Bridging the divide between HR and the C-suite

“In a lot of cases, they have a rough go of it without the respect, necessarily, of the other C-suite colleagues.”

So says Catherine Connelly, professor of human resources and management at McMaster University, in discussing an unfortunate divide that can happen between HR and the C-suite.

That’s evident in a recent survey that found almost half of HR leaders (44%) are feeling increased pressure and scrutiny from the C-suite to show the value of their work, to justify the investment in people programs.

And while 83% feel they can have a significant impact on important metrics such as company productivity, the C-suite doesn’t fully agree, at 61%, found Lattice's 2024 State of People Strategy report, which surveyed over 1,000 HR and C-suite professionals in Canada, the U.S., England, Germany, France, and other global markets.

Similar gaps are apparent when it comes to avoiding costs, where 60% of HR leaders believe they can have an impact, compared to 44% of the C-suite, along with:

• customer satisfaction (54% versus 30%)
• revenue (53% versus 27%)
• product quality (52% versus 28%).

It’s a pretty common refrain, according to Connelly.

“I think a lot of senior HR people see themselves as having strategic goals, and able to help with the company achieving strategic goals, but they are treated more as a functional area, and that their function is more routine. And I think that has a lot of implications for that relationship.”

Why HR is undervalued

Even senior HR managers, who are doing everything they can to meet their goals and the goals of the company are caught between senior leadership, who do not support what they're doing, and trying to meet the day-to-day needs of their organization, she says.

“They're really kind of stuck… Also, somebody in HR is not viewed as possible CEO material. And I think it's harder for them to be taken seriously, even though they have so much to contribute.”

Another challenge? HR is not always noticed or appreciated until something goes wrong, such as a lawsuit or serious staffing issues, says Connelly.

“For the most part, if HR is doing a fantastic job, it's invisible. And so it’s sometimes more difficult for them to really demonstrate the business case or for them having a seat at the table to help with the strategic decisions.”

It’s also interesting to note that a lot of the most senior managers at companies didn't come up through HR, so they don't necessarily have a deep knowledge of the HR topics, she says. Plus, human resources topics are absent from a lot of MBA programs.

“It's been replaced with leadership courses. But if you go back maybe 30 years or so, you would have a course on staffing or personnel, and something like talent management wasn't seen as niche. It was seen as ‘Oh, well, of course, you'd have to know all of this.’”

While leadership courses are still valuable, says Connelly, “there are some nuts and bolts issues with workforce planning or training and development — fundamental things about what you will need to make sure your company succeeds long term — [that are missing and now] people learn on the job once they get to a certain level… but it's not seen as fundamental to most curriculums anymore.”

HR leaders siloed in C-suite

While many HR leaders have become part of the C-suite, they're often perceived as taking a very specific view and being “too people-oriented and not business-oriented enough, where the CFO… thinks strategically, but is focused on the numbers [and the] CMO is focused on the customers,” says Karl Moore, associate professor of strategy and organization at the Desautels Faculty of Management at McGill University.

“We tend to get a little bit carried away in our own area, in our own specialty, and the CEO comes from one of those roles — more apt to be from finance or operations, maybe marketing, and less often to be from HR.”

Of course, you may say finance people care too much about numbers, and that's a fair criticism, he says, “but if you have one side or the other in charge, it tends to be a bit unbalanced. And we need the HR and the finance perspective — both.”

Cutting costs in tough times bad for HR

Furthering the disconnect between HR and the C-suite? While HR teams may be confident in HR programs’ ability to impact productivity, only 69% are confident or very confident in demonstrating their impact, found Lattice. The same is true for:

• avoiding costs (68%)
• customer satisfaction (65%)
• revenue (64%)
• product quality (58%).

But demonstrating that impact is important because for the CEO, the business perspective comes first, particularly in challenging times, says Moore, and finance gets a bigger voice. As a result, “perhaps inappropriately,” some HR initiatives are dialed back because they cost money and “survival is the key.”

