Big Debate Title

One giant leap for HR


Traditionally, CEOs have come from a finance or operational background but there are clear links between HR activity and the skills needed to lead a business…

Words by Dan Cave | Design by Theo Griffin

 
 

The HR pipeline is filled with people who don’t want the {CEO} job

 

I often hear that HR leaders don’t want to be CEOs or COOs. I think that is – and this is strong feedback – unacceptable

 

Earlier this year, HR Grapevine spoke to a roster of senior HR leaders asking if the function was ready to become business leading. Answers ranged from it had the capability to – indeed, many organisational aspects that HR has ownership over, such as employee engagement and productivity, are now considered critical to business success – to it was lacking in the mindset needed to lead. Kevin Green, both an ex-CEO and ex-HRD, told HR Grapevine that whilst much of the people function still performs a supporting role, at the top of the profession HR leaders are re-imagining their job to include more business strategic and leadership aspects; central parts of the skillset for the top seat in business: the CEO position.

Despite this apparent new alignment, between HR leadership and the skills needed to become a CEO, HRDs rarely go on to the top. A 2013 report from Mullwood Partnership found that only five per cent of HR leaders went on to get the hottest seat in business. Mary Barra, CEO at General Motors, is one rare example. Nigel Travis is another. He became CEO at Dunkin’ Brands, the parent company of Dunkin’ Donuts, as well as Papa Johns, after spending 20 years working in HR. Kevin Green also bucks the trend. Prior to spending almost a decade as CEO of the Recruitment & Employment Federation, Green spent five years as HRD of Royal Mail. Yet, as Green sees it, most HRDs don’t harbour ambitions of getting the top job. “If we asked how many HR directors want to be CEOs,” says Green, “I think it would be a low percentage. We get loads of nice people, and lots of pleasant people but we don’t end up with the best business brains.”

 

‘Unambitious HR’
Green isn’t alone in his thinking. Marc Effron, President of The Talent Strategy Group, works in leadership consulting and talent management, and emphatically believes that HR won’t start to produce CEOs. “The HR pipeline is filled with people who don’t want the job. There’s no interest,” he explains. Could it be that if the HR function isn’t associated with paths to the top then “the best business brains” are, in Effron’s and Green’s thinking, perhaps unlikely to want to join HR in the first place? “If HR is to produce CEOs, they first need to drain the pipeline and fill it with people who love business and fill it with people who have the ambition to do something more than operate two or three levels down,” Effron adds.

The HR pipeline is filled with people who don’t want the {CEO} job

 

Changing CEO skillsets
Despite HR not being a traditional route to the top, or HR practitioners apparently not wanting to become CEOS, it’s not to say high-functioning contemporary HR leaders don’t have the skillsets needed to work as the top executive. Whilst gaining an MBA from Harvard or having a background in finance and core business operations are the most typical routes to the top job – a 2015 Forbes article found that 32% of Fortune 100 CEOs, at the time of publishing, were previously CFOs – one think piece on paths to becoming a CEO concluded that “[future] CEOS will be confronted with countless unforeseen issues and challenges…[therefore] throwing something else into the mix is certainly useful.”

Some of these challenges were noted by Harvard Business School. The organisation recently charted what today’s CEOs are spending their time doing. It found that where they spend the overwhelming majority of their working day is on tasks that senior HR practitioners, in mature – to steal Bersin phraseology - HR departments, will be familiar with. Most Chief Execs spend the majority of their time on people and relationships. They spend the second largest chunk of their time on strategy and the third highest on organisation and culture. All core parts of a successful HR leader’s job.

 

Most common first job functions of CEOs

Business Development

Sales

Engineering

IT

Consulting

Finance

Entrepreneurship

Operations

 

HR’s silver lining
In fact, today’s CEOs – of which it is unlikely that many, if any, came from HR backgrounds – struggle the most with parts of the job which are HR’s bread and butter. According to executive search firm Egon Zehnder, in 2018 50% of CEOs cited problematic areas as driving cultural change with almost the same number (47%) struggling to develop senior leadership capability within their organisation. Balancing short-term and long-term transformation they also found difficult. Therefore, could it be that HR’s skillset makes it suitable for the top job?

