The. Evolution. Contributor: Mark Arian, Executive Vice President, Corporate Transactions, Aon Consulting

Transcription

1 The Evolution of the CHRO Contributor: Mark Arian, Executive Vice President, Corporate Transactions, Aon Consulting

2 The Evolution of the CHRO The Evolution of the CHRO In recent years, the growing value of corporate functions such as IT and Procurement has boosted their leaders into the C-suite, expanding their influence and ability to shape strategy. Now, it is HR s turn. Far too often, HR is viewed as reactive, rather than proactive. HR strategy is viewed as an end in itself, rather than supporting a broader business strategy. And the metrics by which HR success is measured do not directly correspond to company financials. But this is no longer good enough; HR needs to step up its game. Boards and CEOs are increasingly recognizing the critical importance of human capital in driving business results, particularly in uncertain economic times. They are calling on senior human resource leaders to play a vital C-suite role. Aon Consulting is witnessing a dramatic increase in the demand for Chief Human Resources Officers (CHROs) who can drive change within the organizations, and help senior management lead through change. At the same time, boards and CEOs want HR leaders who will reinvent the human resources function as a talent supply chain process working horizontally across silos rather than vertically within them to fully develop human capital. Many human resource leaders may be unaware of just how strong this demand is, or how fast it is growing. As an indication, one of Aon Consulting s strategic partners, Jason Hanold, Managing Director and Human Resource Officers Practice Leader at Russell Reynolds, reports that more than 75% of his top-level HR searches are for HR leaders who are expected to fill this new role. Hanold estimates that the number has jumped by at least two-thirds in the last five years. In the past, boards and CEOs asked whether the HR leaders had a compensation background, or could go to the board on executive pay. Those are still important competencies, but the most urgent questions are now, Can the HR officers lead the organization through change? Can they address key talent needs globally for the organization and make sure the company is focused on talent? Can they keep people engaged in this difficult economic environment, when in many cases rewards compensation is being cut? Both Aon Consulting and Russell Reynolds note a trend, namely that boards and CEOs want leaders who will be transformational, who will be stewards of the culture, who will drive higher levels of engagement, and who will be the best ones in the company at assessing talent. The recession has made all of those capabilities acutely important. Most companies are now going through tremendous transition. They are being whipsawed by price pressures, the cost and availability of capital, changing consumer needs, the semi-permanent and permanent changes in the economic infrastructure, and the need for business to be careful with the spend. There has been a lot of change in the last 18 months, and there is likely to be much more ahead. Boards and CEOs are calling on CHROs not simply to react to all this change, but to help companies navigate their way through it to be change-management leaders. Right now, the HR Department does not lead change management at most organizations. But if not HR, then who? One of the forces driving this new role is the growing recognition by senior managers that they are often less than successful in leading employees through transition. Recent studies have found that senior leaders tend to rate their change management skills very highly, while the people they lead even their direct reports generally score them poorly. 1 a o n c o n s u lt i n g 2009

