HR’s Role as the Architect of Change
Change ManagementPerformance Management
Step 1. Set a clear, compelling strategic direction
'The purpose of an organisation is to create a customer'.
2. Manage what you Measure.
3. Build high performance habits
4. Connect the dots
Beyond self-service to #HR service delivery: the new frontier in HR?
HR leaders are in a position to be innovative leaders in their organisations, and Mark Souter explains that HR service delivery is a perfect way to make a truly meaningful impact to the future of your business
Innovation in HR is exploding. As a result, the HR function is extending beyond core activities like recruitment or talent management systems, and increasingly exploring the service delivery space – addressing the people ‘interaction’ before the HR ‘transaction’ occurs. This is transforming the experience of employees and HR professionals, and increasing the strategic value HR can bring.
HR service delivery is about how HR service and information are delivered to employees, via omni-channel experiences (like using telephones calls/ SMS, chat functionality & other ways we interact in our consumer-world). Often, the standard “self-service” options of HR departments don’t meet the evolving needs of employees today. Employees, who have become accustomed to streamlined, user-friendly experiences delivered by consumer technology, are not very tolerant of a poor service experience and will make decisions to change companies quicker than ever before. Employees expect and deserve a terrific service experience at work; one that looks more like the consumer services they experience every day.
HR departments need to look at some of their standard HR processes and ask whether they are delivering for the future. Consider the heart of HR service delivery – employee enquiries. This is a simple concept but is often one of the last things that HR teams address as a priority. Managers and employees have questions and they need answers. In most organisations, email is still the most common way for employees to ask questions, followed by phone calls and visits to the HR office. When I talk to HR professionals, few can tell me how many enquiries their teams field in a day and they do not have a good understanding of the nature of the questions coming in.
“HR departments need to look at some of their standard HR processes and ask whether they are delivering for the future”
To stay relevant in the era of digital transformation, HR professionals should be focusing on building the workplaces of the future. Yet when they are spending 60% or more of their work week answering emails, responding to the same questions, or manually processing forms, there simply isn’t enough time to dedicate to innovating. HR leaders should have a clear HR service delivery strategy. Most are delivering HR services via email and spreadsheets on a daily basis. These methods don’t provide information about how many enquiries are coming in and what types of questions employees are asking.
Moving towards or automating a HR service delivery model makes a lot of sense. Here are some simple steps that will help:
- Automate workflow: –Minimising manual work is critical. Wherever there is manual work, there is greater opportunity for errors, delays and missed deliverables. Enabling technology to move work through your organisation from requestor to fulfiller is at the heart of an effective service delivery strategy. Without automation, you cannot free up your HR resources to focus on more strategic initiatives.
- Sophisticated cross-departmental case management: The best way to minimise or eliminate email as the primary communication method between employees and HR, is to implement case management functionality with workflow capabilities. Cases are auto-routed to the appropriate person or team for follow-up and response, and everyone, including the requestor, has visibility to the status of all requests.
- Develop a comprehensive HR knowledgebase: Empowering your employees to get answers to their questions without being dependent on HR is at the heart a good service delivery strategy. The best type of HR case, is no HR case! Without a knowledgebase, HR will continue to spend a significant part of their day answering basic questions. Knowledge bases build over time, but once in place, they save organisations huge amounts of time and money.
- HR service delivery platform: To fully automate your processes, you must consider your current HR technology and the gaps in service delivery you are experiencing. Missing from many organisations and HR initiatives is a service delivery platform designed to manage how work gets done across an organisation.
“Enabling technology to move work through your organisation from requestor to fulfiller is at the heart of an effective service delivery strategy”
I recently met with the senior vice president of HR shared services for a leading healthcare organisation. They had just implemented a new service delivery strategy and were already reaping the benefits. Instead of simply relying on phones & email, employees were directed to their new HR service centre to get answers and get the right level of HR support, at the right time. In the first month alone, there were 50,000 knowledge base searches and employee experience rocketed.
As you look to the future: considering the workplace and employee environment you want to create, you have to begin by developing an overall HR service delivery strategy & how people experience the workplace services offered. HR leaders are in a position to be innovative leaders in their organisations, and HR service delivery is a perfect way to make a truly meaningful impact to the future of your business.
Leading HR Technology Trends for 2018
The world of HR – and the compensation branch in particular – is characterized by constant change. Each year, new trends, shifting priorities and technological advancements emerge, driving HR and compensation professionals to always stay on their feet to respond. And 2017 has been no exception – we’re just almost wrapping up the third quarter and we’ve already seen plenty of transformative changes and new trends on the compensation front.