And when the labour market is tight and fewer jobs are available, there’s not the same urgency to “pander” to people’s needs or preferences, he says.

‘'Hey, look if they want a job, we've got them, we don't have to spend so much money on them' would be the argument some people would make — which is to a large degree inappropriate. But there's some truth to it… so that's kind of the business take on it that you'd have from other people in the C-suite.”

Sometimes, the work that HR is doing might be seen as nice to have or an extra, says Connelly, especially when the labour market seems a little softer.

“I don't agree with that. But I think there's maybe a bit of a perception.”

When times are tough, budgets are tightened, and HR initiatives such as training always seem to be the first thing that's cut because the benefits are not evident in the short term, she says.

“But long term, that means that you're not going to have the expertise or capability in-house, you're going to have to contract out a little bit more, or you're going to have to hire people down the road at a higher price point — or you're just not going to have the capability to meet your business needs.

“There's also the issue of, if you've fail to send your best people on these training courses, they might quit and go to a competitor that they believe sees them as having higher potential and being able to chart a career path with them instead.”

But it’s a “maybe” — it’s hard for HR to prove that these negative impacts will happen every single time a training program is cut, says Connelly.

“So, it's hard to balance that probability of…. ‘This is likely the outcome’ versus ‘Well, we definitely saved a few tens of thousands of dollars.’”

Connecting HR to business success

Perhaps not surprisingly, high-performing HR teams — those who are exceeding their goals — are more confident in demonstrating the link between HR and business objectives than low-performing teams (82% versus 40%), according to the Lattice report.

They’re also more likely to have an increased HR budget for the next year (62% versus 24%).

HR needs to do a better job of explaining the full cycle of what they are responsible for, says Connelly.

“Sometimes, the exec team, they'll look at their success or their performance or their productivity, and they'll think, ‘Well, it's good, we're great at this because we have great people’ or ‘We have great customer service, because we have great customer service representatives,’” she says.

“That could be true. But then why do you have those excellent staff members who provide that great service? And why do you retain them? Does it have anything to do with your compensation structure?”

There's almost “a missing middle” or a “black box” in terms of senior execs understanding how fundamental the decisions are that HR makes, which become the fabric of the organization, she says.

“It's almost like it's so fundamental, they don't even notice it when it's going well.”

There's sometimes a gray area in HR where they believe something is true, but they haven’t presented the evidence sufficiently to make their case, especially in tough times, says Moore.

“And that's not unreasonable. And we should think about it in terms of every part of the organization should be looked at: ‘How are we doing on production? Is there any way we can save money? How are we doing on service? Is there any way that we can save money?’

“It's a legitimate question — or increased revenues, though it's harder to increase revenues during tough times. So it's a legitimate question to look at every part of the organization; HR is just seen as a bit more fluffy, and not necessarily something we have to do.”

Showing ROI of HR investments

So how can HR do better? HR leaders have got to “sell HR” to the CEO, COO, CFO and other C-suite players, says Moore.

“And when they have survey data, and they have some hard data, go show that to them and share those articles so that they're aware that ‘This is how you do business well’ — making sure HR is front and centre in the conversation,” he says.

“It's a long-term conversation you've got to have over time and convince the other executives of the truth of the matter.”

It’s also about measuring things differently, especially in terms of benchmarking, says Connelly.

That means benchmarking over time or benchmarking competitors, she says, “or providing more context in terms of showing the value of the decisions that have been made.”

And the more HR can personalize the message in terms of this particular company, this particular goal — be it a stretch goal or immediate goal — and how HR can help achieve that, will be effective, she says.

“I think there's too much about HR that just feels routine to too many people. And for too many leaders, their only interaction with HR is when they've done something wrong, since they're being told, ‘No, you actually have to do it this other different way’… so if they can make their interactions more frequently, on the strategic level, I think that's beneficial.”