I recently facilitated a workshop with several CEOs where we worked on the dramatic business growth model components. One of the questions that I had asked them beforehand was, "What is Your Profit/X?" The results showed that there this concept is not clear to many....
I have always believed that a great Chief Human Resources Officer (“CHRO”) was essential to a business’s success. Most CEOs know that because businesses don’t create value, and people do, they depend on their company’s human resources to achieve success. However, CEOs are distanced from and often dissatisfied with their chief human resources officers (CHROs) and the HR function in general. According to a study, while CEOs see human capital as a top challenge, they rank HR as only the eighth or ninth most crucial function in a company.
In the 1990s, CHROs were focused on compliance to keep their employers out of court and the press. Following several executive pay scandals in the 2000s, they became more involved in remuneration. In the 2010s, they gained a more significant say in hiring for top jobs, as the failed successions multiplied. Recently, they have had to deal with the often very public “me too” troubles.
As a result, CHROs backgrounds are changing. Once filled with people who had master’s degrees in labor relations, today, many hold business degrees. While most firms recruit CHROs from HR jobs, more are choosing outsiders or unconventional candidates. According to Russell Reynolds Associates, HR heads appointed to Fortune 100 companies between 2016 and 2019 were around 50% likelier than earlier hires to have worked abroad, in general management or finance.
The CHRO’s role is to assist the CEO in building and assigning talent, especially key people, and that will help the organization reach its potential. Human capital management now needs the same priority that managing financial capital was in the 1980s.
To accomplish this role, the CEO has to:
elevate HR and to bridge any gaps that prevent the CHRO from becoming a strategic partner;
understand the valuable contribution the CHRO could be making and spell out those expectations in clear, specific language; and
redefining the work content of the chief human resources officer.
In this new role, the CHRO’s responsibilities will include:
traditional HR responsibilities—overseeing employee satisfaction, workforce engagement, benefits and compensation, diversity, etc.;
predicting outcomes – crystallizing what a particular job requires and realistically assessing whether the assigned person meets those requirements;
diagnosing problems – pinpointing precisely why an organization might not be performing well or achieving its goals; and
prescribing actions on the people side that will add value to the business – agile companies need flexibility with their human capital, and CHROs should recommend steps that will unlock or create value.
CHROs are expected to have or quickly acquire business acumen specific to the company they are serving, as well as to work with executive peers to shape and influence business strategy. These three areas of expertise are essential for success in any C-Suite position. Gartner has developed a model for the CHROs role, set out below. The five pillars that sit atop the foundation require the CHRO to step beyond HR functional management to lead the business in the critical areas of talent strategy, enterprise change, and company culture, as well as to serve as a trusted advisor to the CEO and the board.
In this new role, CEOs and CHROs have to ask more of each other.
CEOs: Ask for and expect more from your CHRO
Expand Your Thinking. If your expectations for the CHRO role are just the traditional HR function, 90 percent of the opportunity is lost.
Critical Skills. What are the essential skills required for your CHRO? Today’s CHRO role requires a wide range of additional strengths, i.e., the ability to use data and analytics to drive strategy and organizational design; a structured way of thinking; and excellent people-assessment skills.
Align priorities. Use the model for candid conversations about priorities. Since CEOs don’t have a clear idea of where CHROs spend their time, this will provide a framework for expectations and performance evaluation.
Expanded Role. Beyond the traditional HR function, the CHRO needs skills that impact business success, i.e., social media, customer, and employee activism, changing employee expectations of jobs and the work environment, the gig economy, and many more.
Interview Better. When interviewing for a CHRO, key considerations: Do you trust them? Are they looking three to five years ahead to determine talent strategy? Do they have a firm grasp on business dynamics within your industry and your company? Are they able to connect the dots between your company’s mission, values, and every other aspect of the business?
CHROs: ask for and expect more from your CEO
Role. Since many CEOs don’t understand the purpose, show how the CHRO adds value to the organization and is a crucial player in the C-Suite.
Priorities. Ensure HR priorities are aligned with business priorities.
Build and maintain a strong team. As traditional HR requirements never go away, ensure the team to keep those functional areas moving smoothly while the CHRO focus aspects that directly drive business success.
Know your strengths and weaknesses. The CHROs role will continue to increase, so understand where you already provide value, and where they need to grow.
Many companies have not lifted the CHRO to this new role or seen the benefits that they offer; however, the coronavirus crisis has thrust corporate HR chiefs into the spotlight. A CHRO can make or break a company during a pandemic. Never before have more firms needed a hard-headed HR boss.
During the 2008 financial crisis, there was the mantra, “A good CFO could save a company; a bad one might bury it.” Covid-19 now requires a strategic CHRO that is part of what Harvard Business Review calls the G3 – CEO, CFO, and CHRO. CHROs are critical at this time because they are responsible for keeping employees healthy; maintaining morale; overseeing a rapid move to vast remote-working, and, as firms retrench, consider whether, when, how, and who to lay off. How you treat people during this time will live as part of your reputation and culture long after the pandemic is passed. I heard of a company that laid off 300 employees last week and did it with a prerecorded Zoom message. So much for putting employees first! Unlikely the best and greatest will be knocking their doors down when this is passed.
The pandemic makes such “people analytics” more relevant. Beth Galetti, Senior Vice President of Human Resources at Amazon, is an engineer with no HR experience. She oversees 1,000 developers working exclusively on HR software. Amazon’s pre-outbreak investment in digital induction for fresh hires is paying off. “We onboarded 1,700 new corporate employees on [March 16th] alone,” Ms. Galetti reports. Covid-19 may lead to more HR chiefs to adopt such digital systems to improve HR functionality, which will last long after Covid-19 is gone.
At the moment, many CHROs have a multitude of problems. Mala Singh, chief people officer at EA, represents the C-Suite on the pandemic response team, which occupies 60-70% of her day. Her team has been getting staff desks, computers, even noise-canceling headphones for work from home. A significant concern was balancing work with child care, so Ms. Singh gave the caregivers on EA staff as much time as they needed to adapt without using up paid leave. She is digitally monitoring employee sentiment, particularly anxiety. In all businesses, but especially creative ones like EA’s, “having someone stressed about their family situation does not enable productive work,” she explains.
In many companies outside the knowledge industry, HR leaders must strike a balance between treating staff decently and the bottom line. While the instinct is to cut costs through mass layoffs, the crisis provides strategic CHROs with the opportunity to reconfigure company workflow. What needs to be done by whom, what can be automated, and what requires people to share the same space? Workers who were initially considered redundant may be redeployed or reskilled.
The most strategic CHROs should be looking to the other side of the crisis for what skills they may need and start courting key talent wherever it is. Since everyone is working from home, no one is listening to personal calls. For a savvy CHRO, “it’s the perfect recruiting opportunity.”
For those companies that believe they are too small to have a CHOR, I recommend a part-time CHOR who can provide the essential skills required, and leave many of the traditional HR responsibilities to a Professional Employer Organization, i.e., Insperity. PEOs allow the organization to have a full set of HR services while benefiting from the strategic input of a CHOR.
While budgets are tight and you are letting people go, one of the last people you will consider laying off is your CFO; however, maybe you should be considering adding CHOR to manage your human capital better. After the crisis, there will be fantastic talent available to those that are poised to get it.
Copyright (c) 2020, Marc A. Borrelli
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