Shared Interest

CEO is becoming evermore hands-on when it comes to delivering people
strategies. But are the differences between the role of CEO and HR director
clearly defined?

Former US president and architect of the Normandy landings Dwight Eisenhower
once said, "You do not lead by hitting people over the head – that’s
assault, not leadership." CEOs are increasingly taking this message to
hear it appears. HR professionals and management experts have long pointed out
that it is the people in an organisation who can make the difference between
success and failure for the ambitious CEO.

But with eyes narrowly focused on next quarter’s profit and loss account or
shareholder meeting, this message has too often been ignored. Yet there are
clear signs this perception is changing. When GE’s legendary Jack Welch – known
as "neutron" for his ability to cut staff while leaving assets
standing – was lauded in Business Week in 1998, for being "a fierce
believer in the power of his people". It is obvious there has been a major
shift in how bosses see their businesses. The CEO is becoming increasingly
hands-on when it comes to delivering people strategies. It is said Welch hires
all his top executives personally.

According to William E Storts, a managing partner at consultancy Accenture,
executives are becoming more focused on people issues – recruitment and
retention, training and motivation and inspiring workers to be more creative.
"Not long ago, one CEO actually described his job as director of HR,"
he writes on Accenture’s website.

And a survey by the Academy for Chief Executives of its members for
Personnel Today shows bosses in different sectors all taking a very close
interest in the HR issues affecting their organisations. They are even becoming
involved with the recruitment of key individuals.

The changing nature of the workplace, with a faster moving, more flexible
and more demanding workforce, is partly to blame for this paradigm shift in
attitude, says Dr John Potter, visiting professor at the Centre for Leadership
Research at the University of Exeter. "It is a very positive development.
In the 1970s and ’80s the emphasis was on numbers. We have had a shift towards
the importance of people in the business context."

Chief executives have been forced to move away from a command and control
style to a more consensual, people-centred approach. This inevitably raises the
status of HR within the business and HR professionals immediately become more
than simply personnel assistants, he adds.

Examples of this include oil giant Shell, which for a time combined the role
of its financial director and HR director. And publishing and media group
Pearson in 1998 renamed its HR director as "director for people", a
role which encompassed a range of HR issues including recruitment, motivation,
development and reward.

"Everybody laughed at the time, but the cultural shift that went with
it has made a very positive impact on the company," says John Weston, head
of the Centre for Director Development at the Institute of Directors.

There has also been recognition, however slow, that the people strategy of a
business is the same as the business strategy, believes Paul Kearns, senior
partner of Personnel Works. "If the business strategy says ‘pile it high,
sell it cheap’, then it becomes the default HR strategy," he says.
"There is definitely a view coming round to accept that people are your
only source of competitive advantage."

The CEO sets the vision, course and direction of a business, and has to keep
one eye on where the company is going in the future. With people much closer to
the top of the agenda, it is the HR director who will be more involved in
implementing and guiding this strategy, Kearns says. "I do not think the
CEO is going to work out how the strategy gets from A to B. And it is no good
having a high-quality HR director if the CEO does not understand the HR issues.

"There is an opportunity for CEOs to make a significant difference to
their business by focusing less on the financials and looking at the HR issues.
But you need a good, solid HR person around to do that and there aren’t many HR
directors who are seriously influencing the business strategy," he says.

No CEO will want to take responsibility for the technical, day-to-day
operational aspects of an HR director’s job, agrees Potter. "There are a
set of skills involved in running something where actually if you know too much
about its technicalities you can become bogged down in the nitty gritty,"
he says.

So, where does all this leave the HR director? Simple functionary or key
strategist, redundant or at the right hand of the CEO? According to Fiona
Sellers, director of HR consultancy Courtenay, the roles of both the CEO and
the HR director have changed over the past few years and will continue to do
so. "The CEO has become more people-focused. They are more HR-aware
because the people responsibilities have become so much more important. It is
about motivating and holding on to your workforce in a very competitive
marketplace. Getting a more commercial edge has become more important,"
she says.