What are the biggest compensation technology trends to emerge this year thus far? Here are the top five that we’ve noticed this year:
Expanding compensation capabilities:
The compensation function has come a long way since the days of relying on spreadsheets, but this year has seen a full blossoming of what compensation technology can really do. More than just searching for market data, users can now use software to manage market prices by different markets, create salary structures, access in-depth reporting and analytics, and view all of this information a mobile device – all pieces that help to build and maintain a robust compensation strategy.
Accessible data for decision support:
The compensation function is the center of all talent management initiatives that intersect pay. A central database of information about the market helps to drive attraction, retention, and engagement decisions. The same database, which also houses information about current internal pay practices can address operational and regulatory decisions, making this information valuable to all aspects of the business.
Greater focus on job descriptions:
The job description is a crucial aspect of any company’s hiring strategy, and it is also essential to an effective compensation plan. By understanding the duties associated with the job, the required skills and necessary expertise, it will become easier to match your jobs and determine the best compensation rates. Too many organizations rely on outdated descriptions that no longer reflect the true nature of the job. Fortunately, more are recognizing the need to revamp their job descriptions and are mapping them out to define the ideal candidate and salary. Ultimately this leads to greater employee engagement, retention and morale.
Technology breaks down age barriers:
The growing functionality of compensation technology has leveled the playing field for younger compensation professionals. With quicker access to data and the ability to aggregate it and drive insights through software, more junior-level staff can perform compensation tasks that traditionally required a great deal of experience.
Doing compensation internally:
It used to be the norm for organizations to hire external consultants to help shape their compensation strategy, if not outsource the whole thing. The presence of new technology and intuitive tools have made it much easier for companies to build a robust compensation plan on their own that truly matches their organizational needs. While consultants are still necessary in some cases, companies can use technology to save significant time on everything from survey management to modeling pay ranges and building job descriptions.
At the end of the day, compensation is an art and a science. It requires a blend of data, the expertise to make informed decisions, and the tools to help facilitate those decisions. And as the space continues to evolve, the market is flooded with new tools to transform how compensation is done. But not all of these tools are equal.
HR Goes Agile
Agile isn’t just for tech anymore. It’s been working its way into other areas and functions, from product development to manufacturing to marketing—and now it’s transforming how organizations hire, develop, and manage their people.
You could say HR is going “agile lite,” applying the general principles without adopting all the tools and protocols from the tech world. It’s a move away from a rules- and planning-based approach toward a simpler and faster model driven by feedback from participants. This new paradigm has really taken off in the area of performance management. (In a 2017 Deloitte survey, 79% of global executives rated agile performance management as a high organizational priority.) But other HR processes are starting to change too.
In many companies that’s happening gradually, almost organically, as a spillover from IT, where more than 90% of organizations already use agile practices. At the Bank of Montreal (BMO), for example, the shift began as tech employees joined cross-functional product-development teams to make the bank more customer focused. The business side has learned agile principles from IT colleagues, and IT has learned about customer needs from the business. One result is that BMO now thinks about performance management in terms of teams, not just individuals. Elsewhere the move to agile HR has been faster and more deliberate. GE is a prime example. Seen for many years as a paragon of management through control systems, it switched to FastWorks, a lean approach that cuts back on top-down financial controls and empowers teams to manage projects as needs evolve.
The changes in HR have been a long time coming. After World War II, when manufacturing dominated the industrial landscape, planning was at the heart of human resources: Companies recruited lifers, gave them rotational assignments to support their development, groomed them years in advance to take on bigger and bigger roles, and tied their raises directly to each incremental move up the ladder. The bureaucracy was the point: Organizations wanted their talent practices to be rules-based and internally consistent so that they could reliably meet five-year (and sometimes 15-year) plans. That made sense. Every other aspect of companies, from core businesses to administrative functions, took the long view in their goal setting, budgeting, and operations. HR reflected and supported what they were doing.
By the 1990s, as business became less predictable and companies needed to acquire new skills fast, that traditional approach began to bend—but it didn’t quite break. Lateral hiring from the outside—to get more flexibility—replaced a good deal of the internal development and promotions. “Broadband” compensation gave managers greater latitude to reward people for growth and achievement within roles. For the most part, though, the old model persisted. Like other functions, HR was still built around the long term. Workforce and succession planning carried on, even though changes in the economy and in the business often rendered those plans irrelevant. Annual appraisals continued, despite almost universal dissatisfaction with them.
