The Importance of Synergy Between the Chief Human Resources Officer and the Company’s Board

As business disruption remains a constant in our days, companies across all industries must navigate waves of transformation, and human resources play a crucial role in addressing every challenge they face. Consequently, Chief Human Resources Officers (CHROs) and their equivalents have had to extend well beyond the traditional HR territory to support and advise leadership in transformation and growth plans. However, to attract and retain the most valuable employees today and in the future, organizations must acknowledge that these individuals now hold significant bargaining power.

By Claudia Sofianu, Partner, leader of the Income Tax and Social Contributions Department, EY Romania, and Horaţiu Cocheci, Director, Income Tax and Social Contributions, EY Romania

In this context, the HR profession, as well as the position of the Chief Human Resources Officer (CHRO), has gained greater strategic importance, as a quick and efficient understanding of employee needs has become essential, alongside changes in the labor market.

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Data published by the US Bureau of Labor Statistics indicates that by 2031, the number of individuals working in the field of human resources will increase by 7% in the United States. This trend is natural, given the growing number of challenges stemming from the labor market. The battle to identify the best professionals and offer attractive benefits and compensation packages to retain them has become a clear priority. In terms of challenges, according to a 2021 Glassdoor study, 86% of HR specialists mentioned that recruitment has become more of a marketing strategy.

The rise in HR specialists coincides with the accelerated development of artificial intelligence (AI) and machine learning (ML) applications. Companies and boards need professionals who can embrace these new digital technologies and utilize them in their operations. According to TIDIO, an AI-focused company, 67% of HR specialists believe that developing new AI applications will bring significant benefits, positively impacting the recruitment process. The same source indicates that 35% of specialists believe using AI in the recruitment process will uncover unique talents in the job market. The analysis also reveals that 89% of study respondents believe AI can be useful in the job application process for certain positions within companies, from the perspective of future employees.

In this regard, the mission of human resources must be based on awareness of the expansion of emerging AI technologies, and the Chief Human Resources Officer must support the acquisition of new skills for two reasons:

1. The Transformational Impact of AI on HR Practices: By applying AI to recruitment, selection, performance management, employee development, and other processes, more efficient and precise results can be achieved. The profession must incorporate the ability to understand and use AI tools and algorithms, enabling the effective implementation of these tools within the organization.
2. Attracting and Retaining AI Talents: Due to the growing demand for AI talents, competition for qualified professionals is fierce. HR specialists need to develop an understanding of AI to correctly identify needs and attract suitable talents to the organization. This enables them to implement recruitment, development, and retention strategies for professionals, contributing to the organization’s competitiveness in the labor market.

What Support Can the Chief Human Resources Officer Rely on to Create Appropriate Strategies?

Historically, and it remains the responsibility of the board to hold the executive leadership accountable, ensuring that the organization possesses the essential talents needed to fulfill its strategy. And, as always, the board must oversee HR in a manner that reflects the organization’s dynamics. This means ensuring that HR management remains a top priority and that the CHRO maintains a high status within the company. Additionally, it involves supporting the CHRO in listening to employee opinions and influencing the organization to create an employee-centered culture and a more personalized experience. Therefore, while developing an appropriate organizational culture is a top priority for the CHRO, it cannot be achieved without increased involvement from the board.

From these considerations, the Chief Human Resources Officer can find a valuable resource in the board to whom they can consistently turn.

What Does the Chief Human Resources Officer Gain from the Board’s Expertise?

Beyond strategic vision, the most significant advantage a Chief Human Resources Officer gains from the board’s experience is a broader understanding of the company’s business objectives and, consequently, how to support those objectives. This means developing a more comprehensive vision and interdisciplinary approach.

Considering these challenges, The Board Imperative: Further unlock the strategic value of CHROs analysis underscores the strategic dimension that the Chief Human Resources Officer position has gained in the wake of the constant talent crisis in recent years.

The analysis also suggests three ways in which the board and HR leaders can help each other to add value and achieve proposed objectives:

Developing and Supporting the Role of the Chief Human Resources Officer (CHRO) is the first step. Crucial elements such as organizational culture, social inclusion, personal well-being, have become priorities in attracting and engaging people. The board must decide who and to what extent will be responsible for these areas and subsequently discuss and challenge the Chief Human Resources Officer regarding matters within their purview.

The second dimension pertains to reviewing the company’s risk framework to support the HR agenda. The dynamics of the labor market’s talents have taken an increasingly important position on organizational agendas. However, risk profiles are specific to each company’s sector, so their approach may differ. Board leaders must collaborate with the CHRO to assess what is appropriate for their organization. These discussions should not be confined to board meetings; they can occur through regular checks with different members and committees (e.g., Risk Committee, Compensation Committee), including the president.

The last perspective involves supporting HR directors in creating a people-oriented strategy and culture. The board should work with the CHRO to balance the needs of HR strategy and business strategy, as well as define and support the organization’s culture. This entails considering both employee needs in relation to the organization and the organization’s needs in relation to employees.

In this regard, board directors do not need to know granular details about employee information, but they should be informed about potential risks, opportunities, and the possible impact of various scenarios on the organization’s operations. This way, they can ensure that the overall strategy, culture, and employee value proposition of the organization reflect the needs of different employee groups.

Implementing a Sustainable Collaboration

To create a framework that responds to best practices regarding collaboration and thus optimize the relationship between the CHRO and the board, five questions should be considered to have a clear picture of the Chief Human Resources Officer’s role:

1. How do you support and reflect the strategic importance of the CHRO role by enhancing talent governance, both formally and informally? How often, if applicable, do you meet with the CHRO outside the regular schedule of board meetings?
2. How do you collaborate with the CHRO to ensure the organization stays current with HR-related issues and addresses the continuously changing perspectives of employees? How will you know you have succeeded?
3. How do you ensure that you and your leadership team support the organization’s values and culture? What mechanisms do you have in place to measure this?
4. Does the organization possess the critical talents and competencies, including within the leadership team, to achieve its business strategy? If not, what plans are in place to address this issue?
5. As a board member, what role (if any) do you believe you will play in creating a sustainable workforce and accelerating progress regarding the talent agenda?

In our view, the significant added value that the board can provide regarding the HR agenda involves providing clarity and support to the Chief Human Resources Officer, vital elements for any organization.

And, to the extent that the Chief Human Resources Officer manages to obtain relevant answers and implement them, the likelihood of achieving organizational success increases.