Why CHROs make great CEOs

HR doesn't produce a dime’s worth of revenue. They do not make nor improve nor sell any products. They don’t account for one red cent of profits. They are just an overhead item, a large element of overhead, an unavoidable expense that diminishes the earnings produced by the operating groups. - Kent’s response (a Quora user) to a query - “Can HR become CEO of a company?”

Now to be fair, how do we tell Kent that HR has grown since the last time they asked for his signature on hiring documents. Perhaps he only came across outmoded & inefficient HR processes. Or it may be Kent voicing his dissatisfaction with the fantasy world's outmoded bureaucracy?

“Human resources isn’t a thing we do; it’s the thing that runs a business.” - Mary Barra.

The HR department, for decades, was regarded as a cost centre responsible for routine administrative tasks. Not anymore.

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Two researchers find a surprising evidence

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Years back, Dave Ulrich - the Father of Modern HR and Ellie Filler - Chair Member of Korn Ferry, collaborated to examine the CHRO’s role within the C-suite. After studying numerous sets of data, the two colleagues found out a striking evidence of CHROs' increasing responsibility with regards to the CEO's role.

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An experiment was carried out

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Filler and Ulrich scored 14 different leadership aspects and divided them into three categories: leadership style (how C-suite executives act and want to be perceived in groups), thinking style (how they approach situations in private) and emotional competency (how they deal with ambiguity, pressure and risks.) The results were contrasted by evaluating the presence of these three attributes among the C-Suite executives (COO, CHRO, CFO).

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Its shocking results...

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Chief Human Resources Officers had the most traits in common with the CEO among the other C-suite executives. "This finding is very counterintuitive - nobody would have predicted it," Ulrich said. The two researchers later came up with a surprising suggestion because of their discovery: more firms should consider CHROs when hiring a CEO.

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Why Chief Human Resources Officers make great CEOs

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Filler and Ulrich argue that in today's economy, hiring the right talent, establishing the proper organisational structure, and cultivating the right culture are critical to driving strategy—and that having worked as a CHRO makes a leader more likely to succeed at these tasks.

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1. They are well-versed at putting talent strategy first

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HR heads are the only ones familiar with the two most critical aspects of leading a people-first company: 1. sourcing, recruiting & deploying talent, and 2. considering talent during strategic decisions of the organization.

Referring to his two colleagues - Dennis Carey and Ram Charan, Dominic Barton wrote,

“In our combined 90 years of advising CEOs (and their boards), the three of us have never come across a moment like this, when every CEO we work with is asking the same daunting set of questions: Are my company’s talent practices still relevant?” How can we recruit, deploy, and develop people to deliver greater value to customers—and do so better than the competition? How can I be sure that I have the right approach to talent—and the right HR— to drive the changes we need to make?”

This means shifts in HR, and major shifts, are finally happening.

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2. They build the organisational structure, not just processes

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The company board members often overlook discussions about talent. This is because many boards prioritise strategy & compliance above employees. But CHROs lead a talent-first firm and therefore would persuade the board that talent is the source of value and must be at the top of the board's agenda. Likewise, a CEO who is driven by talent will concentrate on two types of "TSR": total shareholder return and Talent, Strategy, and Risk.

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HRs who became CEOs: An instance where HR built a future-ready organisation

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Leena Nair, CHRO at Unilever, has recently been announced as the global CEO of the French luxury brand Chanel. Unilever’s CEO Alan Jope says, "She (Leena Nair) has played a critical role in building our purpose-led, future-fit organisation, which is now the employer of choice in over 50 countries globally.”

Because this is a recent event, the stress has grown even more profoundly on putting people management and HR at the centre of an organisation. Nair has served at Unilever for nearly 30 years, and will now begin her new role as CEO in January 2022.

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3. They view company culture as a business driver

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What is different about the CEOs at talent-driven companies like Apple, Google, Facebook, and Tata Communications? They look at talent considerations as an integral part of every strategic decision.

Among the few HRs who became CEO, Arundhati Bhattacharya, CEO of Salesforce, believes that exposure to the HR function gives C-suite leaders a first-hand sense of what people are going through. “I had a far better idea (as an HR) and grip of the entire workings of various departments.”

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HRs who became CEOs: An instance where HR prioritised people & culture over redundant policies

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Mary Barra (also among the few HRs who became CEOs) is one of the most closely watched executives ever since she became the CEO of General Motors. When she was directing human resources at the company, she converted the company's corporate dress code from ten pages to 'dress appropriately.'

When asked why, Barra explained to an interviewer: “I can trust you (employees) with $10 million of budget and supervising 20 people, but I can't trust you to dress appropriately?” This turned out as a step towards productivity that empowered people to value their work and culture.

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4. They define the leadership model & team dynamics

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CHRO-CEO are inclined to make sure they have the necessary talent in-house before diving into strategic and financial planning. What is the greatest method to nimbly match the right talent to the right strategic projects? Building agile organisations around empowered teams.

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HRs who became CEOs: An instance where HR set an example as the team developer

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Mary Barra used 'leadership jiu-jitsu,' as I like to call it, using her profound knowledge of the General Motors to both stimulate & guide the positive energy of her team. She eventually helped the company recover from its public relations disaster (something the company was suffering from) and positioned herself as the respected global automaker's CEO. Barra was later rewarded with another promotion: the combined role of Chairman and CEO.