Now we’re seeing a more sweeping transformation. Why is this the moment for it? Because rapid innovation has become a strategic imperative for most companies, not just a subset. To get it, businesses have looked to Silicon Valley and to software companies in particular, emulating their agile practices for managing projects. So top-down planning models are giving way to nimbler, user-driven methods that are better suited for adapting in the near term, such as rapid prototyping, iterative feedback, team-based decisions, and task-centered “sprints.” As BMO’s chief transformation officer, Lynn Roger, puts it, “Speed is the new business currency.”
With the business justification for the old HR systems gone and the agile playbook available to copy, people management is finally getting its long-awaited overhaul too. In this article we’ll illustrate some of the profound changes companies are making in their talent practices and describe the challenges they face in their transition to agile HR.
Where We’re Seeing the Biggest Changes
Because HR touches every aspect—and every employee—of an organization, its agile transformation may be even more extensive (and more difficult) than the changes in other functions. Companies are redesigning their talent practices in the following areas:
When businesses adopted agile methods in their core operations, they dropped the charade of trying to plan a year or more in advance how projects would go and when they would end. So in many cases the first traditional HR practice to go was the annual performance review, along with employee goals that “cascaded” down from business and unit objectives each year. As individuals worked on shorter-term projects of various lengths, often run by different leaders and organized around teams, the notion that performance feedback would come once a year, from one boss, made little sense. They needed more of it, more often, from more people.
An early-days CEB survey suggested that people actually got less feedback and support when their employers dropped annual reviews. However, that’s because many companies put nothing in their place. Managers felt no pressing need to adopt a new feedback model and shifted their attention to other priorities. But dropping appraisals without a plan to fill the void was of course a recipe for failure.
Since learning that hard lesson, many organizations have switched to frequent performance assessments, often conducted project by project. This change has spread to a number of industries, including retail (Gap), big pharma (Pfizer), insurance (Cigna), investing (OppenheimerFunds), consumer products (P&G), and accounting (all Big Four firms). It is most famous at GE, across the firm’s range of businesses, and at IBM. Overall, the focus is on delivering more-immediate feedback throughout the year so that teams can become nimbler, “course-correct” mistakes, improve performance, and learn through iteration—all key agile principles.
In user-centered fashion, managers and employees have had a hand in shaping, testing, and refining new processes. For instance, Johnson & Johnson offered its businesses the chance to participate in an experiment: They could try out a new continual-feedback process, using a customized app with which employees, peers, and bosses could exchange comments in real time.
The new process was an attempt to move away from J&J’s event-driven “five conversations” framework (which focused on goal setting, career discussion, a midyear performance review, a year-end appraisal, and a compensation review) and toward a model of ongoing dialogue. Those who tried it were asked to share how well everything worked, what the bugs were, and so on. The experiment lasted three months. At first only 20% of the managers in the pilot actively participated. The inertia from prior years of annual appraisals was hard to overcome. But then the company used training to show managers what good feedback could look like and designated “change champions” to model the desired behaviors on their teams. By the end of the three months, 46% of managers in the pilot group had joined in, exchanging 3,000 pieces of feedback.
Regeneron Pharmaceuticals, a fast-growing biotech company, is going even further with its appraisals overhaul. Michelle Weitzman-Garcia, Regeneron’s head of workforce development, argued that the performance of the scientists working on drug development, the product supply group, the field sales force, and the corporate functions should not be measured on the same cycle or in the same way. She observed that these employee groups needed varying feedback and that they even operated on different calendars.
So the company created four distinct appraisal processes, tailored to the various groups’ needs. The research scientists and postdocs, for example, crave metrics and are keen on assessing competencies, so they meet with managers twice a year for competency evaluations and milestones reviews. Customer-facing groups include feedback from clients and customers in their assessments. Although having to manage four separate processes adds complexity, they all reinforce the new norm of continual feedback. And Weitzman-Garcia says the benefits to the organization far outweigh the costs to HR.
The companies that most effectively adopt agile talent practices invest in sharpening managers’ coaching skills. Supervisors at Cigna go through “coach” training designed for busy managers: It’s broken into weekly 90-minute videos that can be viewed as people have time. The supervisors also engage in learning sessions, which, like “learning sprints” in agile project management, are brief and spread out to allow individuals to reflect and test-drive new skills on the job. Peer-to-peer feedback is incorporated in Cigna’s manager training too: Colleagues form learning cohorts to share ideas and tactics. They’re having the kinds of conversations companies want supervisors to have with their direct reports, but they feel freer to share mistakes with one another, without the fear of “evaluation” hanging over their heads.
