The perception and status of the Chief HR Officer (CHRO) is changing. To date, the CHRO has often been accused of lacking strategic input at board level and has struggled to have a seat at the top table. Now, rather than being absorbed into the finance function as some have suggested, the role has stood its ground and flourished.
Traditionally, the Chief Financial Officer (CFO) has been the CEO’s right hand man at the helm of the company. Now, savvy CEOs are flanked by the CFO and the CHRO, whose contribution in creating value and managing change through talent is seen as a decisive factor in shaping the future.
What has brought about this change?
While finance chiefs are naturally analytical and cultivate an unwavering return-on-investment focus, their human resource colleagues put more emphasis on empathy, psychology, creativity and intuition. But HR is not 100% ethereal and it is by applying more rigour to the scientific element that the CHRO has gone up in the CEO’s estimation.
Here are five disciplines that the CHRO has borrowed from the CFO:
Understanding the business strategy and its alignment with talent requirements is key. Today’s CHROs have a real understanding of the dynamics of the market in which they operate, the competitive environment and the likely impact of technological advances. They are able to interpret future trends into talent strategy, putting short, medium and long term plans in place that directly relate to the achievement of stated corporate objectives.
2. Risk planning
Understanding where the business is heading naturally leads to future proofing and risk management. CHROs not only have clear succession plans in place, but are now mitigating the risk of critical skill gaps by investing in pipelining activities to source and prep alternative talent. Flight or poaching risk is increasingly counteracted by retention strategies, including the development of reward structures designed to tie in key management.
Defining and shaping organizational models to support business goals has become an integral part of the CHRO’s remit. This demands an insight into peer group companies and a top to bottom re-evaluation of the best construct, systems and processes for extracting the maximum performance from people. As with financial modelling, CHROs even do scenario planning to ensure the best chance of sustaining leadership capability.
4. Auditing & analysis
Auditing is done in a number of ways. CHROs continuously assess the strengths and weakness of management, identify where real value is being created and focus resources on building expertise that is critical to ongoing success. They benchmark existing employees against external counterparts and offer coaching to upskill where needed, conduct regular appraisals and introduce KPIs relating to human capital productivity and value creation.
5. Building equity
Just as financiers focus on shareholder value, CHROs build equity in the form of the employer brand. Employee engagement has been on their agenda for years but CHROs are now more sophisticated in shaping culture, gauging external perceptions of the employer brand and developing it to appeal to the type of candidate they want to attract. This is increasingly seen as vital in appealing to the new generation of millennial talent and top CHROs are putting the building blocks in place now, knowing that millennials will comprise an estimated 75% of the workforce by 2025.
CEOs have always been aware of the importance of human capital, but it is only recently that the CHRO has been elevated to the status of true strategic partner, on a par with the CFO. Today’s smart CHRO could well upstage the CFO as the CEO’s greatest asset.