HR Plays the Outside Board Game
The recent election of Gap Inc. HR chief Eva Sage-Gavin to the board of directors of an outside company is the latest example of HR executives following this path. HR leaders not only have much to offer outside boards, they and their employers also benefit from them doing so, experts say.
By Larry Keller
Eva Sage-Gavin joined an exclusive but growing club when the executive vice president for global human resources and corporate affairs at Gap Inc. was elected last month to the board of directors of Sapient, a global services company.
"Fifteen years ago there were very few HR members serving on outside boards. Today I can rattle off the names of a number of them," says Laurie Siegel, who for several years was head of HR at Tyco International – she left last fall -- while also serving on the board of Embarq Corp., the telecommunications company later acquired by CenturyLink.
Historically, CEOs were almost the only executives elected to boards of other companies. That began to change following the Sarbanes-Oxley Act of 2002. Enacted in the aftermath of several major corporate financial scandals, the federal law mandated greater corporate fiscal accountability.
That, in turn, prompted companies to become more transparent and to begin adding CFOs to boards, and then executives from other backgrounds, says Myrna Hellerman, senior vice president and Midwest regional manager at Sibson Consulting. These included HR leaders such as Sage-Gavin, who was named by Human Resource ExecutiveTM as one of the 25 most influential and prominent women in the profession in 2005.
"I think the value is being recognized consistently across the board," says Kim Shanahan, who heads Korn/Ferry's HR practice for North America. "Talent on the agenda has never been a greater focus area for boards of directors. There also continues to be a focus on executive compensation."
Those are areas, of course, in which HR leaders have expertise. The HR perspective also is particularly valuable in issues concerning corporate governance, Siegel says. Who is retiring? What expertise is needed? How does the company bring diversity to its thinking?
"In general, HR executives can help companies by offering a wide range of insights, from broad strategic people and culture initiatives to individual employee and customer experiences," Sage-Gavin says. "Many HR executives oversee more than traditional HR as well, and bring expertise in communications, public affairs and corporate social responsibility, which are so important for a company's reputation and business success. I also believe we need to have more diversity on boards so companies can look at decisions differently and generate great business results."
There are potential pitfalls to HR leaders who join another company's board, but the benefits outweigh them, industry experts say.
"If they've really become committed board members, they have to collaborate with noted leaders," Hellerman says. "Those people could create some developmental experiences for the HR person. It also forces them to think beyond HR. That gives you a broader horizon and framework to think about your own company."
Siegel says that was her experience. "It's easy to lose that cutting-edge, fresh thinking," she says. Serving on an outside board "is a way to stay sharp and current on complex issues." And being part of a group of a dozen people trying to reach a consensus on issues "sharpened my thinking on decision-making styles. I think you take a lot back personally and to your company."
Serving on a board also forced her to consider shareholders' interests, "a particularly important perspective," Siegel adds.
Sage-Gavin envisions similar benefits by joining the Sapient board. "I truly believe this appointment will make me a better executive and help Gap Inc. too," she says. "Whenever you're involved with important business decisions you build your knowledge to help with the next big decisions. I'm excited and proud to offer my experience, while learning from other board members and executives who offer their own expertise from different roles and industries."
Working with other board members from another organization also provides HR executives "a built-in network for other issues in their organization," Hellerman says. "It creates a community of resources."
Before joining an external board, HR professionals must be sure their own company CEO is fully on board. And if it's the board of a publically-traded company, "some of their own privacy, some of their holdings, becomes public record," Hellerman says.
She also cautions that being a board member is a far bigger job than rubber-stamping the external company's proposals. "They need to be willing to make the time commitment. It's not just attending a meeting once in a while, not in this day and age. You can't underestimate how much time is involved."
Siegel attests to that. She volunteered to lead the search for a new CEO at Embarq after getting her own CEO's permission. Soon she was working 20 hours a week for about two months on the executive search, even interviewing candidates on weekends.
"It was really grueling, but it was short-term," Siegel says. "I took time from my personal life, not my work life. I didn't have to do this. You look at your commitments. You have a conversation with your CEO."
Depending on the company, a board may meet anywhere from four to 12 times a year, says David Cross, a partner in Mercer's talent business with a focus on executive and director compensation. Plus, most directors serve on more than one committee, he adds.
"The preparation can be considerable," he says. That's especially true, he adds, if there is a major event occurring such as a merger or acquisition, or the search for a new CEO.
That's true, Siegel says, but board meetings are typically set far in advance, making it easier to schedule them. Committees usually convene during the entire board session, so they don't require separate travel. On those occasions when committee business doesn't jibe with board meetings, they can be conducted telephonically, she says.
Siegel offers this advice to HR leaders contemplating service on an outside board:
Don't serve on more than one for-profit board -- the time commitment will be too much. Think hard about joining the board of a company in crisis -- again, because of the time involved. Don't schedule telephonic board committee discussions during the middle of the business day. Get your feet wet first – don't feel that you have to chair a committee right away.
Cross adds that if an HR executive is elected to a board because they fill a vacuum in expertise or diversity, "that's an area that will be expected to be leveraged."
Shanahan predicts that more HR executives will be following Sage-Gavin and Siegel and join external boards of directors. "I think it will grow even more in the future. There are many [HR leaders] that have the desire and haven't gotten there yet."