HR and Governance are like twin sisters
Value added governance would mean willingness of the Board to invest, to commit time, emotional energy and expertise in powering intangibles. Currently, governance includes holding annual general meetings, board meetings, committee meetings; extending approvals and sanctions, and largely ensuring probity of accounts, risk management, et al. This is the tangible side of governance.
The key purpose of governance is to design the future of the company and promote strategic thinking and take actions to achieve the desired outcomes. One of the most crucial aspects of governance is to recruit and retain a CEO who is competent but not a technician. The CEO has to be an evolved person, constantly learning and capable of making a difference. Value can be added only when both the Board and the CEO are competent and have mutual respect.
In a highly competitive environment, the only way that the companies would continue to have winning streaks is through the soft side of governance. This would mean increasingly focusing on Intangibles. Currently, the focus on intangibles like leadership, customer centricity, HR processes, brand building, et al, is quite inadequate and in some cases peripheral.
Lack of focus on intangibles is a new risk factor. The governance process has to now ensure that the focus on intangibles become central to the strategic management processes. The obsession to create numbers quarter-on-quarter can often be at the cost of building long term value through taking some foundational steps. In such a culture, it is not uncommon to show inflated profits by resorting to manipulations of accounts and putting many danger signals under the carpet. The common element in winning even in complicated and difficult times is a basic truth about People. Continuous focus at the board level to build new capabilities, succession for critical positions and processes to improve empowerment is not something that can be left to the wisdom of management alone. Deficit leadership and HR is a new risk factor perhaps even riskier than normally realized.
The governance process has to ensure, through commissioning of surveys and research, that the right processes are in place in the organization to give the feedback to the board about the level of motivation in people and satisfaction level in customers and take steps to ensure empowerment of both – the employees and the customers.
The board has also to ensure that there is accountability of performance at all levels and reviews the tools for measurement of such performance. The board has also to ensure that CEO is continuously making difference and set in motion the processes that measure this.
HR and Governance are like twin sisters. Good governance is possible through HR and vice versa; they complement each other. Organizations which continuously focus on improving intangibles can be sure of creating tangible results on sustained basis.