A good HR person can bring {to the CEO role} a longer-term view that doesn’t purely use the balance sheet as a case for business success

Jig Ramji, Global Head, Leadership and Talent Development at Bloomberg LP, believes that in the age of disruption, HR is used to taking a long-term view which could set up HR leaders to be good CEOs. “A good HR person can bring [to the CEO role] a longer-term view that doesn’t purely use the balance sheet as a case for business success. I think, in the future, a mixture of having a marketeer, HR person and CFO mindset is the perfect balance to CEO success,” he says. Even traditional aspects of the CEO job which HR might not have had expertise in – such as having a handle on data and financials – Ramji believes HR is getting better at. “The shift in HR is moving in that direction,” he explains. However, he does believe there is a dearth in HR understanding product lifecycle and marketing which he defines as crucial parts of a CEO’s skillset.

 

boxout 2

 

CHRO to CEO
The historically close relationship between CHROs and CEOs means that this element of senior HR leadership has exposure to the business and those that display business leading characteristics .The Center of Executive Succession found that CHROs are the most likely confidant of CEOs. Additionally, CHROS are most likely to report into CEOS. As such, Ramji thinks it is strange the move from CHRO or HRD to CEO doesn’t happen more. “The partnership between the divisional heads of HR is strong with business leaders – they’re actually learning large aspects of the business whilst they’re in HR roles – so there’s no reason that move shouldn’t happen,” he adds.

In addition, CHROs are increasingly picking up tasks and projects which align more with business functionality than traditional HR services. A 2018 Service Now survey found that 75% of CHROs believe their role is more strategic when compared with three years ago. They also reported being three times more likely to contribute to organisational strategy and over three times more likely to be involved in looking at corporate performance. They were also eight times less likely to be looking after core HR services. If HR has exposure to the core business functions, and also the skillsets that CEOs increasingly need, is it mindset that is holding them back?

I often hear that HR leaders don’t want to be CEOs or COOs. I think that is – and this is strong feedback – unacceptable

 

Getting the CEO mindset
“I often hear that HR leaders don’t want to be CEOs or COOs,” explains Ramji. “I think that is – and this is strong feedback – unacceptable.” For Ramji, HR is the function that regularly pushes cross-function movement in organisations, understanding the benefits this behaviour brings. It is also behind development programmes. “However, if HR are not willing to follow the philosophies they espouse I don’t see how they are role-modelling,” he adds.

Ramji suggests that maybe it is because of the mindset of those that reach the top of the HR profession; positing that if HR leaders already spend so much time around the senior leadership and aren’t getting the top job then something must be up. “Maybe there hasn’t been the right calibre of HR leaders within the organisation. It could be [ that there is a barrier to HR people getting the top job] but that could be because of the experience they’ve had with their existing portfolio of senior HR people.”

For Bloomberg’s leadership honcho, it’s not just about HR’s skillset and mindset that’s getting in the way: the organisational view of HR will also have to change if more senior HR leaders make it to CEO. “I think organisations have to be clear that they don’t want people in senior HR roles that are not willing to take risks or do different things. These people often end up being the most successful anyway,” he says.

Effron adds that if HR is to start producing more CEOs, then it has to recruit more “business-focused” minds into the functions and give them exposure to executive-level discussion early on. Ramji agrees – saying that a “new archetype” of HR future leader is needed before the function can seriously start considering becoming a CEO pipeline. “I think it’s a two-staged approach. If the future Heads of HR change…then that will lead to CEOs with a background of being in the future HR role.”

Yet, before that’s possible there has to be the appetite for it. Effron cites a recent US survey which looked at why HR pracititoners wanted to be in the role they were in. “The largest reason was ‘to balance the needs of the employees and the company’,” he says. “I can’t imagine a CEO of a publicly-traded company giving that response when asked why they wanted to be CEO.” Damning stuff.

meteor
 

A good HR person can bring {to the CEO role} a longer-term view that doesn’t purely use the balance sheet as a case for business success

 
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