In an economy where growth plays a constant game of hide-and-seek and disruptive trends such as technology rapidly change the nature of doing business, what role must CHROs play? What makes some CHROs successful and others not? Are firms and the HR profession doing enough to develop the next generation of CHROs?
To find out, Aon Hewitt spoke with 45 CHROs across the globe, collectively representing more than 3.3 million employees and more than one trillion dollars in revenue. The most disturbing finding for HR? More than one-half of the respondents did not have a “career HR” background.
Perhaps more disturbingly, 16 per cent came from line or staff functions, with no background in HR before taking on the top role in the function. Executive placement firms confirmed this wasn’t a sampling bias (they, in fact, see a much larger proportion of non-HR CHROs being hired by employers).
So why is this the case? Here are some factors making non-career HR persons attractive CHRO candidates:
Change agents: Non-career HR CHROs often grow from within a firm. In fact, 46 per cent of this pool were promoted to the position internally, compared to 33 per cent of career HR persons. The reason? These individuals have often been in charge of large-scale transformations at their organization in the form of strategic shifts, acquisitions, diversification or global expansion. Therefore, they have immense credibility with the CEO and the board in terms of their ability to get things done, and drive change.
One CHRO in the study had spent his career at the firm, starting out as an engineer and rising to leadership positions on the business side. But he was always seen as a change agent at the firm, so he was considered the right fit as the firm was looking at streamlining its various units to leverage synergies, which meant a mindset shift from a talent standpoint.
Visibility: Seventy-one per cent of non-career HR persons had board exposure prior to taking on the role, compared to 62 per cent of the career HR group. This makes them aware of the board’s agenda, their interpersonal dynamics and its relationship with the CEO. It also gives them intimate knowledge of what data and issues to bring before the board and, perhaps more importantly, what not to bring forward.
A number of the non-career HR participants had been strategic advisors to the board in the past, either playing roles such as the general counsel or an external consultant.
Business understanding: Knowledge of how a firm makes money is table-stakes for any C-suite member. However, in many cases, non-career HR individuals had a profit-and-loss responsibility and, therefore, deeper knowledge of business and strategy. The expectation is that they be able to translate these into the people needs of the firm.
In fact, when asked to state the five most important competencies required in a CHRO role, 70 per cent of non-career HR individuals cited “business knowledge” compared to 59 per cent of career HR individuals.
The transition isn’t always smooth
Non-career HR CHROs, especially those without any background in HR, don’t always find the going smooth. One such CHRO who earlier lead a business unit shared his experience:
“HR meetings were a turnoff: They’d spend two hours on discussing dress code and none on discussing business impact. The incumbent CHRO was retiring and suggested my name since I was always pushing HR to change the tone and agenda of their meetings. I went to the compensation committee meeting with no idea of what to say. But you learn on the job.”
The transition is particularly difficult for someone coming from the outside, or someone who has grown into the role internally, shifting from a subordinate to a peer.
For a non-career HR CHRO to succeed, she must have a strong second-line that understands technical details, especially in areas like executive compensation or health and benefits. The board and the CEO must also create space for the person to make mistakes while learning the ropes.
Most of these CHROs had a well-defined action plan in terms of the outcomes they’d want to achieve over a two- to three-year period.
Many enlist the help of other peers in the C-suite, particularly that of the CFO (for finance and executive pay-related advice) and the general counsel (for compliance and labour-related advice).
Others join CHRO networks in their region to build their knowledge and to use peers in other firms as sounding boards for their ideas.
Stepping stone to broader positions
The CHRO position is also being increasingly looked at as a “stretch assignment” to test a high-potential C-suite member or successor on his ability to flex and handle a completely alien function. Far from being seen as a terminal or retirement option, CHROs (both career HR and otherwise) are now using their knowledge of having handled the function to move onto much larger assignments.
Since the time of the study a year ago, three of the CHROs have moved to broader roles, including CEO of a strategic division at a Fortune 500 firm.
The HR function is in a state of flux. On the one hand, there are calls to split the function, while on the other there is an increasing drive from within the function to revamp itself to help firms drive value through people. CHROs from outside the function bring a unique perspective and deep business understanding.
The onus is on HR professionals to reinvent themselves, talk the language of business and start embracing data and analytics — the wave of the future.
Neil Shastri is leader of global insights and innovations at Aon Hewitt in New York.
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