You know your company's top officers. But do you know your non-executive board members? Suddenly, non-execs have become some of Europe's most important business leaders. Consider Bruce Thew. He may be the rarest of them all: a multiple-company non-executive director who is also an HRO expert.

by Jay Whitehead

Bruce Thew is a member of a small, shadowy club of arguably the most powerful people in the European economy. While his services are quite lucrative and more in demand than ever, no business schools train people to do what he does. Members of his club are romanced by the biggest investors and the richest companies, yet you cannot find people like him on any job site. If you suddenly find yourself sitting across the boardroom table from him, you will dearly wish you knew more about Thew and his brethren.

Thew is a professional, non-executive board member. And learning to see your HR role and HRO intentions through his eyes is the most important single career skill you could ever acquire.

Here is why: because today’s non-executive board members—objective company outsiders—frequently hold the deciding vote to implement companies’ big HR-related changes—mergers and acquisitions, restructurings, compensation changes, and outsourcing initiatives. Understanding Thew’s view of HR—the board’s-eye view—is the key to succeeding in times of change.

Of the 1,000 largest public companies on the U.K. stock market and 2,000 largest public companies on continental Europe exchanges, more than 50 percent have at least one non-executive director, according to professors at INSEAD, France’s elite business school.

Very little is written or spoken about this increasingly important group, but we do know that their ranks are thinning because of the increasing risks they face from personal liabilities. Non-Execs.com, an Ernst & Young-run web site, reported in September that 72 percent of 150 non-executive directors from 16 countries said the hazards they faced had increased dramatically in the past three years.

But from scarcity and big risk come big rewards. Just ask Thew, a mountain-climbing, football-playing, ballet-loving business pioneer whose management roles have taken him from the Midlands to Minneapolis to Montreal to Mauritius to Moldova. As big-time non-executive directors go, at 48, he is young. Yet in the eyes of the institutional investors and CEOs who fight for his services on their companies, his two decades of board-level experience in large-scale multinational business process outsourcing earn him both big influence and a spot at the top of the compensation scale.

A TOP100 EMPLOYER PERFORMANCE
Thew’s big debut in the international management spotlight came when he led Ceridian’s London-based £250-million, 20-country international division to Sunday Times’ “Top 100 Employer” status in both 2003 and 2004. The Times wrote, “Thew … has a high profile in the company, and 89 percent of staff say he is full of positivity (the sixth-highest score on this measure); 73 percent find him inspiring; and 78 percent put a good deal of faith in his leadership. He manages to stay in touch despite commitments to the global firm, thanks to his on-line chat room.”

When reminded of that recognition, Thew is characteristically frank. “Hey, let’s face it, boards like badges and awards,” he quipped. “In the U.K., the Sunday Times’ Top 100 is a big badge of approval. If the HR department gets that done, they get the credit. Of course, I was the president at the time, so some of that light came my way. But as all boards know, it’s tough to stay up there ”

Thew says he models his people-first methods after author Ricardo Semler, the Brazilian business legend who wrote “The Maverick” in 1993. In Semler’s company Semco, for example, people decided their own pay levels. Because one of Semler’s rules was that if your colleagues thought you were being over-paid, you were subject to termination, most paid themselves too little. Semco’s mandatory vacation time policy also had a remarkable effect—an extra couple weeks of vacation dramatically increased productivity on the job. Semler’s HR innovations turned Semco to a hyper-inflation-defying growth business. “It’s the only business book I’ve read right through,” Thew recalled. “His book inspired me to do the things I did at Ceridian. And it carries through to my non-exec board work as well.”

THE EFFICIENCY-TO-EXCELLENCE CONTINUUM
Given Thew’s strong feelings about the importance of human capital, landing on the Top 100 Employer list was no accident. The upbeat Brit—a man fluent in the Queen’s English, dockworker Cockney, and a robust range of Dutch invectives as well—is a big believer that employees and how they are managed will make or break a company. He also likes to illustrate his board-level view of HR with both finance and sports analogies.

“In the capital markets,” Thew explained, “everything operates on the fear-greed spectrum. On the football pitch, games are decided along the line between teamwork and individual performance. And in human capital management, boards see HR leaders along an efficiency-to-excellence continuum.”

What Thew means by “efficiency” is HR transactions, payroll, benefits administration, turnover management, and recruitment process administration. If an HR department is focusing solely on being efficient in-house, Thew said, it is squandering precious energy that can be used to focus its HR resources on “excellence.” To Thew’s mind, it is impossible for an in-house HR operation to be as efficient as the big HRO providers.

Take payroll, for example. “In a big government department, you have one person paying 125 people. The norm in a U.K. private company is 1 to 400. Ceridian’s average was 1 to 2000, and with one retail client, the ratio was 1 to 7000,” Thew noted. Then on the quality side, improving transaction quality levels from Sigma 2 to Sigma 5 (Six Sigma designations) resulted in virtual elimination of payroll overpayments or underpayments, which were often running two percent of payroll.