3 Most CEOs rise from the finance or accounting organizations they are numbers people. They can manage the financial and organizational sides of the business very well, but they often find that managing the human capital component can be far more difficult. They are increasingly realizing that it takes a different kind of competency to lead people who are passionate about delivering on the organization s commitment. They are looking to CHROs to help them grow that competency. The importance of this was recently demonstrated when a financial services giant sought to save $120 million by trimming its 50,000-employee workforce by 5%. But the plan was not mapped well. Clients serviced by that 5% became disaffected. Employee engagement dropped, which hurt productivity. Top performers saw the handwriting on the wall and left the company. In the end, the company saved only about $13 million, a fraction of its goal of $120 million. Ultimately, boards and CEOs want HR leaders who understand both the dynamics of human capital and the dynamics of business, and how they work together. It is a complex relationship, one that organizations are struggling with, and they are looking to the CHROs to show the way. According to Hanold, this is the kind of change agent the boards and CEOs are asking him to find for the CHRO role. They say, Anybody can pull the costs out of a function that s not a difficult exercise. I want to be able to ask my HR officer how we re going to grow our business organically by 3% and they will be able to think about it and advise the executive committee. These are the kinds of transformative change leaders they want. Aon Consulting and Russell Reynolds independently see that boards and CEOs also want HR leaders who can drive the company s culture. Not the warm, fuzzy aspects of culture, but rather the building of speed and pace in the culture, the high-performance orientation, the lack of tolerance for mediocrity those elements that build appropriate cultural edge. The CEOs recognize that those aspects translate into driving financial performance, and they want the HR officer to be the one who s accountable for driving that proactively. As a corollary, senior management is looking for the CHRO to be a change leader in the HR function itself. Since talent drives growth, the talent supply chain should be the driving force within an organization, particularly in a global business. That cannot happen as long as HR is mired in the 1950s model that lays it out as a series of silos, such as recruiting, benefits, and compensation. Boards and CEOs are not pushing for a more efficient delivery of what HR has always done, but rather for a complete reimagining of HR as a business process in which talent is acquired, developed, and retained across every silo. This type of thinking has already taken hold in other areas of business, such as in supply chains and in sales and marketing centers, but HR is not thinking along these lines. Benefits do not drive performance nobody thinks that. So why, if HR wants to be a strategic partner of the CEO, is it organizing the function around benefits? One common thread throughout all this is employee engagement. Aon Consulting is seeing a much greater demand for HR leaders who know what it takes to drive engagement. Senior management is well aware that studies have demonstrated a high correlation between employee engagement and business performance, and that is where they want the CHRO s focus to be. This means that CHROs need to leverage employee engagement as a critical ingredient to driving and accelerating successful organizational change. Interestingly, studies have also found strong connection between how engaged employees are, and how they view management s ability to create shareholder value and lead through change. And so here is another area where the CHRO role in guiding senior management can have a significant impact. It may surprise some HR leaders to learn that many CEOs want them as opposed to other members of the executive committee to be their most trusted advisors. We often see this when a new CEO is coming in, says Hanold. They ll say, I want my HR officer to be my trusted advisor, my confidant. a o n c o n s u lt i n g

4 The Evolution of the CHRO What the CEOs are looking for is the kind of advice that no one else in the C-suite can provide. The description that we hear most from CEOs, says Hanold, is, I want them on the executive committee so they can be the referee between the conflicting agendas. Those agendas range from the professional to the interpersonal. Many leaders recognize that they have a blind spot when it comes to emotional intelligence and they want someone with a high EQ to be their coach and guide, he adds. You have a prime opportunity for HR officers, who typically have a spike in navigating around emotional intelligence, says Hanold. In some way, it s pattern recognition with leaders. If there is chemistry between the CEO and the HR officer, if the CEO trusts him or her implicitly, that becomes a very powerful relationship. Our whole search is focused on that chemistry. Aon Consulting is convinced that boards and CEOs are demanding transformational CHROs because they have no other choice because, in the end, no one else but HR can take ownership of the human capital component, or help senior management learn how to lead through change, or create the talent supply chain process that has become so critical to business success. The role of the CHRO is no longer a luxury in business. Boards and CEOs are saying that role is now a necessity; they want and need HR leaders to rise to the occasion. Mark Arian is Executive Vice President, Corporate Transactions, at Aon Consulting. He can be reached at or mark_arian@aon.com. 3 a o n c o n s u lt i n g 2009

5 Aon Consulting is among the top global human capital consulting firms, with 2008 revenues of $1.358 billion and 6,300 professionals in 229 offices and 90 countries worldwide. Aon Consulting is shaping the workplace of the future through benefits, talent management and rewards strategies and solutions. Aon Consulting was named the best employee benefits consulting firm by the readers of Business Insurance magazine in 2006, 2007, 2008 and 2009.