DigitalOcean, a New York–based start-up focused on software as a service (SaaS) infrastructure, engages a full-time professional coach on-site to help all managers give better feedback to employees and, more broadly, to develop internal coaching capabilities. The idea is that once one experiences good coaching, one becomes a better coach. Not everyone is expected to become a great coach—those in the company who prefer coding to coaching can advance along a technical career track—but coaching skills are considered central to a managerial career.
P&G, too, is intent on making managers better coaches. That’s part of a larger effort to rebuild training and development for supervisors and enhance their role in the organization. By simplifying the performance review process, separating evaluation from development discussions, and eliminating talent calibration sessions (the arbitrary horse trading between supervisors that often comes with a subjective and politicized ranking model), P&G has freed up a lot of time to devote to employees’ growth. But getting supervisors to move from judging employees to coaching them in their day-to-day work has been a challenge in P&G’s tradition-rich culture. So the company has invested heavily in training supervisors on topics such as how to establish employees’ priorities and goals, how to provide feedback about contributions, and how to align employees’ career aspirations with business needs and learning and development plans. The bet is that building employees’ capabilities and relationships with supervisors will increase engagement and therefore help the company innovate and move faster. Even though the jury is still out on the companywide culture shift, P&G is already reporting improvements in these areas, at all levels of management.
Traditional HR focused on individuals—their goals, their performance, their needs. But now that so many companies are organizing their work project by project, their management and talent systems are becoming more team focused. Groups are creating, executing, and revising their goals and tasks with scrums—at the team level, in the moment, to adapt quickly to new information as it comes in. (“Scrum” may be the best-known term in the agile lexicon. It comes from rugby, where players pack tightly together to restart play.) They are also taking it upon themselves to track their own progress, identify obstacles, assess their leadership, and generate insights about how to improve performance.
In that context, organizations must learn to contend with:
Multidirectional feedback. Peer feedback is essential to course corrections and employee development in an agile environment, because team members know better than anyone else what each person is contributing. It’s rarely a formal process, and comments are generally directed to the employee, not the supervisor. That keeps input constructive and prevents the undermining of colleagues that sometimes occurs in hypercompetitive workplaces.
But some executives believe that peer feedback should have an impact on performance evaluations. Diane Gherson, IBM’s head of HR, explains that “the relationships between managers and employees change in the context of a network [the collection of projects across which employees work].” Because an agile environment makes it practically impossible to “monitor” performance in the old sense, managers at IBM solicit input from others to help them identify and address issues early on. Unless it’s sensitive, that input is shared in the team’s daily stand-up meetings and captured in an app. Employees may choose whether to include managers and others in their comments to peers. The risk of cutthroat behavior is mitigated by the fact that peer comments to the supervisor also go to the team. Anyone trying to undercut colleagues will be exposed.
In agile organizations, “upward” feedback from employees to team leaders and supervisors is highly valued too. The Mitre Corporation’s not-for-profit research centers have taken steps to encourage it, but they’re finding that this requires concentrated effort. They started with periodic confidential employee surveys and focus groups to discover which issues people wanted to discuss with their managers. HR then distilled that data for supervisors to inform their conversations with direct reports. However, employees were initially hesitant to provide upward feedback—even though it was anonymous and was used for development purposes only—because they weren’t accustomed to voicing their thoughts about what management was doing.
Mitre also learned that the most critical factor in getting subordinates to be candid was having managers explicitly say that they wanted and appreciated comments. Otherwise people might worry, reasonably, that their leaders weren’t really open to feedback and ready to apply it. As with any employee survey, soliciting upward feedback and not acting on it has a diminishing effect on participation; it erodes the hard-earned trust between employees and their managers. When Mitre’s new performance-management and feedback process began, the CEO acknowledged that the research centers would need to iterate and make improvements. A revised system for upward feedback will roll out this year.
Because feedback flows in all directions on teams, many companies use technology to manage the sheer volume of it. Apps allow supervisors, coworkers, and clients to give one another immediate feedback from wherever they are. Crucially, supervisors can download all the comments later on, when it’s time to do evaluations. In some apps, employees and supervisors can score progress on goals; at least one helps managers analyze conversations on project management platforms like Slack to provide feedback on collaboration. Cisco uses proprietary technology to collect weekly raw data, or “breadcrumbs,” from employees about their peers’ performance. Such tools enable managers to see fluctuations in individual performance over time, even within teams. The apps don’t provide an official record of performance, of course, and employees may want to discuss problems face-to-face to avoid having them recorded in a file that can be downloaded. We know that companies recognize and reward improvement as well as actual performance, however, so hiding problems may not always pay off for employees.
