Talent Management Column

The Restructuring of the Top HR Job

The never-ending struggle for short-term financial results has resulted in a uniquely American style of HR leadership for publicly owned companies. The notion of strategic HR is very different in many other parts of the world.

Monday, May 21, 2012
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I've been spending a lot of time with HR executives around the world recently, especially with the heads of HR functions in some of the largest companies. Something is happening to those top jobs that is new and different; something that is perhaps unique to CHROs in the United States.

In the old days, and by that I mean a decade or so ago, there was a notion about what the strategic aspect of the top HR job should be. Indeed, my very first column for HREOnlineTM talked about that.

The idea was that firms had business strategies for competing in their product markets. Those strategies came with requirements for the way the firm had to operate in order to execute that strategy.

And HR's role was to make the choices about whom to hire, how to reward them and how to design the various practices that shaped culture and individual behavior in ways that supported that strategy. In non-business organizations where the notion of strategy is a little different, the basic idea of supporting execution was the same.

In many parts of the world, this model still holds up.

In Europe and the U.K., the idea of supporting the execution of strategy is HR's underlying reason for being. Businesses there are getting much more aware of the role of culture in effective organizations, and the leaders of the businesses are looking to HR to help them achieve the culture they want. The top HR person sees the execution of strategy as his or her overriding task.

In the United States, though, the story has been different.

Most of the transactional aspects of HR in bigger companies have been pushed out to vendors. The capabilities for handling anything new are rented from outside -- the design and roll-out of compensation programs or of engagement surveys, for example, are nearly always done by consultants and vendors now.

I recently saw a description of the leadership-development program for a large company, and it was a recitation of the vendors chosen to do each of the tasks associated with that program. Selecting and managing vendors is now a big part of the HR role, although "vendor management" functions inside the companies are taking over more of that role.

A positive spin on the outsourcing of all those tactical and administrative aspects of employee management is that it will let HR concentrate on strategic tasks. This is where something new is emerging, but it is not the idea of aligning practices with strategy.

At least in U.S. publicly held companies, the traditional notion of business strategy as a long-term approach to competitive markets around which other practices -- such as workforce planning and the building of culture -- could be based no longer exists.

Instead, most companies now have a financial strategy that drives the business, and that involves constantly monitoring profits and changing the business even in radical ways to pursue high levels of financial performance.

The virtually constant restructuring that goes on in U.S. companies now includes selling off divisions and acquiring new ones, getting in and out of markets based on current prospects there, and changing strategies in markets where they remain.

There is nothing like an overall business strategy for the corporation and nothing like a stable strategy within individual businesses. If one looks at an industry such as banking, the major banks have not had anything like a clear business strategy that remained in place more than a year or so in the last 25 years, in part because they have been in a nonstop process of acquiring and divesting operations.

The idea that the strategic function of HR should be to help execute strategy has little meaning when the business does not have a clear strategy.

While new CEOs still talk about the importance of aligning practices and creating new cultures to fit their new vision of the firm, anyone close to business knows that changes like that take a long time to execute and that the vision of the firm will almost certainly change before efforts to build a new culture ever take place.

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So what is the new role? For the top HR executive, it is to be the personal adviser to the CEO and increasingly to the board of directors about key hiring decisions.

One aspect of all this flipping of strategies has been a nonstop churning of executives that focuses on bringing in outsiders. There are lots of key positions to be filled, and successful HR leaders have positioned themselves either as heads of that process or, at the very least, as conduits between the search firms -- which execute most searches -- and their CEOs.

The old succession-planning process, which filled these jobs from within, was largely a staff function. This new role is much more personal, a counselor and adviser to the CEO.

The role with the board does seem to be something new. Terms limits and more demanding roles seem to have created more turnover on these boards and, in turn, more positions to fill.

Increased scrutiny on corporate governance means a greater interest in doing real searches to fill those roles. Smart HR heads have positioned themselves as the intermediary there as well, the main adviser to the chair of the board or its lead director.

This new role as something akin to an Assistant Kingmaker is heady stuff. It puts the top HR executive in the middle of the most important conversations at the board and operating-committee levels. It is another reminder, though, that public companies in the United States are on a different path than other businesses in the nation and in the rest of the world. 

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School. His latest book, with Bill Novelli, is Managing the Older Worker: How to Prepare for the New Organizational Order.

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