In HR and finance and accounting shared services, those who have grown very efficient are even selling it to outsiders, with HP and Xerox being significant examples. “And when your shared-services operation gets really efficient,” Thew observed, “you sell it off, like GE to Genpact, BT to Accenture, BA to WNS, BAE to Xchanging, BP and Tenneco to Exult, and KPMG to OPI. All roads on the efficiency trail run to outsourcing.”

In Thew’s board’s-eye view, the hard truth is that HR energy spent on transaction efficiency is wasted because it is something the board will never notice. “If you want positive visibility at the board level,” Thew said, “outsource transaction processes as many as you can, to maximize efficiency. Spending your staff’s time on being efficient is not making a difference at the board level.”

“I’m involved with an outsourcer—OPI Global, where agreeing to immediately halve the client’s existing costs is the norm. And then they have to increase productivity and quality each quarter—mandatory—or they run the risk of losing their clients where this expectation is the norm. Don’t tell me that any in-house department would agree to such fantastic discipline.”

“Excellence,” on the other end of Thew’s spectrum, only happens after conquering “efficiency.” To Thew and his boardroom colleagues, “excellence” means marrying human capital to the company’s business model. For the best real-world definition of “excellence,” Thew pointed to the Sunday Times 100 Best Employers list. His favorite story is Asda, the U.K. retailer whose business turnaround in the mid to late 1990s was run by Archie Norman, who went on to chair the Conservative Party, and Allan Leighton, who is now the pre-eminent non executive in the U.K. and chairman of the Royal Mail (against whom Thew played painful, five-a-side football).

“Tough blokes, those two,” he recalled. “They won more often than they lost. And they sent me home bloody and bruised more than once.”

Thew came to know the pair when he won the role as Asda’s payroll outsourcer. Asda was most notable for Leighton and Norman’s excellence-driven management style.

Asda’s HR environment was obviously different—there were no manager offices and Norman and Leighton sat out in the open. The employee of the week got to park by the front door, and the two executives were constantly out meeting with the shop floor staff. They linked HR policies to business-model metrics that mattered—customer service and satisfaction, experienced staff retention rates, and a legendary procurement team. Although they left the company by late 2000 after Wal-Mart’s takeover in late 1999, Asda’s innovative staff culture led them to being crowned best employer in 2002, then No. 7 in 2003, No. 31 in 2004,” Thew said. “And that was most remarkable because Asda had 127,000 employees, with the next biggest 100 Best company having 15,000.”

By 2006, Asda was off the list. “In my view they fell off the list without Archie and Allan’s leadership, which drove a culture of innovative schemes for employee well-being, a sense of belonging, personal growth and giving back to the community,”

THEW'S SIX UP AND SIX DOWN
Thew is very specific about how he can tell if HR leaders are driving excellence, or merely settling for efficiency. In his system, there are six traits of each tendency, and he shares them here for the first time.

Among traits of HR excellence, if you show these to your board, you get a seat:

• You understand the company’s business model, which means you know exactly where managers are feeling pain and where money is made and lost. Not many HR directors talk like that, and those who do are extraordinary. They know exactly how they helped the team in discrete business terms. The big differentiator is when the HR director gets out of HR and gets into business success. When an HR person sees everything from an HR perspective rather than the board’s view, it’s a bit like a salesman telling you what the product is, rather than telling you what it does for you.
• You understand the value of management training and selection and focus most of your effort on the management layer, where the leverage really lies.
• You understand the company’s competition—specifically, what the competitors are doing for their people and how they are competing for talent. Microsoft competes with Oracle and SAP; Sainsbury’s is up against Tesco; Barclays up against Lloyds and HSBC; Norwich Union versus AXA; and so on.

  HR leaders make themselves extremely valuable when they know the competition. Poaching from your rivals is a great HR skill, and the best poachers really know something about excellence. One of Thew’s boards is now trying to recruit 300 people in Bangalore, India, and the HR department is very clever in this very competitive environment. They make the environment seem very attractive. They focus on the things that make their company look different from the places from which they are recruiting.

• You understand productivity in the high-cost or high-yield areas; for example, as a supermarket operator and your biggest area of cost and yield may be in shop-floor staff. The store manager tells you that the best shop-floor staff is a parent who lives within two miles of the store and they understand the buyer because they are themselves parents. The excellent HR leader then gears the recruit and retention machinery around finding and retaining that target employee.

  “For one company I’ve been involved with, HR looked hard at the sales force and discovered that the best salespeople had five years of experience within operations, and those people were selling three times more than the average,” he said.

