Ambitious
HR professionals want to work their way to the top, but in most cases it will
not be a direct route. Godfrey Golzen asks why CEOs need a so-called ‘hard’
background
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 survey shows 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 the head-hunters 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, although since executive search is a pure people-play, that is not so
surprising.
The
fact is, however, that most CEOs have moved up from line positions and often
have a background in the "hard" skills of management. Clive Morton,
the previously quoted commentator on HR issues and author of the award-winning
bestseller Becoming World Class, thinks that the reasons may be psychological
and cultural. "In Myers-Briggs terms, a typical CEO is a sensor and a
thinker, whereas an HR manager would rely more on feelings and intuition,"
explains Morton. "For a CEO, decisions would be approached from a
right/wrong point of view. An HR person would be more aware of grey areas."
That is often reflected in their education. Although no studies have been done
on the matter, anecdotal evidence suggests that a high proportion of CEOs have
degrees in subjects like finance, engineering, science, maths or law, where
answers can be seen in black and white terms.
"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 is
a view that 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 about
the fact that RSM’s research shows that HR managers spend less than 5% 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 like 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 points 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, and they relate to taking a proactive view of what
the mantra "people are our greatest asset" really means. Professor
Lynda Gratton of London Business School provides a number of clues and examples
in her latest book, Living Strategy (FT/Prentice Hall). At Glaxo Wellcome (now
SmithKlineBeecham), for instance, the management team recognised that
competitive advantage in the immensely challenging environment of
pharmaceuticals lay not just in research capacity as such, but in the
willingness of research teams to share their knowledge – and hence in the
creation of incentives that would further this end, a pure HR play.
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 frontline of the war for talent, it was decided that
competitive advantage could only be sustained by getting HR involved in
creating a culture of commitment and involvement that 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’s 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 ER’s Ian
Keenan.
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, who warns, however, that top talent from other
functions, aware of the possibilities of HR, are now 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 – research, market entry strategies and
maintaining competitive advantage – as witness the example quoted by Professor
Gratton. But they are embedded in the very structure of new economy
organisations, in particular in the fact that these are based on networks,
alliances and partnerships, both between people on the inside and with 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 role 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 they need to understand how every aspect of HR management impinges
on other functions. One CEO, for instance, insists that 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.
There
is no great secret about how such competencies can be achieved.
Mahoney-Phillips says, "Career development for HR directors is no
different from that of other functional specialists. At UBS, for any
senior-level position we would look for experience across functions, divisions
and culture. HR directors need to take opportunities to contribute to other
strategic project teams." He notes, rather ominously for HR, that "we
see rotations of other functional directors into HR, but rarely in the other direction".
While
practical experience is the best teacher, there are other ways in which HR
people can develop their skills, most notably through doing an MBA or through
executive programmes dealing with specific aspects and tools of management. The
core part of an MBA, offering as it does very intensive modules in finance,
marketing, operations management, business strategy, information systems and
quantitative methods, was seen by Sue Turner, HR director service provision at
Barclays Bank, as a way out of the career silo of mainstream HR.
"These
days I can talk to any of my boardroom colleagues, knowing what I and they are
talking about. I couldn’t do that before," she says.
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 – Cranfield, for instance, has
just launched an executive development programme for HR managers in conjunction
with Wharton, ESADE in Spain and HEC in France. But a generalist MBA at a good
school will provide the core courses previously referred to. 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.
Skills
HR managers need: an Anderson survey
Sixty
HR directors surveyed by the human capital division at Andersen Consulting felt
the following skills and competencies are 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
New
business facts
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 like
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 will 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.
Further
reading
–
The 8 Practices of Exceptional Companies. How Great Organisations Make the Most
of their Human Assets, by J Fitz-Enz, published by AMACOM.
–
Living Strategy by L Gratton, published by FT/Prentice Hall.
–
Competitive Advantage Through People by J Pfeffer, published by Harvard
Business School Press.
–
Tomorrow’s HR Management by D Ulrich, M Losey and Lake G, published by Wiley.
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