HR on the board: HR professionals are providing some much-needed expertise as members of boards of directors

HR Magazine, June, 2004 by Robert J. Grossman

The expertise gap often shows most glaringly in compensation, observes Terry Shepherd, chairman and CEO of St. Jude Medical, a 6,000-employee global medical device manufacturer in St. Paul, Minn., with annual revenues of $1.5 billion. "Compensation is incredibly complicated and is more of a lightning rod than anything else a board encounters. That's why someone on the committee has to know it in-depth."

"For my fellow committee members who are not steeped in HR, comp is a little like Chinese," agrees Wendy Yarno, chair of St. Jude's Compensation Committee and executive vice president of worldwide marketing for Merck & Co. "My knowing how these things should and shouldn't work is important. HR expertise on the committee is insurance against having things come back to bite you."

Knicely's compensation know-how also helps him play an important role in board discussions at Agilysys Co. "We're evaluating performance of the CEO and senior officers to determine what compensation is appropriate," he says. "With my background around incentive plans and long-term awards, I add lots of value."

In addition to sitting on the compensation committee, Knicely chairs the nominating and governance committee, where he's helping set up formal governance principles and establishing criteria for selecting and evaluating directors.

Adding Value: Fuzzy Focus

At St. Jude Medical, Yarno often finds herself guiding the board toward discussions of HR issues her peers would prefer to avoid. "They'd rather deal with the numbers and areas that are more easily measurable, where there's more clarity, only a certain number of options," she says.

"But in HR it's harder, like when you're talking about how to transform an organization, how to manage emotions or ways to set up performance management systems. Ultimately, they're all judgment calls."

Boards gravitate away from the people side because it's so difficult, agrees Michele Hunt, who has served on Hewitt Associates' board for eight years and previously was the VP for people at Herman Miller Inc. "Most of the time, boards are focused on the traditional things--the financials, the plan, the forecast--not the people. But if you don't drill down to see if the people are aligned, you'll get in trouble. If your compensation gets out of whack, if you're not doing succession planning, you're looking for trouble."

"Having an HR expert on the board makes a real contribution to the discussion that otherwise might not happen," sums up Madelyn Jennings, chairman of the Executive Committee of the Freedom Forum, formerly senior VP of HR at Gannett Co., and a director at Personnel Decisions International, the Hanes Corp. and Harte-Hanks Communications.

Avoiding Pitfalls

Sometimes boards benefit from an HR executive's sixth sense, an ability to pick up subtle indications of misalignment or discord others may miss. Bemis Co. director Barbara Johnson, who oversees HR as vice president and treasurer at Carleton College in Northfield, Minn., is an example.

Recently, observing the dynamics of board encounters with management, Johnson sensed an undercurrent of discontent and brought it to the attention of her colleagues. "My intense HR background and experience working with other managers made it obvious that something was going on with the staff that was impeding a smooth transition on the management team," she says. Johnson raised the issue with other board members, and the CEO took action to resolve the problem.