Although people drive every organization's success, research shows that most CEOs undervalue their HR function and their chief human resources officer (CHRO). No wonder, then, that managing human capital is a top challenge for companies. To address it, say the authors, CEOs must redefine and elevate the CHRO role. They should spell out their expectations in a new written contract, focusing on three contributions that the CHRO, as an expert on talent (both in-house and at the competition), should be making: predicting the outcomes of strategically deploying human resources, diagnosing people-related problems that are hurting the company's performance, and prescribing actions on the people side that will create value. Administrative tasks, such as managing benefits, might be delegated to others. And the CHRO should be assessed by actions that deliver revenue, margin, brand recognition, or market share. With a new mandate from the CEO, and with appropriate business training, the CHRO can contribute to the organization just as powerfully as the CFO can. Indeed, the CEO should partner with the CHRO and the CFO in what the authors call a G3--a triumvirate to steer the company. Although reshaping the HR function could take three years or more, the authors' experience with companies such as GE and BlackRock suggests that it's well worth the effort.

Though it's been over a decade since the first wave of post-Enron governance reforms, boards are still failing to provide strong oversight and strategic support for management's efforts to create long-term value. Consider these damning results from a recent McKinsey survey: A mere 34% of directors believe that the boards they serve on fully comprehend their companies' strategies, and just 16% think that their boards have a strong understanding of the dynamics of their firms' industries. Another survey asked directors and C-suite executives where the greatest pressure to deliver short-term results came from. The most frequent response? Boards. In this article the global managing director of McKinsey and the CEO of the Canada Pension Plan Investment Board propose measures to strengthen boards and encourage their members to focus more on long-term opportunities and strategy. Companies can start by recruiting independent thinkers and people with the right expertise as directors, fostering high-quality strategic conversations, and instituting key nonfinancial metrics. Engaging deeply with major long-term shareholders, especially about growth strategies, would also alleviate a lot of the pressure to maximize short-term results. And board compensation needs to be rethought: Directors should be paid more (but serve on fewer boards), and the mix of rewards should be retooled to emphasize long-term performance.

In a wide-ranging interview, the Managing Director for McKinsey and Company Worldwide, Dominic Barton, discusses his firm's work on the global problem of water scarcity, what type of talent his firm seeks out and why workplace flexibility is so important today.

Since the financial crisis of 2008, there has been widespread agreement on the need for public companies to build value for the long term. Nonetheless, because of pressure from financial markets, a detrimental focus on short-term performance persists. Reversing this trend, the authors say, depends on the leadership of major asset owners such as pension funds, insurance firms, and mutual funds. They should act by taking four practical, proven steps: 1 Define long-term objectives and risk appetite, and invest accordingly. Major asset owners should set a multiyear time frame for creating value, decide how much underperformance they can tolerate in the short term, and then align their investments with this agenda. 2 Practice engagement and active ownership. Big investors should cultivate ongoing relationships with the companies they invest in, collaborating with management to optimize corporate strategy and governance. 3 Demand long-term metrics from companies to improve investment decision making. Rather than focusing on quarterly financial statements, investors should seek to obtain and analyze data that indicate a company's long-term health. 4 Structure institutional governance to support a long-term approach. Big investors must have competent board members committed to investing for the long term, as well as policies and mechanisms to translate this philosophy into action.

Senior leaders who write off the move toward big data as a lot of big talk are making, well, a big mistake. So argue McKinsey's Barton and Court, who worked with dozens of companies to figure out how to translate advanced analytics into nuts-and-bolts practices that affect daily operations on the front lines. The authors offer a useful guide for leaders and managers who want to take a deliberative approach to big data--but who also want to get started now. First, companies must identify the right data for their business, seek to acquire the information creatively from diverse sources, and secure the necessary IT support. Second, they need to build analytics models that are tightly focused on improving performance, making the models only as complex as business goals demand. Third, and most important, companies must transform their capabilities and culture so that the analytical results can be implemented from the C-suite to the front lines. That means developing simple tools that everyone in the organization can understand and teaching people why the data really matter. Embracing big data is as much about changing mind-sets as it is about crunching numbers. Executed with the right care and flexibility, this cultural shift could have payoffs that are, well, bigger than you expect.

As the current financial crisis and the Great Recession begin to ease, executives may be tempted to heave a sigh of relief and return to the comfort of business as usual. But doing so would constitute a serious mistake for their companies-and a grave disservice to capitalism itself, argues Barton, the global managing director of McKinsey & Company. Rising income inequality, high unemployment, and spiraling budget deficits are fueling public distrust of business, while the shifting balance of power between East and West exacerbates these tensions. But perhaps the biggest danger is that short-term approaches to investing in and managing companies-the "quarterly capitalism" that led to the financial meltdown-still persist. The time is ripe, Barton says, to restore capitalism's founding principles so that it can deliver the sustainable growth the world needs. Business leaders have a choice: They can initiate the necessary reforms, or they can let the system be reformed for them. They should consider three concrete steps in particular: changing their organization's structure and incentives to focus on the long term; disseminating the perspective that serving the interests of all major stakeholders is compatible with the goal of maximizing corporate value; and putting together more effective boards, ones with the knowledge and heft to govern like owners. None of these steps will be easy, Barton acknowledges, but they are all necessary to make capitalism stronger, more resilient, more innovative, and more equitable-a system once again worthy of the public's trust.