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Why CHROs are the new C-Suite power players

June 16, 2024
Borderless Leadership

This is the first in Chief’s new series, The New C-Suite, which examines how rapidly-shifting workplace norms and technologies have impacted today’s top corporate power players — and what it means for executive women.

What do Mary Barra, CEO of General Motors, Leena Nair, CEO of Chanel, and Anne Mulcahy, former CEO of Xerox, all have in common? They all once served as HR leaders. Once relegated to the sidelines, HR and People leaders have become a pivotal part of the C-Suite, especially as remote work, ‘quiet’ hiring and firing trends, DEI initiatives, and other talent management functions have taken center stage in the corporate landscape.

According to data firm AON, the failure to attract and retain top talent comes in as the fourth largest risk to organizations today, a huge jump when compared to previous years when it didn’t even rank in the top 10. The need for an executive leader to manage that talent continues to grow, with 473 of the Fortune 500 having a Chief Human Resource Officer, and the role seeing a growth in average salary as well.

The function also continues to be dominated by women. Spencer Stuart research found that 70% of CHRO roles in the Fortune 500 are held by women, trailing only Chief Inclusion and Diversity Officer for sheer representation. Since the role interfaces closely with the CEO and every other department, the CHRO offers essential experience on the way to the corner office.

The New CHRO
The CHRO, sometimes also called Chief People Officer, plays a role that’s constantly evolving. Once seen as strictly dealing with benefits, employee relations, and recruiting, the HR leadership role often didn’t even report directly to the CEO. But today, some of the most influential companies have reworked the position to be more central to the business.

“Larger companies — especially in tech, consumer packaged goods and B2B software — have discovered how powerful a good HR department is,” says HR consultant Daniel Space. While the one word answer a CFO’s job is likely “money,” the answer for the CHRO role should be “people,” suggests Space. This includes driving long-running responsibilities like talent acquisition and retention strategies, but also newer initiatives like diversity and inclusion efforts, as well as compliance with an ever-changing regulatory landscape.

“The Chief People Officer is the architect of talent acquisition, the steward of talent within the organization, and a key influencer of its culture and values,” explains Tammy Perkins, former Chief People Officer with logistics firm HAVI and a former senior HR leader with Amazon and Microsoft.

The CHRO is increasingly expected to also have to have a strong handle on new technology initiatives like AI and data management. In a Mercer survey of 100 CHROs, 79% note a need for more strategic management in the face of disruption, and 60% expect to see an increased use in technology and automation.

Secrets to Success
While improved employee engagement and retention were once the leading metrics used to gauge success, these days there’s more expectations that CHROs contribute to organizational performance across the board.

This means that CHROs must continually implement, measure, and analyze key people metrics. “Creating a solid framework is essential for distinguishing performance levels and making well-informed decisions about talent,” says Perkins. This includes analyzing net ads versus hiring plan, fill ratios, top talent award ratios, management of low-performing employees, promotion rates, succession planning depth, and turnover rates. But it can also involve managing intangibles, such as company culture and overall productivity.

What Women Need to Know
Carving out a powerful position as an CHRO starts with having a good handle on the business. Nearly 40% of CHROs wish they had a stronger grasp of other departments — such as finance and operations — when entering the role, according to the Mercer report.

“In HR, we don’t know how to market ourselves, and due to privacy, we are often isolated. Many leaders don’t have faith in our credibility to understand how to translate business objectives into people strategies,” says Space. “CHROs need to have the opportunity to show and demonstrate this and not just be relegated to paperwork, employee relations and creating performance decks.”

Perkins has done this by establishing close relationships with the CEO and leadership team. “By forging strategic business partnerships, I align organizational goals with the employee experience, fostering positive and trusted relationships with leaders,” she says. “This approach ensures that HR initiatives are closely integrated with the overall business objectives.”

How to Reach the Top
CHROs have a tenure on par with other C-Suite execs, staying about 4.6 years in the role. Turnover hit record levels in 2020 due to pandemic-era disruptions, but that has since slowed, leaving fewer positions open. When positions do open up, firms are often hiring from within. Of 55 openings for the role at Fortune 500 companies, 37 were internal promotions.

For aspiring CHROs, building a strong foundation in organizational development and change management can be a valuable asset. Networking with other C-Suite executives is also a must, as well as seeking mentorship from other CHROs.

Aspiring and existing leaders should also play a role in resisting out-of-date stereotypes and changing the narrative around HR.

“HR must be considered a business partner — not the ‘heart’ of the organization, not the pizza planners, not the police, and not the therapists,” says Space. “With good HR practices, we help organizations help themselves.”

By Lindsey Galloway

Source: chief.co.uk

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