She believes when it comes to governance, a crucial part of that is understanding what boards are concerned about today.

I’d like to share some of the critical issues that Institute of Directors (IoD) members have told us keep them awake at night.

Not all of these are directly related back to areas in which HR has traditionally had a large responsibility, but with the expanding scope of people and culture teams, it is to your advantage to know what is being said at the top.

Increasingly, expectations on directors – for example, to understand their organisation’s social licence to operate, to consider a broader range of stakeholders, and to develop effective climate strategies –have implications for HR professionals. So if you want to step up your influence, you need to anticipate new questions, new responsibilities and new possibilities. And, perhaps, be prepared to take the lead.

“If you want to step up your influence, you need to anticipate new questions, new responsibilities and new possibilities."

Insights From Our Director Sentiment Survey

The IoD’s annual Director Sentiment Survey takes the pulse of New Zealand’s governance community to identify the issues and challenges that matter most to our members. It provides highlevel views sourced from around 1,000 directors across a range of sectors. These people represent both commercial and not-forprofit boards.

In our 2022 survey, “labour quality and capability” was – hands down – the single biggest factor cited as a potential risk to the New Zealand economy. Directors were concerned that they would not be able to find, or to retain, the people they needed to keep their organisations running smoothly.

The third most cited factor was “immigration policy”, which directors perceived as having a huge influence on their ability to secure “labour quality and capability”. So boards have talent and people slap bang in their sights, and 87 per cent of directors are reporting their boards are having strategic discussions on talent.

So what might people and culture teams offer to help boards navigate a tight labour market?

Research has shown that values and beliefs increasingly influence how and where people shop, where they invest, and who they work for. Above all, employees want to feel like they are contributing to something meaningful.

Organisations with a clear purpose are more likely to attract and retain scarce talent and capability. You can help by providing a sound business case for the Board to clarify your organisational purpose (if they haven’t already). Then people and culture teams have the ability to affect how that purpose is shared and understood throughout the organisation.

“Above all, employees want to feel like they are contributing to something meaningful."

Determining purpose is the first ‘pillar’ of the IoD’s Four Pillars of Governance Best Practice. If your eyes and ears on the ground suggest that this purpose is not well understood by management and staff, or it is understood differently in different teams, you need to share this with the Board.

Check Your Communication Skills

An aspect of the contemporary HR environment that is increasingly important is communication skills. Since we are talking about “stepping up your influence” in a governance context, that means communicating upwards. I’d like to share an observation I have from my time serving on, and reporting to, boards.

“Don’t assume your board is full of HR experts."

Don’t assume your board is full of HR experts. Directors bring expertise to a board but they are also generalists who have to make decisions across many areas. That means you need to share data and ideas in a way that a non-HR expert can understand. Make sure you tell a story that demonstrates the relevance of the information you share.

This is increasingly relevant around climate action, a topic on which boards are beginning to focus significant attention and on which they are interested in the ideas and feelings of staff. In the 2022 Director Sentiment Survey , when we asked board members to choose up to three future trends that they were currently paying attention to, the top two factors were talent and climate change.

People and culture has a great deal of influence when it comes to how an organisation approaches the climate challenge. It is worth reflecting on what your team is doing to lead climate action in your organisation.

A first step may simply be establishing the role of HR in climate leadership. There may also be scope to consider how remuneration and incentivisation can assist the organisation in reaching climate goals, or if you need to bring on new people with different skills to deliver the Board’s climate priorities.

A quick note on climate change: the IoD’s Chapter Zero New Zealand is the local branch of a global initiative to help directors make good climate governance decisions. While the information – available free at chapterzero. nz – is targeted at directors, it will be relevant and of interest to HR professionals. It is worth taking a look.

Shared Value

Every year the IoD identifies five issues it considers should be top of directors’ minds.

Our ‘top five’ do not aim to be comprehensive but, rather, are intended to help directors add value to their organisations by thinking over the horizon, anticipating developments and supporting management to be responsive to the changing operating environment.

This list gives directors and their boards a sense of where potential opportunities and future strategic challenges may arise. Considering these issues will help to minimise surprises, support good decision-making and help boards and management prepare for the future (in ways that can be anticipated now).

One of our top five for 2023 is ‘shared value’, the idea of shifting our thinking from organisations to people; from profit to shared value; from ‘me’ to ‘we’.

Shared value is a concept that encompasses many areas the HR professionals will be aware of. It includes pay and conditions, with a focus on attracting and retaining good staff. It includes health, safety and wellbeing. It includes sustainability and associated issues around gender equity, diversity and inclusion.

Boards will likely discuss a couple of things in the context of shared value.

First, they will want to ascertain how the organisation’s strategy impacts on stakeholders, including management and staff. Again, does the business strategy support the HR team to retain and attract staff, for example? Is the overall strategy up to date, by which I mean aligned with the other strategic initiatives you have introduced as a board? The HR team’s role in this is to ensure that the Board has enough information to make good decisions. It is about communication, again.

A second question boards are increasingly asking is, are there gaps in our remuneration –gender and ethnicity pay gaps have been hot governance topics over the past few years – that may undermine our ability to attract and retain staff?

Boards need to ask this, and HR teams need to answer, to ensure risks and opportunities in this area are managed effectively.

An important recommendation from our Top Five Issues for Directors in 2023 was this: “Prepare a new people strategy that acknowledges the nature of the post-pandemic environment and more fully recognises employee contributions; makes an investment in talent; ensures diversity, equity and inclusion”.

Keeping the lights on

Our 2023 Director Sentiment Survey is currently being analysed, but one early trend we are observing is boards are feeling the economic squeeze.

The focus on talent remains acute, and long-term goals around climate change retain their potency, but for many directors short-term financial challenges exist that need to take immediate priority. 

So when seeking to ‘step up your influence’, remember to tie your recommendations and the stories you weave around data to financial impacts, where possible.

Directors have a duty to act in the best interests of an organisation, and there can sometimes be tension between long-term goals and short-term needs. A people and culture team that can explain the positive social and cultural aspects of a shared value approach, for example, with reference to morale and profitability is talking the language a board speaks, a language in which sustainability is both a long-term goal and a short-term business imperative. And that is worth its weight in gold. 

Kirsten Patterson, CMInstD, is a qualified lawyer and a Distinguished Fellow of the Human Resources Institute of New Zealand, Chair of the Global Network of Directors Institutes, Chair of the Brian Picot Ethical Leadership Advisory Board and previously Chair of the Wellington Homeless Women’s Trust. With extensive governance and leadership experience, she is actively involved in community initiatives.