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The Changing Face of HR

A new study from the Wharton School and PricewaterhouseCoopers counters some popular thinking on where top HR leaders at the nation's largest companies are coming from and where they may be headed.

Wednesday, June 2, 2010
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A recently completed study by the Wharton School at the University of Pennsylvania in Philadelphia and New York-based PricewaterhouseCoopers offers some new and, in some cases, counterintuitive insights into who the top leaders in HR are and what skills and experiences they're coming to their posts with.

The study -- Who Gets the Top Job? Changes in the Attributes of Top HR Leaders and Implications for the Future by Peter Cappelli, the George W. Taylor Professor of Management and director of the Center for Human Resources at Wharton, and Yang Yang, a Wharton post-doctoral fellow -- recorded the attributes of the top HR executives in Fortune 100 companies in 1999 and then compared those attributes to the individuals who held similar roles in the Fortune 100 companies at the end of the decade in 2009.

The two then drilled down further to compare, between 1999 and 2009, the attributes of the top HR leaders of the 60 companies that made Fortune's list both years, allowing them to examine changes within companies. This is important because there were telling differences between the companies that appeared in both years of the Fortune 100 listings versus those that appeared only once, the authors say. (See some of those comparisons here and here.)

One of the things they found was that HR executives are not coming into their jobs from non-HR positions as much now as many have thought. In 1999, 30 percent of top HR executives came into that role from another function. By 2009, that figure was down to slightly more than 20 percent. Those in the most recent list suggest HR leaders today are pursuing more HR-specific professional tracks.

Ironically, the study also found that today's HR leaders at the nation's largest companies have even more outside business experiences than in 1999; however, the time spent in those non-HR fields was for briefer periods and, therefore, the experiential knowledge and skills were more shallow.

What all of this means for the future of HR remains to be seen. In Cappelli's estimation, an overall question coming out of the study is, "Does the more professional career path of HR leaders now suggest that the talk about the need for more business acumen in HR is mostly talk? Or have HR executives been able to pick up that acumen without business experience?"

In a Q&A with Managing Editor Kristen B. Frasch prior to the official release of the study at the Human Resource Executive ForumĀ® in New York in April, Cappelli sheds some light on the reason for the research, what was involved and what can be gleaned.

What went into this work? What was the motivation behind it, and the process?

The idea behind the study was to see what we could learn about the future demands and directions for the human resource function. We reviewed what has been written on this topic and found, not surprisingly, that predictions were all over the map.

When we look carefully at what we know about forecasting, specifically about issues like these, we find that the best guesses about what the future will be like come from trends that are already under way. This result may not be surprising, especially when considering changes in a complex phenomenon like the HR function because there are a lot of pressures for inertia. Change comes slowly, so anything that changes the profession will have to be pretty big and under way for awhile.

Given that view, we thought it would be most useful to see what changes are already under way in the HR function. We think the most important pressures will come from the business and from the boss -- in this case, the CEO.

So we set out to see how the people who have been appointed to the top HR job have changed over time. We did this by deciphering who held the top HR job in 1999 and then in 2009 in the Fortune 100 companies -- focusing on these big companies not only because they employ a lot of people, but because they are the ones that other companies, vendors and students of the HR function tend to follow.

 

What were you most impressed with in terms of key findings?

The most important finding is probably not a big surprise to anyone looking casually at the people in these jobs, and that is the rise of women. They held 44 percent of the top HR jobs in the Fortune 100 in 2000 and 59 percent by the end of the decade.

The decline of specialists -- lawyers and Ph.D.s -- from 1999 to 2009 and the fact that these executives are older than their counterparts a decade ago are probably important as well. The sharp increase in international experience and also in talent-management functions may tell us the most about where HR is headed.

What findings did you find most surprising or counterintuitive to prevailing thought? For instance, am I right that your study refutes the notions that more companies are filling top HR posts from other functions besides HR and that corporations are looking for top HR people to have broader business exposure?

The most surprising results are, indeed, those that seem to debunk common views about where the HR leaders are coming from. Contrary to the perceived wisdom, they are actually less likely to be brought in from other functional areas than a decade ago. And the proportion that come from outside the company is roughly unchanged -- indeed, it appears to be much less the case than for other top jobs.

It could be that we focus disproportionately on a few examples of such individuals because they are so unusual. Much more of their career has been spent in HR than was true for those holding the top job a decade ago. A much greater proportion of the new HR leaders appear to be lifers in the function than a decade ago.

