The Increasing Responsibility of CHROS: Proving Strategic Value
Much has been written about HR’s emerging role as strategic business partner. But, a study involving over 100 directors reveal that executives still view HR as a highly transactional support function that usually does a great job with compensation and benefits – but not as an influential strategic player in the boardroom. Consequently, chief human resources officers (CHROs) must often demonstrate their value as a true strategic partner.
Executive Perceptions of HR and CHROs
According to the Harvard Business Review, research shows that although CEOs worldwide view HR as a top challenge, they rank HR as the eighth or ninth most critical aspect of an organization. A survey by People + Strategy and the National Association of Corporate Directors concluded that 71 percent of directors rank the CHRO as an excellent or good leader of the HR function. But, less than 31 percent reported that the CHRO has a good or great amount of influence on board decisions.
Interestingly, the CHRO is reportedly one of the top earners in the C-suite. The Harvard Business Review reported in 2014 that CEOs and COOs are the highest-paid executives. CHROs are next, earning an average annual base salary of $574,000. If salary ranking is any indication, the CHRO is an important aspect of operations.
Redefining the CHRO’s Role
The CFO’s role is defined by the board, external auditors, regulators and investment communities. This is not the case for CHROs, whose role typically is defined by the CEO. Therefore, CHROs must ensure that the CEO has a clear view of potential contributions this C-suite position is capable of making, such as:
- Improving business outcomes through strategic HR management
Organizational performance largely depends on the fit between individuals and jobs. A poor fit can severely damage the bottom line, which the CHRO can prevent by identifying gaps in skills or behavior. A consistent collaboration with the CFO can ensure that assigned jobs, key performance indicators and budgets will produce desired results. Of particular value is a CHRO who is able to make meaningful predictions about the competition by examining established and potential competitors.
- Evaluating problems
The CHRO is in a unique position to detect why the organization may not be meeting objectives or performance goals. Instead of hiring outside consultants, the CHRO, CEO and CFO should work together to examine underlying external factors – such as economic slumps or falling interest rates. The CHRO can link external factors data to the company’s social system – that is, how employees are behaving or how they’re working together – to uncover areas causing unnecessary friction.
More Transformational, Less Transactional
To reshape their board’s traditional view of HR, CHROs must become increasingly involved in planning efforts, for example:
- Leverage technology to engage your people. By measuring performance and providing feedback, you can empower your colleagues with information and give them the opportunity to accomplish tasks.
- Listen to your people and be prepared to develop strategies with the board that take action and resolve key problems. Surveying your people is a great method to show your employees that 1) you are listening and 2) you care. However, if you are going to listen, be prepared to take action.
- The CEO and C-suite succession process – from identifying and developing candidates, to choosing successors, to supporting the new executives.
Studies show that most CHROs have some work to do before their board views them as the top influential strategic partner. But, CHROs can make headway by exhibiting their value to the CEO and becoming advisors to the board.