HR Compliance

The New CHRO: Top Strategic Leader who Owns Human Capital Agenda

In many organizations, the CHRO has joined the C-suite as an executive leader of the human capital agenda. To create the most business value, the CHRO must be able to lead up, down and across with a strategic mindset through continuous change.
By Donna Chan

The evolution of the Chief Human Resources Officer (CHRO) position has many implications for the person filling the role and for the organization. The CHRO must be a strategic leader who manages a business unit, owns the human capital agenda, and is capable of working with and advising internal and external stakeholders from the Board of Directors and CEO to industry peers.

Challenges faced by CHROs include developing the new role without much guidance, given its relative newness, and developing the right skills required for a changing business environment now and in the future.

Creating business value will depend on the CHRO’s ability to balance strategic and operational demands in a way that drives talent outcomes in alignment with business strategic goals.

Going Strategic to Face Volatility Head On
There is general agreement that one of the most radically transforming positions is the CHRO, an executive-level position that answers directly to the CEO and reports to the board. Historically, the Human Resources director has answered to an executive-level position such as the Chief Financial Officer or the Chief Operations Officer, keeping a filter between the HR function and the CEO.

In the changing, competitive business environment, it has been recognized that talent management is critical to meeting business goals. The HR position transformed into an executive position included in the C-suite, but with that transformation came expectations that CHROs would possess the ability to change traditional human resources practices into a human capital agenda that drives business outcomes.

The first challenge CHROs face is the lack of role models. Today’s CHROs are the transformative leaders who are shaping the new role as a value generator through business acumen, strategic and tactical leadership skills, data-based decision-making, and high-level communication skills. The CHRO must be able to fully integrate the talent management process with the strategic goals of the business within a dynamic environment.

This is a very challenging responsibility given the extreme volatility and uncertainty that defines the business environment. It is up to the CHRO to successfully lead in order to meet board and CEO expectations, and cross-functional needs for talent, and all while managing the HR business unit.

What the Next Generation of CHROs Should Know
AON Hewitt conducted the “Learning to Fly” study and summarized the key findings in “Developing the Next Generation of CHROs.” Forty-five global CHROs were interviewed to get their perspective on position requirements, needed skills and competencies, dealing with different stakeholders, and what the next generation of CHROs should know.

This interesting survey revealed that organizations are not doing a good job of planning for and developing the capabilities of internal candidates for CHRO succession planning. Five areas of development were identified: Leading up, leading across, leading the function, leading externally, and leading self. The recommendation is that organizations use the 70/20/10 model of 70 percent experiential learning, 20 percent networked learning, and 10 percent training opportunities.

The study makes it clear that CHROs must become strategic leaders who serve as the link between the board, CEO and HR outcomes. The CHRO owns the human capital agenda and thus assumes responsibility for aligning leader behaviors with organizational goals, developing agility and adaptability in the workforce, taking an advisory lead on executive compensation and succession planning, while being a full peer and participant in C-suite team strategy development and management to driving business results.

There is also a CEO expectation that the HR function will be a high performing team that connects everything it does to business strategy and across functions. Finally, the CHRO is a brand ambassador, works with regulators on compliance, builds relationships with peers, and connects with academia.

Such a broad agenda may seem daunting, but moving into the C-suite means the CHRO has to develop the competencies that executives need to think strategically, drive change, and influence others.

Most of the CHROs interviewed were tapped for the positions because they had experience inside and outside of HR, had developed a global mindset, and had worked in different industries. The global mindset did not come only from working in other countries. Many of the CHROs had never worked outside the U.S. but learned through interacting with people from different cultures. It is important for the CHRO to coordinate with the Chief Diversity Officer to develop a diverse candidate pool and workforce because diversity brings innovation and more globally relevant business, keeping the company competitive and able to meet long-term goals. Bringing a global mindset to the CHRO position enhances the relationship.

Staying Ahead of Change
The new CHRO is a person who is a team leader, and advisor to the executive suite, a relationship builder, a peer coach, network builder, industry participant, and business unit leader.

That is not all. The CHRO must have financial acumen because compensation and benefits costs are a major component of an organization’s expenses, and technological knowledge to increase employee engagement through technology solutions. Financial and technology acumen contribute to the ability of the CHRO to design and administer employee rewards structures, which contribute to the Employee Value Proposition.

The advice current CHROs give future peers is to spend the time developing the competencies and capabilities needed to own the human capital agenda. Dynamic business environments demand CHROs able to get ahead of trends, new developments, and unexpected events. That leads to one other role the CHRO plays which is risk manager.

Boards and CEOs are acutely aware of the importance of being able to attract, engage, retain, and develop the right talent and to have a successful succession plan. The risk of losing competitiveness in the labor market is high, and that can impact sustainability.

The CHRO must be able to stay ahead of change and help the business gain a competitive advantage. It is imperative that organizations understand the importance of developing a CHRO able to successfully drive high performance in a multi-cultural, multi-general workforce where change is business as usual.