Frontline decision rights. The fundamental shift toward teams has also affected decision rights: Organizations are pushing them down to the front lines, equipping and empowering employees to operate more independently. But that’s a huge behavioral change, and people need support to pull it off. Let’s return to the Bank of Montreal example to illustrate how it can work. When BMO introduced agile teams to design some new customer services, senior leaders weren’t quite ready to give up control, and the people under them were not used to taking it. So the bank embedded agile coaches in business teams. They began by putting everyone, including high-level executives, through “retrospectives”—regular reflection and feedback sessions held after each iteration. These are the agile version of after-action reviews; their purpose is to keep improving processes. Because the retrospectives quickly identified concrete successes, failures, and root causes, senior leaders at BMO immediately recognized their value, which helped them get on board with agile generally and loosen their grip on decision making.
Complex team dynamics. Finally, since the supervisor’s role has moved away from just managing individuals and toward the much more complicated task of promoting productive, healthy team dynamics, people often need help with that, too. Cisco’s special Team Intelligence unit provides that kind of support. It’s charged with identifying the company’s best-performing teams, analyzing how they operate, and helping other teams learn how to become more like them. It uses an enterprise-wide platform called Team Space, which tracks data on team projects, needs, and achievements to both measure and improve what teams are doing within units and across the company.
Pay is changing as well. A simple adaptation to agile work, seen in retail companies such as Macy’s, is to use spot bonuses to recognize contributions when they happen rather than rely solely on end-of-year salary increases. Research and practice have shown that compensation works best as a motivator when it comes as soon as possible after the desired behavior. Instant rewards reinforce instant feedback in a powerful way. Annual merit-based raises are less effective, because too much time goes by.
Patagonia has actually eliminated annual raises for its knowledge workers. Instead the company adjusts wages for each job much more frequently, according to research on where market rates are going. Increases can also be allocated when employees take on more-difficult projects or go above and beyond in other ways. The company retains a budget for the top 1% of individual contributors, and supervisors can make a case for any contribution that merits that designation, including contributions to teams.
Upward feedback from employees to team leaders is valued in agile organizations.
Compensation is also being used to reinforce agile values such as learning and knowledge sharing. In the start-up world, for instance, the online clothing-rental company Rent the Runway dropped separate bonuses, rolling the money into base pay. CEO Jennifer Hyman reports that the bonus program was getting in the way of honest peer feedback. Employees weren’t sharing constructive criticism, knowing it could have negative financial consequences for their colleagues. The new system prevents that problem by “untangling the two, ” Hyman says.
DigitalOcean redesigned its rewards to promote equitable treatment of employees and a culture of collaboration. Salary adjustments now happen twice a year to respond to changes in the outside labor market and in jobs and performance. More important, DigitalOcean has closed gaps in pay for equivalent work. It’s deliberately heading off internal rivalry, painfully aware of the problems in hypercompetitive cultures (think Microsoft and Amazon). To personalize compensation, the firm maps where people are having impact in their roles and where they need to grow and develop. The data on individuals’ impact on the business is a key factor in discussions about pay. Negotiating to raise your own salary is fiercely discouraged. And only the top 1% of achievement is rewarded financially; otherwise, there is no merit-pay process. All employees are eligible for bonuses, which are based on company performance rather than individual contributions. To further support collaboration, DigitalOcean is diversifying its portfolio of rewards to include nonfinancial, meaningful gifts, such as a Kindle loaded with the CEO’s “best books” picks.
How does DigitalOcean motivate people to perform their best without inflated financial rewards? Matt Hoffman, its vice president of people, says it focuses on creating a culture that inspires purpose and creativity. So far that seems to be working. The latest engagement survey, via Culture Amp, ranks DigitalOcean 17 points above the industry benchmark in satisfaction with compensation.
With the improvements in the economy since the Great Recession, recruiting and hiring have become more urgent—and more agile. To scale up quickly in 2015, GE’s new digital division pioneered some interesting recruiting experiments. For instance, a cross-functional team works together on all hiring requisitions. A “head count manager” represents the interests of internal stakeholders who want their positions filled quickly and appropriately. Hiring managers rotate on and off the team, depending on whether they’re currently hiring, and a scrum master oversees the process.
