The right stuff

Why is it so hard for HR directors to become a natural choice as a company’s
CEO? In the last part of our three-part series on CEOs and the boardroom HR,
Godfrey Golzen examines why true HR professionals are so often ignored

HR management is in danger of falling victim to flawed logic – namely that
all CEOs have to be good at managing people, HR managers are good at managing
people, therefore HR managers are destined to be the next generation of CEOs.

That may be so, but it doesn’t necessarily follow. Our profile of the top 20
senior executives in the past two issues of Personnel Today show that a growing
number of CEOs have spent a considerable amount of time in HR roles, but they
are still in the minority. Even fewer have moved directly from HR into the top
spot, so does this mean that "people are our most important asset"
is, for most organisations, rhetoric rather than reality?

Not really. For one thing, in some of the most important companies a spell
in HR has become a necessary step on the way to the top. Donald MacLeod,
European vice-president for headhunter Korn/Ferry International, reports that,
as in a growing number of instances, the joint MDs of Mars in Europe, have both
had long spells in HR. Indeed, KFI’s highly regarded European president, Dick
Buschman, is one of the few business leaders to have made a direct transition
from HR, though since executive search is a pure people specialism, that is not
so surprising.

The fact is, however, that most CEOs have moved up from management line
positions and often have a background in the "hard" skills of
management. Clive Morton, author of the award-winning bestseller Becoming World
Class, thinks the reasons may be psychological and cultural. "In Myers-Briggs
terms, a typical CEO is a sensor and a thinker, whereas an HR manager relies
more on feelings and intuition," says Morton. "For a CEO, decisions
are approached from a right/wrong point of view. An HR person is more aware of
grey areas." That is often reflected in their education. Anecdotal
evidence suggests a high proportion of CEOs have degrees in subjects such as
finance, engineering, science, maths or law, where answers are in black and
white.

"But why should HR people want to be CEOs anyway?" asks Klaas
Wassenaar, who runs the HR Leadership programme at the Rotterdam School of
Management. This view is echoed by Ian Keenan, principal consultant at ER, a
UK-based niche consultancy in HR. "People go into HR because they’re more
interested in those issues than in the numbers."

What the Rotterdam programme is setting out to do is turn participants into
best-in-class HR managers rather than into CEOs. Wassenaar is concerned that
RSM’s research show that HR managers spend less than 5 per cent of their time
on strategic issues and that their general business awareness is low, which on
the one hand makes them targets for outsourcing initiatives, and on the other
makes them less-than-credible board members if they do move to top spots.

"While HR managers are being promoted to the boards of companies, their
traditional internal-facing, cost rather than revenue roles do not ‘cut it’
with the board looking for new or succession CEOs," says John
Mahoney-Phillips, group head of Human Capital Performance at UBS.

"How many HR directors really talk in terms of ROI and can measure and
quantify it?" At UBS, he says, traditional HR disciplines and measures
such as assessment, performance management, succession planning and internal
surveys are crucial, but as a basis for developing a strategy for developing
and deploying human capital, not as sets of processes carried out for their own
sake.

The programme at RSM focuses on HR professionals who want to become HR
business leaders, not functional specialists, and that is ultimately the route
to the top – for those who want to take it. Mahoney-Phillips point out that in
the light of such an objective, HR people ought to welcome outsourcing as
"a liberation from the lower added-value activities that so many HRMs
complain about".

He adds, "If anything, the lack of a passion to raise the game and
truly align people and business strategy is why HRMs are not making it to the
top – they should embrace outsourcing as one strategic shift in the value they
can add to the business."

Lots of others are now emerging, relating to taking a proactive view of what
the mantra, "People are our greatest asset" really means. Examples
are provided in London Business School professor Lynda Gratton’s latest book,
Living Strategy (FT/Prentice Hall). At GlaxoSmithKline (formerly Glaxo Wellcome
and Smith-Kline Beecham), for instance, the management team recognises
competitive advantage in the immensely challenging environment of
pharmaceuticals lies not just in research capacity as such, but in the
willingness of research teams to share their knowledge – and in the creation of
incentives to further this end – a pure HR focus.

