The skills gap on boards that is holding culture change back
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Culture is a company’s secret weapon but on boards there is a woeful lack of expertise in this area. Annie Coleman, a Senior Advisor at Audley with over 40 years' experience in transformational change, argues that to gain a competitive advantage organisations must address this skills gap.
Chanel boss Leena Nair and Roisin Currie of Greggs have something in common: they were appointed chief executive after gaining extensive experience in Human Resources.
But their promotions were not typical. Figures from global data company BoardEx show a far more common route to the top job is through finance and operational roles — and these are still overwhelmingly held by men. However, within senior HR roles in the FTSE 350 over 72% are held by women.
So, is it any wonder that there are still only 10 female CEOs in the FTSE 100? Despite culture and employee engagement being considered of great importance by over 70% of senior leaders today, and over a third admitting they haven’t got their company culture right, seemingly this has less bearing on your ability to climb the ranks.
And it begs the question. If more CEOs had experience in People and Culture, rather than just finance and operations, could this help them better tackle their company’s culture issues, and at the same time increase the number of women in CEO positions?
Culture is the foundation of a successful business and the key to sustainable competitive advantage. Consistently CEOs who prioritise culture observe better performance across their business, whether that be improved financial results, managing operational risk, attracting top talent, or achieving greater levels of employee engagement. Managed well, culture has the potential to be an organisation’s greatest asset. Not managed, monitored or measured, it risks becoming its greatest liability. And yet very few FTSE 350 companies have any expertise in this area represented on their Executive Board.
Recent research by Women on Boards and Protiviti, a global consulting firm, titled ‘Hidden Talent’, reveals a very limited range of skills and expertise among Executive Board directors across over 1,000 companies in the FTSE All-Share and AIM listings, with hardly any holding HR or People and Culture roles. Of the almost 4,800 board seats across the 585 FTSE All-Share companies analysed, 25% were held by Executive Board leaders. Not surprisingly, the most frequent executive positions to hold board seats were Chief Executive Officer (CEO), Chief Financial Officer (CFO), and the registered board Company Secretary.
Just 2% of Executive Board Directors hold positions other than CEO, CFO and Company Secretary. There is a further concentration in that small minority on COO or CTO roles, focused on operational efficiency. And again, these are predominately male-held roles.
The responsibilities of the board have continued to evolve over the past decade and yet the focus remains on traditional skill sets such as finance, operations and CEO prior experience. Skills such as social responsibility, human resources or culture show negligible presence in the boardroom.
As Janet Barberis, the Managing Director of Protiviti puts it, “Driving cultural change within an organisation is complex and requires significant professional skills and experience to achieve.
Yet, we find few boards draw directly on the Executive Leader with responsibility for people and culture. Whether formally or informally, it seems boards could look closer to source the expertise they need.”
Boards today are tasked with far more than ensuring compliance and financial results. They need to create the context for innovation and creativity, which in turn attracts and inspires talented people to work to deliver the purpose and vision. The Boards who get the culture right understand that it’s about nothing more – or less – than executing strategy. When your culture and strategy are in sync, your employees execute your strategy not because you have told them to, but because they want to.
Of course, Non-Executive Directors, especially Chairs of REMCO, have an extremely valuable role to play in their contribution and challenge around People and Culture. And it is also true that boards can draw on executive input without those leaders holding a full board seat. But as the Women on Boards report states it is indisputable that a formal board position enables individuals to influence outcomes and organisational strategy in a unique and more powerful way.
Furthermore, findings of a recent survey by Women on Boards amongst its members demonstrate the lack of seriousness with which Boards regard People and Culture, revealing that they are not given high priority. Feedback included comments such as “Tokenistic and performative and there was an absence of appetite for long-term action and reactivity around Culture”. And, “There is insufficient understanding of the risks around People and Culture. There is movement in the right direction, but it’s slow”.
Creating positive cultures that attract, retain, and develop key talent is a complex challenge and one where experience and dedicated expertise are beneficial. Very few boards give a formal seat to their organisation’s executive expert on People and Culture, and even rarer is having a CEO or CFO who has had experience running the HR /People and Culture function.
As Anne Mulcahy, the former CEO of Xerox, who has extensive experience in HR says. “Your strategy can be roughly right, but if you can’t motivate and engage people around your strategy you will get nothing done”.
Maybe the answer lies in more Heads of People & Culture or HR being appointed to the Executive Board. Or all CEOs and CFOs being required to spend a portion of their executive career development in these areas as a prerequisite for their current roles.
As a result, culture and employee engagement in the business would be prioritised, the bottom line enhanced, and maybe we might see more female CEOs on the FTSE100.
By Annie Coleman, Senior Advisor at Audley.