Board-level HR

Ryan Ahern, director of L&D, IoD, says:

Enlightened shareholder value

A failure of governance procedures caused the recent banking crisis, which led to revisions to the UK Corporate Governance Code in 2010. Yet legislation, regulation and codes of best practice only go so far in shaping behaviour inside the boardroom.

According to UK company law, the directors have a legal duty to promote the success of their organisation in the interests of its shareholders. However, company law also requires directors to take account of the interests of other stakeholders – known as the concept of enlightened shareholder value. If directors are to create and sustain successful companies, they also need to consider the effect of corporate decision making on employees, local communities, suppliers, the environment and long-term reputation. In short, they must adopt a much wider perspective than a short-term focus on the company share price or profits.

Monitoring value

It’s the role of the board to define a vision of what the organisation stands for and what this implies for company behaviour. The board should monitor the extent to which its values are embedded throughout the company on an ongoing basis, and hold management to account for their success in achieving the right corporate culture. There’s a need to ensure company managers are held accountable for their stewardship.

Avoiding group think board diversity

Boards are typically seen as white, male and middle class. However, there is increasing recognition that such a boardroom is not ideal in terms of corporate effectiveness or wider social legitimacy. One of the key purposes of a board is to introduce a range of perspectives into decision-making. However, one of the greatest challenges that all members face is applying critical and independent thought to the challenges they face. They must avoid the perils and limitations of ‘group think’, in which homogeneity or a close bond between members can lead to a lack of a proper appraisal of an initiative or its alternatives.

One way to guard against it is to ensure there is sufficient diversity among members, for example in terms of gender, ages or backgrounds. The appointment of a non-executive director from an entirely different background is one suggestion to help address this issue, with any shortfall in a candidate’s experience plugged through proper training.

About the Institute of Directors

The IoD offers director-focused training programmes in the UK, covering the role of the director, finance, strategy and marketing, and leadership. To test your levels of knowledge and development needs as a director, go to: www.iod.com/knowledge

Craig Errington chief executive, Wesleyan, says:

CEO lens of HR

Too often, HR departments find themselves acting as service delivery teams rather than as thought leaders within the business. HR must be involved in designing and leading the strategic direction, not simply waiting to follow it.

Shaping HR strategy at Wesleyan Assurance Society

People development and the desire to be an employer of choice is an integral part of our business strategy. In 2005, we had a staff engagement index of 54%. Now, at 81%, it exceeds the industry average. Every year we carry out an employee opinion survey (EoS) which highlights the areas that need improvement. For example, feedback has shown that staff wanted more transparency on how to progress within the company. We then ask each department to set out an action plan detailing how it aims to make positive changes and by when.

By encouraging our HR department to take on a strategic role, we have saved millions of pounds through significantly reducing staff turnover, recruiting some of the best talent in the industry and vastly improving staff engagement. HR plays an integral role in our business. The financial services industry is undergoing a major regulatory change known as the Retail DistributionReview (RDR), which requires all financial advisers to have a diploma in financial planning. We’ve taken each of our 360 advisers through a development programme and supported them as they took a series of exams to gain the qualification.

A primary aim was to avoid a high number of re-sits, as these would have increased the amount of time the sales force were off the road and hit the bottom line of the business. Using a blended approach to suit different learning preferences, we achieved first-time pass rates that were significantly higher than the industry average.

Through the recruitment and development of people, HR holds the key to translating our high-level strategies into reality. In recent years, it has re-designed our approach to managing performance, championed our continuous improvement initiative, overseen our staff forum and identified areas for attention using our employee opinion surveys.

Career progression framework

Our HR team introduced a career progression framework supported by a development programme. Every member of head office has a clear plan of the training and development they require for their job. They also have a transparent view of what they need to do to move to the next level or to another department. Within the first year of implementation there was an increase of 14% in the number of staff who believe Wesleyan offers opportunities for personal development.

Internal communication

I personally sat with every team in head office in 2012. I enjoyed a one-hour session in which we discussed what’s important to them and answered their questions about the business. Teams are also invited to meet with other members of the executive team so that there are clear and open lines of communication. I also lead monthly managers’ meetings, covering key aspects of business performance such as sales performance, operating profit and key project updates. Managers are then required to cascade this information to their teams so that every employee is updated on how the business is doing.

Female representation at board level

To our shame, we had never appointed a female member of the board in 170 years. Although some will say this was because of a lack of female applicants with the appropriate experience, I don’t subscribe to this theory. We have always had an excellent, diverse pool of talent within the business – we just needed to identify and nurture it. We’re now making real progress. Last year we appointed Samantha Porter to the board as marketing director, and she has now extended that role to include sales. I’m pleased to say that Sam received a highly commended award at the IoD awards in 2012 in the category of Young Director of the Year, having won the West Midlands’ title.

Liz McKenzie has also joined the executive team as director of HR and corporate planning. We have many more excellent women working their way through to senior management roles. We’re also well on the way to having all of our executive directors at Chartered status with the support of the IoD.

Aspiring to the board? CEO tips

1. Strategic evidence & earned respect
When recruiting a new member of the executive team, I need to see a proven record of successful implementation of their strategic ideas. It’s no good knowing what to do if you can’t make it happen. I want to see evidence of their ability to motivate and manage the people around them – someone who has earned respect rather than demanded it. I like people who are never happy with the way things are because they believe they can always be improved.

2. Confidence in challenging
A good director should feel confident in challenging a member of the board – including the CEO and chairman – on anything. The key is to challenge effectively and accept that sometimes others will have a different view that is equally valid.

3. Lead the way
I expect my directors to lead the way by respecting the people they have around them and seeking their ideas and thoughts on ways to improve the business. A director is no different from any other employee in the business – we all have a job to do and we should respect that everyone adds value if they do that job well.

4. Chartered Director status
The excellent training I received from the IoD as I worked towards Chartered Director status helped me to stay focused on what I wanted to deliver. The IoD Director programmes help you understand the broader role and legal responsibilities of a company director.