In Motorola’s move into mainland China, the marketing people promoted the
idea that creating and developing a cadre of Chinese managers, an HR task,
would also yield invaluable insights for a marketing strategy. At
Hewlett-Packard, operating in the front line of the war for talent, it was
decided competitive advantage could only be sustained by getting HR involved in
creating a culture of commitment and involvement other companies would find
difficult to imitate. The technology itself was just another commodity.

"One doesn’t think of Jack Welch in the context of HR, but it is
significant that at every stage, having put the processes for change into
place, he spends an enormous amount of time going round and talking to
people," says Keenan from ER.

The speed of advance in technology has, paradoxically, put people at the
heart of strategy. At the same time, it has opened a Pandora’s box of
opportunities for HR managers who want to make it to the top. "Those who
want to and can combine HR skills, experience and competencies with commercial
awareness assuredly will," says Sarah Barwell of Courtenay, a specialist British
recruiter of top HR talent. She warns, however, that top talent from other
functions, aware of the possibilities of HR, are now also seeing it as a step
on the road to the top – a view unheard of even three years ago.

The fact is that as the result of technology, HR issues are appearing in
functions where they never appeared before. Witness the example quoted by
Professor Gratton – research, market entry strategies and maintaining
competitive advantage – HR is included in these areas. But they are embedded in
the very structure of new economy organisations, in particular because these
are based on networks, alliances and partnerships, both between people on the
inside and external, and to an increasing extent global stakeholders, such as
financial institutions, members of the supply chain and customers. That is why
Citicorp chairman John S Read is quoted in the McKinsey Quarterly as saying,
"Our global human capital may be as important a resource, if not more
important, than our financial capital".

CEOs of leading-edge companies are aware of these new strategic scenarios
and of crucial roles that HR managers could play. The trouble is that not
enough are doing so. "When they get on the board, in many cases they’re
not really at the top table," says Linda Holbeche, director of research at
Roffey Park, a British business school that is developing a global strategic HR
network. One reason is that they are not used to taking rapid-action executive
decisions.

"Take management development. It’s a vital process and needs a lot of
thought on how to integrate it with business strategy. But it’s not something
that happens fast. And there’s also the fact that a lot of HR work consists of
process, administration and checking," Holbeche says. These latter elements
of the job are just the ones that are being outsourced. "HR managers need
to think beyond outsourcing and look at ways in which they could play a full
role as business partners," she adds.

So what can HR managers do to achieve the credibility they need and
currently lack, to get to the top? Above all they need to enhance their
business awareness, which means understanding how every aspect of HR management
impinges on other functions. One CEO, for instance, insists his HR managers
should be able to justify every proposal in terms of measurable forecasts of
costs and benefits and certainly financial skills is one of the areas where HR
people tend to be weakest.

Many HR people are critical of the standard content of their functional
training on the grounds that it does not develop the overall business awareness
that you need to be credible at the top. That is a situation that a number of
business schools are seeking to correct. The Rotterdam School of Management,
Cranfield School of Management, Roffey Park Management Institute and City
University all offer

HR-related MBAs and executive programmes. They are a big commitment in time
as well as money, but there is a price to be paid if you want to get to the
top.

For contact details of suppliers mentioned here go to www.personneltoday.com/directory

Skills that HR managers need:

In an Andersen survey HR directors questioned by the human capital division
at Andersen felt the following skills and competencies were crucial to carry
out their role effectively

– Interpersonal skills
– Communication skills
– Vision and creativity
– Leadership
– Change management skills
– Strategic perspective
– Cultural fluency
– Business and market awareness
– Technological literacy
– Project management experience

Getting ahead in today’s business environment

If you want to get ahead in the new business environment, then take note of
the following trends

– Invisible assets, particularly knowledge, are replacing tangible assets as
the foundation of competitive advantage

– There are fewer people, but more are brought in on a project-by-project
basis – more like a film crew than regular employees. That raises other issues
such as trust and the importance of communication

– Human capital – the basis of competitive advantage – is a scarce resource.
In order to attract and retain it, companies 
have to become the employer of choice. That takes HR into the areas of
employer brand and reputation management on a global scale

– Cultural sensitivity is all-important, not just in the obvious areas of
what might be called etiquette, but in how HR policies and core values, like
fairness, are perceived in different parts of the world – and particularly in
the notoriously tricky aftermath of mergers and acquisitions.

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