• You understand that good practices around people change all the time. For example if a new competitor enters the market space, you may need to not only monitor staff turnover—both voluntary and involuntary—but also achieve “excellence” focus on the high-yield areas and build retention programs accordingly. In retail, this may well be your store managers rather than your accountants if a new supermarket opens in your area. Excellent HR leaders recognize the business threat and react.
• You have an ability to handle one-offs like a merger or acquisition or major business threat. During an acquisition, an excellent HR leader has a methodology to assess and keep the best people, not just some random way of picking. That’s because the biggest danger is in having the best staff leaving from both companies. At times like these, you would also have a network of the skilled additional resources required.

TRAITS OF MERE HR EFFICIENCY
If you show only these “efficiency” behaviors, and none of “excellence,” you will not get a hearing or seat at the board:

You are only interested in measures of efficiency. These include the usual suspects: cost-per-hire, time-to-fill, and time-to-resolve. Efficiency for efficiency’s sake won’t get you the attention of the board. The more time you can spend helping your board to build a profitable business, the more you’ll be recognized by the board. The efficient cost and delivery of training and recruitment is not something the board cares about, unless it helps this goal.
You are constantly bombarded by reports of lack of efficiency—payroll errors, benefits enrollment errors, incorrect staffing. You will get board attention, but it will be negative, not the type of attention you want.
Your HR department is the depository of the woes of an organization—an agony aunt. Are some of your staff merely problem children that have been parked in your department to keep them out of trouble? Is your department simply keeping one or more managers’ deficiencies quiet rather than re-training or replacing him or her?
Are you simply a crisis middle manager? If you have got weak management, your HR department has become a tribunal for sexual harassment, for example, being used as a crutch for weak management elsewhere. A restructuring should not be announced by the HR department; rather it’s the task of the manager. The key for HR excellence is to know how to coach managers to do it themselves. Weak managers will get HR to do their dirty work, and weak HR people will allow themselves to be used in this way to mollify a manager.
Are you a budget controller? The board couldn’t care less about a slight budget overage or savings. You are a cost center, but that shouldn’t make you overly cost-conscious.
   “As a director, if I’ve got a major recruitment drive, I am not interested in having HR saying I’ve got no money in my budget for it,” Thew said. “I want to reach my objectives, not worry about the HR budget.”
   HR managers need to reach a stage in which they can present change control, especially in M&A and major change situations. Often, mergers will get rocky because HR is trying to hold the budget line. Excellence is not about budget control.
   By the same token, HR is not about being the lowest cost provider. If you are in a highly competitive environment where skills are a premium, spending more in HR is very sensible, and the board will listen to those arguments. If you are in a standard, low-growth, cost-efficiency environment, HR departments can still spend more if it can show business productivity, and that’s always attractive to the board. That’s excellence.
   “One phrase that makes me see that an HR director is not striving for excellence is ‘I beat my budget. That’s why I’ve been a success this year,’” Thew noted, pointing out one instance in which an HR director who went to the board of his company with a £10 million annual saving was told that it was “a drop in the ocean.”
Are you obsessed about having the best IT system? The greatest HR directors manage human capital, not data. The drive to automation is not nearly as important as the drive to use human capital better.

TODAY'S HR INNOVATORS
Thew contends that the two companies that exhibit HR excellence right now are in the food retailing sector: Tesco and Waitrose. He noted that Tesco in 2003 was taking in a remarkable £1 for every £8 spent in the nation’s shops. Today, it’s closer to one in seven, and it is doing it in good part due to the excellent customer service delivered by its staff. Sainsbury’s used to be No. 1, with Asda biting at its heels. But Tesco has cruised away from them. Both companies are taking on Wal-Mart and Carrefour globally in the same way they took on Sainsbury, which will be a competition worth watching.

Tesco recently won, for the second year in a row, Britain’s most admired company, a survey sponsored by Mercer. To further make Thew’s point that Tesco takes HR seriously, the HR director is paid £300,000 plus bonus, and he reports directly to the CEO.

“In some ways even more impressive than Tesco,” Thew said, “is Waitrose, one of the most expensive and profitable food retailers in the U.K.” The company has engineered in partnership with Ocado, the largest home delivery service in the U.K. At Ocado, innovations include recruiting staff from Poland, but not because Polish labor is cheap. Polish recruits are paid well above the minimum wage, and unlike the local workforce, they are keen to learn, work hard, and prepared to stick with the work.

Thew pointed out that his “efficiency-to-excellence” continuum is at its most important when it comes to industries that have suffered a huge structural interruption. A recent example is the online betting industry, which is rupturing due to a new American law that outlawed the services and immediately took billions of pounds out of the market. Thew questioned how HR reacts in this situation “Can the growth opportunity in Asia help replace the loss?” he asks.

“And if so, can HR get out ahead and restructure, recruit, and retain accordingly? When an HR leader is on the forefront, rather than waiting for the board to tell him/her what to do, that’s excellence.”