There is increasing pressure from various directions, including the US Securities and Exchange Commission (SEC), for companies to tell investors more about human capital. This inevitably will lead Boards to think more about their oversight of HR.

Currently, in the US you’ll often hear that the Board’s only role in HR is to hire and fire the CEO. A bit more broadly, they spend a lot of time working on the CEO’s compensation package but only take a cursory look at other human capital matters. This may be a missed opportunity.

Why US Boards often take a narrow approach

One reason US Boards often take a narrow approach to oversight of human capital is their mandate. It is not expected, perhaps not even considered appropriate, for them to dig into HR matters. It’s also the case that board members are already overburdened with work and not eager to take on new responsibilities. Finally, the CEO, who is often the Chair of the Board, likely feels they get quite enough oversight from the Board as is and don’t encourage them to stick their nose into other matters.

This is all reasonable, but if human capital intangibles are what drives much of the value of the organization, then it seems imprudent for the board not to show interest in what HR is doing.

How Boards could add value around human capital

Management theorists have long noted that having supervisors look over the shoulders of workers isn’t necessarily a recipe for improved performance. Those providing oversight need to have something of value to add.

 In the case of the Board and human capital, they can potentially help by:

• Providing an outside perspective. Non-executive/independent directors can help by providing an outside perspective. Leaders within the organization may suffer from groupthink and an outsider can see things they overlook.
• Identify human capital risks. One of the main duties of Boards is to be alert to risks. The HR department, up to its neck in running day-to-day operations, may not have had the opportunity nor the mindset to sit back and reflect on risks.
• Longer-term perspectives. Closely related to thinking about risk, Boards can think about human capital from a longer-term perspective than HR might normally deal with. The board can ponder how the organization’s needs and the labour market might evolve over the next five to ten years.

More generally we might task the board to be alert to any blind spots concerning human capital that exist within the organization. Are there things that HR and the leadership team have not noticed for one reason or another that the board can bring to their attention?

What could go wrong?

A more engaged board could create several problems for HR. They could ask for a lot of reports that take undue time to produce. They could nitpick data or practices that they don’t fully understand. They could start giving unwanted advice on how to run the function. Often HR leaders at companies that do have engaged boards find it a mixed blessing in that it raises the profile of the function but creates extra work that may not add value.

What to do today

Any HR leaders interested in the role Boards can play concerning human capital could start by finding out what the relevant committees are doing already. Find out who the board members are and to the extent possible their views and interests.

Next HR leaders should ponder what role they would ideally like the Board to play. It’s important to keep in mind that a board empowered to look more closely at HR may be a headache as well as a supporter. Consider how different mandates and operating processes (such as agenda setting) would work out in practice.

It will be up to the CEO and Board to decide what role they play in the oversight of human capital, HR leaders can help them with that decision by clarifying how the board could, and perhaps should, add value.

David Creelman is CEO of Creelman Research. He has a particular interest in helping HR develop the capability to handle AI issues. If that’s a concern, then get in touch. You can connect to Mr. Creelman on LinkedIn or email him at dcreelman@creelmanresearch.com