People and Organizations: The Need for Great CHROs
by Pat Hedley, GA Managing Director
"Only one competency lasts. It is the ability to create a steady, self-renewing stream of leaders. Money is just a commodity. Talent supplies the edge."
Bill Conaty and Ram Charan
Talent Masters: Why Smart Leaders Put People Before Numbers
Perhaps more than any other C-level role, the position of CHRO is undergoing continued transformation. Driven by the well-recognized importance of talent and organizational effectiveness as a major value creator and competitive differentiator, world-class CHROs are increasingly business leaders who help build and shape enterprise strategy in concert with the C-level team and the board. Today's CHROs are charged with a mandate directly related to business success: accessing the best talent; retaining, motivating and rewarding individuals and teams, and developing future leaders. CHROs are bridges to the board of directors on a wide variety of issues from compensation to succession planning and to external audiences on brand and company culture.
Several factors have created the need for a more versatile CHRO. Companies are operating in a more complex global marketplace where the demand for capable talent is greater and the competition for that talent is more intense. Recruiting and retention are top agenda items for growth companies and developing the right organizational structures, creating optimal incentive systems and building the internal infrastructure to support growth are key strategic initiatives. Innovative organizations need a leader to help shape the organization, grouping functions together to ensure the best cooperation, interaction and information flow to be effective. CHROs today must possess the industry knowledge and business expertise to devise an HR strategy that is tightly aligned with business strategy, corporate profitability and long-term objectives.
It is no longer appropriate to think of the CHRO as the manager of HR administrative functions and operations. In fact, outsourcing and process improvements have removed the burden of HR administration freeing up time for higher value initiatives. As we have shifted from a manufacturing based economy to the global information age, HR no longer has to manage labor relations but must oversee a more demanding workforce where employee engagement and team productivity drive success. These trends are reducing the emphasis on many traditional HR duties and heightening the focus on talent and leadership development and serving in a strategic advisory role to the C-level team and board as the primary HR leadership objectives.
As companies upgrade the HR function, it will be important to look for professionals who can rise to the continued challenges for the role. In a recent survey, Randy MacDonald, IBM's CHRO, outlined three major areas of opportunity for CHROs:
• Cultivating creative leaders - who can more nimbly lead in complex, global environments
• Mobilizing for greater speed and flexibility - producing significantly greater capability to adjust underlying costs and faster ways to allocate talent
• Capitalizing on collective intelligence - through much more effective collaboration across increasingly global teams. (1)
Some additional issues and areas of focus that will fall within the scope of the CHRO role include:
• Complex global regulatory landscape
• Risk management and compliance
• Communication with a broad range of internal and external constituents
• Change efforts and change management
• Culture, ethics, integrity and brand
• Impact of technology on work, i.e. social media and telecommuting
Jerre Stead, Chairman and CEO of IHS, Inc (a former GA portfolio company) believes that having a top CHRO as part of the company senior leadership team is critical to success. "Today's leading Human Resources executives are essential contributors to business strategy and company performance," noted Stead. "In this dynamic global knowledge economy, companies with the best people, culture and leaders are better positioned to compete, grow and win in the marketplace." Jeff Sisson, CHRO at IHS and GA Special Advisor adds, "In a world where talent, knowledge, and capabilities are the new economic currency, the role of world-class CHROs in contributing to business performance and success has become recognized with top CEOs and in the Boardroom."
At GA we have witnessed and supported the need for high caliber CHROs across our portfolio companies globally. Once a company gets to a certain scale (about 1,000 people) or is experiencing 30%+ growth, adding a strategically focused CHRO as part of the C-level team becomes a ‘must-have' resource and one that can make a big difference in business performance and growth. In fact, we helped recruit half a dozen CHROs to our companies in 2011 and are continuing our focus on this key role at our companies globally. For additional thoughts on the role of the CHRO, please contact GA's Resources Group
(1) "Working Beyond Borders: Insights from the Global Chief Human Resource Officer Study." IBM Corp. p. 3.