To keep things moving, the team focuses on vacancies that have cleared all the hurdles—no req’s get started if debate is still ongoing about the desired attributes of candidates. Openings are ranked, and the team concentrates on the top-priority hires until they are completed. It works on several hires at once so that members can share information about candidates who may fit better in other roles. The team keeps track of its cycle time for filling positions and monitors all open requisitions on a kanban board to identify bottlenecks and blocked processes. IBM now takes a similar approach to recruitment.
Companies are also relying more heavily on technology to find and track candidates who are well suited to an agile work environment. GE, IBM, and Cisco are working with the vendor Ascendify to create software that does just this. The IT recruiting company HackerRank offers an online tool for the same purpose.
Learning and development.
Like hiring, L&D had to change to bring new skills into organizations more quickly. Most companies already have a suite of online learning modules that employees can access on demand. Although helpful for those who have clearly defined needs, this is a bit like giving a student the key to a library and telling her to figure out what she must know and then learn it. Newer approaches use data analysis to identify the skills required for particular jobs and for advancement and then suggest to individual employees what kinds of training and future jobs make sense for them, given their experience and interests.
IBM uses artificial intelligence to generate such advice, starting with employees’ profiles, which include prior and current roles, expected career trajectory, and training programs completed. The company has also created special training for agile environments—using, for example, animated simulations built around a series of “personas” to illustrate useful behaviors, such as offering constructive criticism.
Traditionally, L&D has included succession planning—the epitome of top-down, long-range thinking, whereby individuals are picked years in advance to take on the most crucial leadership roles, usually in the hope that they will develop certain capabilities on schedule. The world often fails to cooperate with those plans, though. Companies routinely find that by the time senior leadership positions open up, their needs have changed. The most common solution is to ignore the plan and start a search from scratch. But organizations often continue doing long-term succession planning anyway. (About halfof large companies have a plan to develop successors for the top job.) Pepsi is one company taking a simple step away from this model by shortening the time frame. It provides brief quarterly updates on the development of possible successors—in contrast to the usual annual updates—and delays appointments so that they happen closer to when successors are likely to step into their roles.
To be sure, not every organization or group is in hot pursuit of rapid innovation. Some jobs must remain largely rules based. (Consider the work that accountants, nuclear control-room operators, and surgeons do.) In such cases agile talent practices may not make sense.
And even when they’re appropriate, they may meet resistance—especially within HR. A lot of processes have to change for an organization to move away from a planning-based, “waterfall” model (which is linear rather than flexible and adaptive), and some of them are hardwired into information systems, job titles, and so forth. The move toward cloud-based IT, which is happening independently, has made it easier to adopt app-based tools. But people issues remain a sticking point. Many HR tasks, such as traditional approaches to recruitment, onboarding, and program coordination, will become obsolete, as will expertise in those areas.
Meanwhile, new tasks are being created. Helping supervisors replace judging with coaching is a big challenge not just in terms of skills but also because it undercuts their status and formal authority. Shifting the focus of management from individuals to teams may be even more difficult, because team dynamics can be a black box to those who are still struggling to understand how to coach individuals. The big question is whether companies can help managers take all this on and see the value in it.
The HR function will also require reskilling. It will need more expertise in IT support—especially given all the performance data generated by the new apps—and deeper knowledge about teams and hands-on supervision. HR has not had to change in recent decades nearly as much as have the line operations it supports. But now the pressure is on, and it’s coming from the operating level, which makes it much harder to cling to old talent practices.
Inside the Mind of the CHRO
Jennifer Weber, chief human resources officer (CHRO) for Lowe’s Companies, Inc. has all the qualifications you might expect from a top-level HR executive – and then some. Before joining Lowe’s in 2016, Weber was executive vice president of external affairs and strategic policy for Duke Energy Corp.; a position she took after 20 years as an HR consultant and practitioner, including CHRO for Duke Energy.
Moving out of HR for a season was “daunting,” Weber told attendees at a 2015 conference.1 However, it was ultimately an opportunity that allowed her to test her mettle and prepare for a role at a larger company.