You mention in your report that your analysis suggests HR heads in Fortune 100 companies have experiences in more functional areas now and also have more total years of work experience. Yet the analysis also indicates their non-HR experience may be shallower instead of broader. Can you explain that?

Despite the fact that the HR heads at the end of the decade spent more of their career in the HR function, they do report having had assignments that exposed them to more areas of business than those from a decade earlier.

In other words, they did more non-HR work in a shorter period of time. That would seem to suggest that their experience in other areas of business is shallower now. The biggest area of increase was in international/global work. Twenty-eight percent of the 2009 top HR leaders had such experiences as compared to only 8 percent in 1999.

 

In your estimation, would that and should that be a concern to CEOs and boards of directors? Why or why not?

If you are a CEO or board member filling the top HR job, it's important to ask whether a candidate has enough business knowledge and context to fit into the executive team. Can they get that without substantial experience in other functions or without line management? It's certainly possible.

But it's also worth asking two questions: Do you want them to be able to think like an executive about HR issues; in which case, maybe they don't need broad experience? Or do you want them to be part of the strategy-making team; in which case, maybe they need broader business experience?

It's possible to sound like a business person in interviews and yet only be a subject-matter expert, and that's worth thinking about.

What's the study's overall takeaway for HR executives today and going forward? Can you extrapolate from your findings to predict what they will be like and what they'll be focusing on in 2019?

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The big trends under way are unlikely to change direction for awhile, and these include the growing importance of talent management and measuring employee outcomes within HR as well as the increased importance of international experience for leadership roles.

The central debate going forward is whether the top human resource job, in particular, will go to someone who is seen primarily as an executive of the company, someone who is a business person, first, with experience in many areas of operations, or to an HR specialist. In other words, is HR becoming more of a profession like accounting or corporate counsel? Or is it becoming more of a strategic business role?

The evidence here is for the professional view. But it is worth noting how such trends can change. When we compare these results to those from a similar study done in 1985, it seems as though the 1999 period was the outlier: Top HR executives in 2009 look much more like those in 1985 than did those in 1999.

One of the things we know about both 1985 and 2009 is that they were periods of slow growth following deep recessions. In contrast, 1999 was part of a long economic boom. The HR needs were much more novel in the boom period than in these periods of slow growth.

Top HR executives in 1999 were more likely to come from outside HR, were more likely to be hired from outside the company and were more likely to have broad business experience -- because business needed novel HR solutions. Big changes in the economy are likely to trump even long-term trends.

What was your reason behind studying the two groups, the 100 from each year and the 60 from both years? What were the key differences between the two and what do those differences tell us -- about the companies, industries, business trends, HR function, etc.?

There are two ways in which we could see changes in the nature of the people running the HR function in the Fortune 100 companies over the past decade. First, the nature of the companies making up the Fortune 100 has changed over time: Manufacturing companies, for example, have been replaced by service companies.

The nature of the work in service companies is also different, so the HR tasks and HR leaders are likely to be different in service companies. Even if the top HR people in all companies stay in place, we might see changes in the Fortune 100 leaders because the companies in the Fortune 100 change.

Second, a given company may change the type of HR leader it has. This may be the more interesting change, as it reflects developments in a given company. So we also look at the 60 companies that were in the Fortune 100 in 1999 and again in 2009 to see how their leaders change.

When we look overall at the HR heads in the Fortune 100 companies in 1999 and compare them to the HR heads in the Fortune 100 companies in 2009, we are seeing the combination of both effects: Some proportion of the changes are due to different companies being in the Fortune 100; some are due to companies changing the nature of who they want in that role.

Not surprisingly, the changes in the 60 companies that were in the Fortune 100 in both periods are slightly more modest because they capture only the within-company changes. The exception has to do with the nature of the career paths.

These companies were actually much less likely to have an outsider in the top HR job in 2009 than in 1999 (35 percent versus 31 percent) and much less likely to have someone from another function (31 percent lateral moves in 1999 versus 19 percent in 2009). So there is a much sharper swing back to the internal HR career in these companies: 46 percent of the top HR executives in 2009 began their career in HR versus 33 percent in 1999.

One of the lessons we should take from this is that what is going on in the biggest, oldest companies is not what is happening [elsewhere]. By focusing on them, we may be telling a misleading story about the overall changes in HR.

Read also:

HR's Own Job-Hunting Skills Rank Poorly

Attracting and Assessing HR Talent

Examining HR Attributes

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