Similarly, HR directors have become more commercial. "The CEO and HR
director are becoming closer. CEOs talk about HR directors being their
right-hand person, their conscience, their barometer. There is a very special
relationship between the CEO and the HR director just as there is between the
CEO and the finance director.

"But I think that very few CEOs will want to develop an understanding
of the technical aspects of HR, so although they are more HR aware, they will
still need someone on the team who has the technical understanding, who can
actually put these things into practice," she explains.

Inevitably the level of change varies according to the sector, she adds. In
the service sector, the view that you can gain an edge through being more HR
aware is, perhaps unsurprisingly, more common. In other areas, the City for
instance, HR is still perceived as being more focused on bonuses and reward
structures. HR directors are also being called on to coach the CEO as issues
such as how you manage and how you are perceived by your staff become more
important, contends Sellers.

One man who has seen it from both sides is Clive Hyland. Hyland started life
in HR and industrial relations with Lucas Industries, rising to become HR
director at Thorn EMI. Then, at 28, he switched tack completely into general
management, becoming an installation manager with Ericsson and finally, 15
months ago, managing director of IT services firm PinkRoccade UK.

"For me, as a managing director, the people dimension of an
organisation is absolutely critical. You can guarantee a minimum level of
performance, but it is the voluntary effort, the motivational element that
makes the difference," he says.

Having a CEO who is increasingly concerned with people strategies is, if
anything, more likely to strengthen the relationship between the boss and the
HR director, he says. "Both sides will recognise its value. And even the
best CEOs need someone to bounce ideas off."

With a much broader remit and already having to juggle many balls in the
air, the CEO will not want to become involved with the back room or back office
element of HR – dealing with the employment law issues, putting the personnel
and administrative system in place and so on.

But Hyland adds, "An HR director is only of very limited value if he
cannot understand what HR means on the front line. They have to have a feel for
the motivation of the business. "I do not see the roles blurring but I
think they can move on to another level where the HR guy is on the board as a
member because he is making a significant contribution to the business, whereas
too often it has been as an insurance against things going wrong."

Organisations are expected to be a reflection of their leader, agrees Sue Cheshire,
managing director of the Academy for Chief Executives. But chief executives do
not want to become bogged down in the enormous, and ever increasing, legal
obligations that can be sifted and sorted by an efficient HR director.

"It is very important that CEOs, HR directors and all leaders of
organisations have to be fully aligned and look at what skills and talents are
required for the organisation – what are the necessary attributes," she

Yet it is important not to overstate the case, says Chris Pierce,
professional standards executive at the Institute of Directors. CEOs are not HR
directors and are never likely to want to be.

"A lot of CEOs are saying they have responsibility for determining the
strategy of the organisation with particular reference to HR because they are
seeing it as the main source of competitive edge.

"But often the situation is misunderstood that the chief executive is
the main exponent of the core strategy in the first place. There will be things
that the CEO will say about the core strategy, central to which will be the
development of the HR strategy, so they will be seen as being involved unduly
in HR matters," he explains.

Turning in a profit, growing or consolidating the business, adding value for
shareholders and, as looks increasingly likely, riding out the coming economic
storm will remain priorities for the conscientious CEO. But the fact that
people strategies are being given added weight is a challenge and an
opportunity for the HR professional.

In a sharply worsening economic climate, the hunt for a competitive edge is
likely to become even more fierce. "CEOs have turned over the stones with
everything else on them but now they are turning over the stone marked
people," says the IoD’s Weston.

"There is an opportunity for HR professionals to push their case,
particularly the strategy for the business. Now is really an opportunity while
a lot of the businesses are up against it and looking for a competitive
advantage. If they can find that then the HR professional has got a bigger role
to play," he adds.