Based on the traditional expectations of CHROs, Kathleen Hogan was a surprising choice for the top HR role at Microsoft Corp. Before being hired in 2014, she was corporate vice president for worldwide services and chief operating officer for worldwide sales. She never held an HR position, yet Microsoft CEO Satya Nadella saw her “as the right person to push our cultural transformation” regardless of functional experience.2
Route to the Top
As these recent case studies show, companies are increasingly looking for well- rounded HR leaders with a range of experiences across departments and business units. That is in large part because HR has become a cornerstone of leading organizations: a team that drives culture as a competitive advantage, helps the CEO stay in touch with employees, and girds the company for success in the ubiquitous “war for talent". In fact, a recent Harvard Business Review article suggests the CHRO may have more influence than any other direct report to the CEO.3
With this new profile come new routes to the top. The classic path to CHRO is a linear series of upward moves come within HR: Recruiter to HR generalist to HR business partner to regional head of HR, and so on. While many CHROs are still successful on that path, Russell Reynolds Associates' analysis of Fortune 100 CHRO biographies reveals that a large percentage are increasingly taking on non- traditional leadership roles along the way.
More than one in four has held a general management role in a business unit, 21 percent have held a leadership role in finance, and 10 percent a sales or marketing role. Nearly 30 percent have held a significant international leadership assignment – likely a reflection of the growing global nature of large organizations.
Looking at CHRO appointments across time, it is clear these trends are even more pronounced among more-recently appointed HR leaders. We observe a 56 percent increase in international experience among newer CHROs compared with longer- tenured ones, for example, and similar upticks in general management and finance experience.
While general management roles can give CHROs a broader view of the organization, our analysis suggests that leading specific areas of human capital – such as Learning and Development (41 percent), Compensation (36 percent), and Diversity and Inclusion (10 percent) – are also an essential element of a career in HR. While a small majority of Fortune 100 CHROs have served as a regional or divisional head of HR, it is clear those roles are by no means a required stop on the route to the top.
Comparing the backgrounds of recently-appointed CHROs to those appointed three or more years ago, there is a decline in almost all traditional HR experiences. Only half of those appointed in the last three years have been a regional or divisional HR head, for example, compared with 64 percent of those appointed in earlier years.
A notable exception to the trend away from HR leadership roles for CHROs is the uptick we observe in those leading HR Information Technology efforts. While the numbers are still small, this increase likely highlights the growing emphasis many organizations now place on HRIT systems, such as employee information databases, payroll systems, benefit administration, and performance support tools. If so, it is likely that an increase in HR Analytics – which showed a large percentage decline on small numbers – will soon follow.
Inside the Mind of the CHRO
To better understand CHROs, Russell Reynolds turned to our proprietary database of psychometric profiles of nearly 9,000 executives, and compared information on current CHROs against more junior human resource professionals, as well as other C-suite executives. The data shows that CHROs are unique, demonstrating psychometric traits clearly different from their colleagues.
STANDING OUT WITHIN HR
Only a small percentage of HR professionals will ever become a CHRO. What separates these individuals from their HR colleagues?
Relative to their fellow HR professionals, CHROs have more active minds. Rather than simply work with the ideas and models that helped them in the past, they continuously seek out new ideas and insights. They also possess a keen independent streak that allows them to embrace emerging, and sometimes even disruptive, practices.
Reading people and situations
HR professionals at all levels deal with people day in and day out, but CHROs go above and beyond in how they interact with individuals from across the organization. Relative to their colleagues, CHROs read people and situations more actively and with clearer understanding, and are quicker to change their approach, behavior, or talking points based on the needs of a specific situation. This is undoubtedly aided by their incredibly active mind.
The decisions made by HR have a long- lasting impact on the organization. They influence who joins, who leaves, and how well people perform while in role. CHROs recognize that their actions can have significant repercussions across the organization. As a result, they are organized and systematic in how they plan, and proactive in how they approach their work. They are naturally deductive thinkers, constantly connecting the dots between multiple parts of the business and between multiple issues, and able to think several steps ahead practices.
STANDING OUT WITHIN THE C-SUITE
HR professionals deal with a diverse array of constituents and stakeholders throughout their career, including essential partnerships with business unit heads and those who lead other functions. Once an HR professional rises up to the CHRO spot and enters the C-suite, they have the added challenge of finding their place on the executive team. Based on an analysis of CHROs and other CxOs, it is clear that CHROs have unique psychological traits that they bring to the table.
Independence of Thought
As mentioned earlier, CHROs have active minds. They are stronger deductive thinkers than their peers; constantly seeking out new ideas, and connecting dots between various parts of the organization, between different people, and most crucially, between different opportunities. They read people and situations well, and can develop a clear-eyed assessment of what is really going on. Notably, they possess an independence of thought that is especially valuable in the C-suite, reducing their likelihood of falling victim to groupthink.
