HR Governance: A Deloitte Point Of View | Queen's University IRC

Deloitte and Queen’s IRC are co-delivering an HR Governance Symposium to be held on December 1, 2011. In preparation for this event, Queen’s IRC Research Associate, Alison Hill, sat down with Ian Cullwick from Deloitte to discuss HR governance, its meaning, constituents, and implications for organizations. This article provides an overview of that conversation.

1. How does Deloitte define HR governance?

Broadly speaking, HR governance encompasses the oversight and leadership of HR strategy, related policy, and program results. More specifically, HR governance is comprised of two components: formal governance and internal HR governance. Formal governance involves the Board of Directors, and ideally, a standing HR or Compensation Committee. Internal HR governance consists of the CEO and management team’s approach and strategy to HR management and program efficiency and effectiveness.

2. In what ways does HR governance differ from corporate governance?

I would say that HR governance is not distinct from, but rather a core component of, good corporate governance – in the same way that financial governance or risk governance are also core components. Formal HR governance includes risk management, as well as policy and program governance. Indeed, HR governance also includes the internal oversight and management of an organization’s HR strategy, programs, practices, and outcomes, through clearly defined roles, responsibilities, and accountabilities both down and across the enterprise. In addition, HR governance involves the HR business model, and the organization, measurement and management of the HR function, along with the related implications for its management and employees.

3. According to Deloitte’s research, what are the critical components that constitute successful HR governance?

Deloitte recently concluded a major research project (2011 CHRO Public Sector Study) on public sector HR governance and management. According to our findings, the majority of respondents from both public and private sector organizations think that organizations are doing a good job in articulating corporate vision and values. Moreover, organizations are now implementing HR planning and questioning the efficiency of their HR business models. Areas of priority, however, include developing formal HR governance structures and practices, HR performance measurement metrics, and clarity of accountabilities for all stakeholders, including Board, line management, and employees.

Based on our experience, a critical component of HR governance is clarity of the organization’s desired HR strategy, scope of HR policies and programs, and its enabling HR business model, including clarity of roles, responsibilities, and accountabilities for all stakeholders. HR Governance also requires clarity of formal roles and accountabilities between the Board, the Chief Executive Officer, Chief Human Resources Officer, and line management.

4. What is the role of HR governance in organizations today?

Given our Canadian demographic profile, there is a pending wave of baby boomer retirements with huge implications for talent management. In addition, there are several factors that are elevating the importance of HR governance, such as a dynamic economic climate and labour market demand for specialized skillsets, coupled with HR challenges and crises that we’ve continued to witness over the past five to ten years. Furthermore, because of regulatory change we’ve witnessed over the past five years, the HR agenda and its effective governance have now become profound priorities for the vast majority of organizations.

Good HR governance in this day and age needs to balance the need for effective oversight and confidence with the need for focused HR strategy execution to differentiate and enhance competitive position over the longer term.

5. What role do Boards play in supporting HR governance?

Boards need to ensure that contemporary HR governance is formally embedded in existing structures and practices, such as an HR/compensation standing committee, or in its absence, through another standing committee such as an executive or governance committee.  Boards must also ensure that the CEO has implemented an effective internal HR governance framework and strategies that reflect relevant industry economics, desired culture, workforce dynamics, and leadership preferences. Another important role for Boards is understanding the various HR risks facing the organization, and being satisfied that management priorities, policies, and practices effectively respond to strategic, regulatory, and operational needs. Successful execution would generally require effective risk management and performance measurement practices, combined with effective dialogue with the CEO and CHRO.

As noted above, and as suggested in related research by Deloitte (2011 CHRO Public Sector Study), HR risk management and performance measurement are generally not well done by most public and private sector enterprises. For organizations without formal HR governance structures, practices, and skillsets (i.e., qualified HR practitioners on their Board), the time is now to rethink those key organizational requirements. Optimizing labour and human performance is necessary. Knowledge-intensive organizations must implement more formal corporate governance HR practices and strengthen internal HR governance practices.

6. What are some key resources that individuals could access to learn more about implementing effective HR governance?

Several organizations have released research on HR governance. I would recommend the Canadian Coalition for Good Governance (https://ccgg.ca/), or the Ontario Securities Commission (www.osc.gov.on.ca). The Globe and Mail also released a study of private sector organizations recognized for good governance. Accordingly, I would suggest a review of the HR governance practices that these organizations have adopted.

7. Why has Deloitte partnered with the Queen’s IRC to host an HR Governance Symposium?

I think that we all recognize the fact that good HR governance will be absolutely critically important to the execution of good HR strategy and delivery of optimal business results. There is a need to respond to very dynamic and complex regulatory and compliance changes. HR governance is particularly needed for organizations where people and knowledge are the competitive difference.

8. What are the intended learning objectives and outcomes of the HR Governance Symposium?

The purpose of the Symposium is to shine a light on the topic of HR governance. The premise of the event is that if HR governance is not done well, optimal strategy and business results will not be achieved. Good HR governance is effectively the key to HR success and organizational performance, which in turn, impacts Canada’s broader economic prosperity. Participants will engage with contemporary thinkers on the topic of HR governance, and have the opportunity to share and discuss emerging practices. As well, through lectures from subject matter experts, participants will explore different contextual perspectives and scenarios for HR governance. The event is designed to stimulate discussion on the topic across sectors and thought leaders.

Good, formal HR governance and strengthened internal HR governance and management will enable more efficient and transparent HR decision-making and processes, such as corporate compensation, executive compensation, workforce planning, and organization restructuring.

To learn more about upcoming HR Governance Symposiums, please visit the IRC’s website.