In many boardrooms across the country it would not cross the minds of the
assembled members that the finance director might not have a right to be seated
among them. With the HR director it is a different matter. With the CEO
increasingly championing the HR function that could change. But a seat on the
board won’t be handed to HR directors on a plate, he warns. "HR
professionals have to be much more assertive. They must say ‘we can guide you
through this maze but you have to trust us to do it’. This is good news for HR
professionals, but only if they seize the moment."

How CEOs view HR

Derek Potts, chief executive,
Inner Circle Services

"I am in the middle of recruiting three to four new staff.
I have found, unless I take care of the specifications and expectations
outlining my vision for the company, I end up having to take the reigns and
redoing it all myself anyway, because whoever turns up for second interviews
simply does not measure up to my ex- pectations or our needs. So as CEO I am
today being the HR manager too, but sometimes it is a simply more efficient use
of my time. As owner of the culture of the company, it is very important, more
so to me than anyone else."

Jacqueline de Baer, CEO, De Baer

"I take an active role in recruitment strategy, setting
the brief for the kind of candidates who will be successful in the company. A
cultural fit is essential – ’empire builders’ will not work, for example, and
neither will shrinking violets. Teamwork and proactivity are essential. One of
the most important elements of commercial success is having great staff and I
always personally interview senior-level candidates."

David Moad, managing director,

"As the leader of the organisation, the chief executive
(through their actions, personality, beliefs and skills) is ultimately
responsible for attracting and, just as importantly, retaining an
organisation’s key assets – its people. What we think of as traditional HR
issues, such as managing the well-being of the organisation, or facilitating
effective internal communication, must be seen to be coming from the top.
Anything less and the initiative will fail, because if the board doesn’t buy
into it, and are seen to buy in to it, no-one will take the idea seriously –
and it simply won’t work. It’s not so much that the chief executive is taking
over the HR director’s role; the most successful companies appreciate that the
two roles are intrinsically linked."

Source: Academy for Chief

CEO vs HR director: their roles

Chief executive

There is no management role more important in a business than
that of the chief executive officer. In an organisation with a board of
directors, the CEO will normally be the person with prime responsibility for
carrying out strategic plans and policies as established by, and reporting to,
the board.

In a firm without a board, the CEO will generally set the
direction of the company and oversee the operation of the organisation.

No two CEOs will have the same responsibilities or functions
within an organisation but, as a rule of thumb, his or her responsibilities
will include:

– Acting as the key go-between between board and staff,
providing direction, tone, leadership and strategic insight in conjunction with
the chairman, who will manage the board.

– Overseeing the delivery of the organisation’s programmes,
products or services.

– Recommending the yearly budget for board approval, managing
and overseeing the organisation’s finances in coordination with the finance

– Managing the HR strategy in coordination with the HR
director, ensuring people management strategies are legal, competitive and
appropriate to the sector.

– Acting as the public face of the company, to shareholders,
regulators, politicians, the media, public and competitors.

– For non-profit organisations in particular, the CEO will also
often play a pivotal role in areas such as fund-raising, campaigning and

HR director

The HR director may be a board-level position, acting in close
contact with the CEO and finance director, or it may be a less high-flying
personnel function. Either way, the HR director is expected to direct and
co-ordinate the main HR activities of the company.

Similar to the CEO, no two HR directors will have the same
remit or responsibilities, but the range of key responsibilities are likely to

– Analysing wage and salary data to ensure reward and benefits
and compensation policies remain competitive.

– Ensuring the right people are working in the right way in the
right part of the organisation.

– Ensuring people are retained or shed as necessary, in
coordination with the CEO, and drawing up projections of future need.

– Advising managers, both above and below, on company policy in
areas such as equal opportunities, compensation, benefits, personnel law and
changes in domestic, European and, if appropriate, international legislation.

– Ensuring all appropriate records or data recording mechanisms
are in place.

– Representing management in negotiations with workforce,
unions or other bodies on people-related issues.

– Promoting and publicising the firm’s HR record and practices
to corporate officers, government and the general public.

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