Not surprisingly, as the member of the executive team most focused on people, CHROs are naturally more caring, more sensitive, and more supportive than their fellow leadership team members. They are naturally more responsive to “people problems” in the organization. They can bring to debates and discussions an especially valuable understanding of how a specific decision or action will be interpreted by the workforce, and what the impact will be on morale and retention.
Lastly, and perhaps most importantly, CHROs are a stabilizing influence on the executive team. These are individuals who have spent their careers dealing with heated, emotional situations, and they understand how to make people feel listened to and engaged with. CHROs have some of the strongest active listening skills among members of the C-suite, making them especially valuable sounding boards and advisors within the senior ranks.
What’s Next for CHROs?
Research on successful executives is increasingly showing that leaders who thrive at the senior-most levels of organizations are able to manage competing sets of competencies – pairs of psychological traits that, on their face, seem to contradict each other. They can be both pragmatic and disruptive, reluctant and risk-taking, vulnerable and heroic, and connecting and galvanizing. We call these four pairs of traits Leadership Span.
Leaders who can "span" are able to be high-level, long-term performers, more so than their peers. They are able to flex and adjust for changing circumstances, inside and outside their organizations. They can change and grow as their companies, markets, competitors, and customers shift.
Several of these characteristics will be critical for CHROs in the future:
As companies position themselves for innovation, CHROs will need to be more risk taking and disruptive. This isn't to say that they take their eyes off the risk management aspects of their job, or make foolish and ill-advised moves, but that they think about how HR can enable disruption, and how the company can support new hires who are perhaps significantly different than the typical employee. Being risk taking and disruptive builds on their natural proclivity to push back against group think.
As organizations enter into more alliances, and transform themselves from single monoliths into networks of organizations who share common goals, CHROs will need to help the organization become more connecting. Existing efforts to build networks within the company will need to shift to focus on building networks across organizations. HR professionals will need to rethink their approach to helping employees come together on common goals, even if they don’t share common employers. Being connecting builds on their tendency to be good listeners and to make the workforce feel heard and represented in the corner office.
Considerations for CEOs?
Given the growing complexity of the role, CEOs face a number of vexing questions when selecting a CHRO: Are we looking for a CHRO who will reinforce our existing culture, or help create a new one? Do we want a CHRO with experience outside of HR? Should we look for candidates with experience in emerging areas, like HRIT and HR Analytics?
While not all CHROs will have such non-traditional components to their career paths as Weber and Hogan, almost all modern CEOs are looking for CHROs who can wear multiple hats:
A Strategic Challenger
Every executive who moves up to the C-suite faces the challenge of switching from a laser focus on tactical and performance issues in one part of the business to a broader focus on strategy for the whole enterprise. They also need to be able to push back against ideas and proposals when appropriate. CHROs need to demonstrate not only this strategic mindset, but also a fluency in business operations, product offerings, competitive forces, and market dynamics – issues they might not have been exposed to earlier in their time in the organization.
A Culture Creator
Hand-in-hand with being a thoughtful role model, CEOs also expect a CHRO, perhaps more than any other C-suite member, to be a culture carrier. CEOs recognize the truth in the phrase “culture eats strategy for breakfast,” and understand that who the company is significantly impacts what it can achieve. CHROs play an essential role in creating and nurturing a strong corporate culture; one that lets people perform at their best while achieving strategic objectives.
A Thoughtful Role Model
A CHRO is often perceived as the human face of the executive suite; someone who should be well-attuned to the attitudes and morale of the workforce. This is the executive most likely to not only know employees by name, but to know their back stories, too.
Disruptors and Innovators
If an organization is going to be innovative and disruptive, its senior leaders must be, too. CHROs can help not only position the workforce to be successful in the future, but help grow and develop fellow C-suite members to be able to lead the organization in the future.
Does your CHRO succession plan or search criteria match the commercial needs of your business? Our research discovered that companies increasingly look to appoint business leaders with general management, finance, and international experience.
When Microsoft CEO Nadella publicly stated his intention to create a culture that embraces diversity and inclusion, Hogan was ready to oversee the expansion of parental leave benefits, an increased 401(k) match, and adding Martin Luther King Day to the roster of company holidays. More importantly, she was the leader capable of changing the culture. In 2016, she announced new data on pay rates by race and gender, illuminating the progress the company had made toward equal pay across all categories.
Today's CHRO is a strategic partner, operational expert, thoughtful role model, and a curator of culture. They produce tangible results that reinforce and advance CEOs' strategies. While not every CHRO will have the same opportunity Hogan did to make headlines, effective ones are ready to make measurable impact CEOs can highlight with the Board and every employee.