Why Is It So Hard To Be A Chief HR Officer (CHRO)?

Times have changed. Once considered the junior executive in the C-suite, today the CHRO may be the most important of all. And as AI transforms our businesses, the job gets bigger every day. (Jack Welch often said the CHRO was the #2 most important job in the company.)

 

Companies Have People Challenges Everywhere

Let me start with the obvious: companies have people issues everywhere. Most companies still struggle with hybrid work, managers and employees are stressed, and employee happiness is low. The trauma of the pandemic severed the link between company and employee, enabling workers to push for flexibility, higher wages, and more benefits.

Dealing With A Labor Shortage

In the middle of this we face an ongoing labor shortage. Low fertility rates and retiring baby boomers have pushed unemployment rates to 50 year lows and this problem won’t go away for decades. The traditional “hire to grow” model is failing, as we see the cycle of “hire, then layoff” in fast-growing tech companies. (Read our new research on talent acquisition.) CHROs have rethink the hiring model to one of “growing productivity and internal mobility,” a shift which is harder than it looks.

Redesigning The Organization

And there’s more. In the last few years companies have finally decided to do away with the functional hierarchy. Most companies we talk with are flattening, reducing mid-level managers, and operating in a more cross-functional way. Forward thinking organizations (Bayer, ING Bank, Telstra, Mastercard, Netflix) are adopting a new operating model we call the “The Dynamic Organization,” creating high levels of agility and faster time to market.

The CHRO must lead this effort, and help redesign the job architecture, pay practices, managerial roles, performance management, skills models, and career strategy.

Every Company Is Now Global

Consider globalization. Thanks to remote work, every company is now global. This means we all have to understand global labor practices, different talent markets, and how to lead remote teams. The CHRO must lead decisions like where to hire, where to locate facilities, and how to globalize leadership, pay practices, employment policies, and labor relations.

M&A

We’re also in a cycle of consolidation. Industries like media, retail, healthcare, and technology are consolidating. This means most CHROs are dealing with an acquisition or the prospect of being acquired. These deals force issues like downsizing, organizational integration, and senior leadership alignment. Many blame Boeing’s problems with the 1997 acquisition of McDonnell Douglas, which created the failing new culture. CHROs have to become experts at buying new companies, integration, and leadership alignment.

Improving The Leadership Pipeline

This lead to another tricky role: dealing with new models of leadership. As our Irresistible Leadership research shows, leadership models have changed. Not only do we need to grow general managers, but leaders are now everywhere. Flatter organizations force companies to build leadership skills at all levels.

When done well (as I discuss for Marriott and Delta below), leadership development is pivotal. Of all the HR investments we make, leadership development drives the most value, and the CHRO must lead this effort.

Updating Legacy HR Technology

HR technology is a bit of a mess. Companies have dozens (even hundreds) of legacy HR systems, littered with tools for recruiting, training, scheduling, onboarding, surveys, and compliance. AI promises to help, but even Workday customers are fed up with their systems, (read “Why Everyone Hates Workday”). The CHRO can no longer ignore technology: they have to clean this up.

Redesigning the HR Function

And finally there’s the complex job of running HR. The CHRO leads one of the most complex functions in the company. The CHRO must transform the HR team, moving from the “service delivery” model to an HR team of consultants, problem-solvers, and analysts. This means creating a Systemic HR operating model, simplifying the employee experience, and developing HR professionals who can advise senior operational leaders.

What Does A High-Performing CHRO Look Like?

We talk with hundreds of CHROs each year and we’ve built a model to assess performance. Great CHROs are HR experts, they’re creative change leaders, and they’re C-level business executives.

Last month at our Irresistible Conference we celebrated two world-class CHROs, Joanne Smith the Chief People Officer of Delta Airlines and Ty Breland, the CHRO of Marriott. These individuals helped lead their consumer-focused companies through the pandemic into the greatest growth ever. Delta is now the #1 rated airline in the US, and Marriott is now the #1 hospitality company in the world. In both cases, as our HR Hero Award points out, these individuals demonstrate creativity, business-minded thinking, and a wide range of skills in the domain.

Introducing Our CHRO Research Program: CHRO Insights™

We are in the middle of launching a major CHRO-oriented research program to study the CHRO role, including research, education, and tools. What we’ve discovered already (we’ve looked at data on 47,000 global CHROs), are a few important things.

First, there is a major increase in the C-level importance of the CHRO.

CHRO pay has rapidly increased, and more and more companies tell us that HR is leading the company’s AI initiative, productivity program, and culture change.

Second, the CHRO job more difficult than it looks and many are replaced by their CEOs.

Most companies do not have good succession plans for the CHRO (84% of high-impact CHRO positions are filled externally), telling us we need to focus on building CHRO skills. This inspired us to focus here, and you’ll see more from us about CHRO professional development in the coming months.

Our global HR capability model covers 94 different areas, and the average level of confidence (among more than 11,000 HR professionals) is around 3 out of 5. Imagine the variety of issues that CHROs must face: everything from AI strategy to global culture to employee experience, pay, diversity, and more. This is why most high-impact CHROs have multi-disciplinary backgrounds (social sciences, psychology, history, and some in STEM).

Interestingly, I just talked with the senior partner for CHRO placement in a global executive placement firm. He told me that among the 200+ CHROs he placed in the last several years, a large percentage of them had “failed” in their C-level role and were asked to work for another replacement CHRO. I’m not saying this is the majority, but he sees it as a growing trend.

Third, the CHRO role is expanding.

Many of the CHROs I talk with now own the facilities strategy (because facilities impact hybrid work, benefits, and work experience), the total employee experience strategy (including mental health and wellbeing), the productivity strategy, as well as the compliance, training, recruiting, pay, and performance program. The role continues to expand

Fourth, strong CHROs are now transforming the HR function.

Companies are using our Systemic HR model to consolidate functional silos in HR, create new product and solution teams, and cross-train the HR team to deal with AI and these new issues. Our Systemic HR study found that almost 75% of HR departments are going through some form of internal transformation.

Consider the simple fact that only 13% of L&D departments are actively involved in skills strategy or talent acquisition, and only 8% of talent acquisition teams are involved in workforce planning and internal career mobility projects. There is lots of work to do in this area.

Finally, the HR function is not developing itself.

Let me add one final blockbuster. Not only are there very few CHRO succession programs (as I mentioned, more than 80% of high-performing CHROs come from the outside), the level of investment in HR Professional Development is dismal.

Our Systemic HR study found that only 18% of HR departments have an internal development program, 19% rotate people between HR and the business, and only 55% state they have a “culture of professional development” in HR. This has to change.

Later this summer we will be launching our first study of the CHRO role, and describe our CHRO Insights program in more detail.

In the meantime I want to celebrate those of you who take on (or aspire) to these roles, and let you know we’re working on some exciting things to come.

PS. If you’d like to be interviewed for this research please reach out and we’ll set up a call.

Additional Information

Introducing The Systemic HR™ Initiative

Learn about Galileo, the World’s AI Expert Assistant for HR

Special Josh Bersin Academy Course: AI in HR (highly acclaimed)