Partners at the Helm
As CEOs look on talent issues as ever-more crucial elements to achieving overall business goals, their reliance on -- and relationships with -- their CHROs become paramount.
By Will Bunch
Jim Ryan, the president and CEO of W.W. Grainger Inc., the Chicago-based industrial supply company, doesn't formally schedule a lot of one-on-meetings with Joseph High, the executive he hired two years ago to run his human resource function, under the title of senior vice president and chief people officer.
That's because Ryan and High -- with offices on the same hallway in the corporate suite -- are talking to each other constantly, usually in person or, if it's late at night or if one or both are traveling, by text and email. And they say that, while those conversations may occasionally touch on workaday matters such as benefits or healthcare, it's much more likely that Grainger's CEO and its chief human resource officer will dwell on big-picture questions of corporate strategy -- and the key people who must implement the kinds of things they're talking about.
"I go to Joseph on a whole spectrum of different issues -- our relationship is not just based on HR," says Ryan, who joined Grainger in 1980 and recently marked his fifth year as CEO. "Fundamentally, your relationship is based on the business."
High, who was formerly the CHRO at Toledo, Ohio-based Owens Corning, notes that one reason his advice is sought after is that, as the top human resource executive, he's in touch with every unit of the company as he travels to Grainger's offices around the world, regularly hosting events called "Java with Joe," in which employees are urged to speak their minds. "We live and die by our relationships -- with our customers, with our teammates and our suppliers," he says. "We have hundreds of customer encounters every day, and the quality of those interactions drives the success of our business."
The close working relationship between Ryan and High says a lot about the state of CEO-CHRO relations in 2013. Human resource chiefs are getting much more valuable face time with the heads of their companies than ever before, and they're increasingly functioning less as a purveyor of administrivia and more as a trusted adviser, or a "consigliere," as one expert colorfully puts it.
This summer, Human Resource Executive® surveyed 387 chief human resource officers about their relationships with their companies' CEOs -- how often they met or spoke, whether they communicated more frequently than they did a couple of years ago, and which issues mattered most to the big boss. The answers were less of a surprise than a confirmation of what those who follow the HR field already know: that these 21st-century strategists are not your father's CHROs.
With more top executives viewing talent development -- particularly for those in the corporate suite and those most likely to move up into it -- as a make-or-break for executing their business strategy, the CHRO has increasingly become a critical member of the CEO's inner circle, even if he or she is rarely a candidate to move into the top job.
Kevin Cashman, a senior partner with Korn/Ferry International's Minneapolis-based Leadership Talent and Consulting division, says the closer ties between CEOs and their heads of HR are largely outgrowths of the realization that having the right talent to execute the corporation's strategy is as important as the strategy itself, maybe more so. "What becomes clear is that the job is now to be an activist in forming the strategy, through leadership and talent -- that's the real job," he says.
Experts say that in this brave new world of CEO-CHRO relationships, the human resource executives who flourish will be the ones who see themselves as business partners with the company chief and with his top lieutenants, who understand the firm's broader strategy because they helped to shape it in the first place. "You've got to be somebody who understands and gets involved with actual product-line management," says Wayne Cascio, a professor of management at the business school of the University of Colorado-Denver, "or otherwise, you'll be seen as an administrator of benefits and not much more than that." Indeed, authorities on the subject say a new CHRO should spend as much time cultivating the CEO relationship -- speaking candidly, winning his trust, as he or she spends on the nuts and bolts of HR.
Breaking it Down
More than 60 percent of the CHROs surveyed by HRE said their relationship with the CEO had strengthened over the last 24 months, while just 7 percent said they'd drifted farther from their boss. Perhaps even more significantly, just over 30 percent of those surveyed said the CEO has been spending more time over those last two years on HR issues, more than twice as many as those who indicated that such time has decreased.
Those close relationships have been forged despite fairly high turnover rates in the C-suite -- nearly 60 percent of the CHROs said they'd moved into their jobs within the last six years, and a majority (53 percent) had not been hired by the current CEO.
Michael Davis, the senior vice president for human resources at General Mills, is a fairly typical large-company CHRO; he came to the Golden Valley, Minn.-based food giant 17 years ago to head the HR operation after a stint running the executive-pay unit at New York-based consultancy Towers Watson. Like High at Grainger, Davis says his office location just two doors down from General Mills' CEO Kendall Powell makes it easier to serve as a confidant.
"I think most CEOs like that proximity," Davis says. "He and I don't have to schedule anything with each other -- if we need each other for two or three minutes, it's easy." And when they do speak, he adds, it could be about any issue, not necessarily confined to personnel matters. "There are things the CEO can't talk about with anyone but someone who's in a trusted-adviser role," he says. "He can talk to me about anything that's on his mind. Sometimes, he comes in and he just wants to talk out loud."
Some seven out of 10 CHROs surveyed for the article say they meet face-to-face with the top boss at least a couple times a week, and more than a third -- like Davis -- say they talk in person to the CEO at least once a day. Most experts and CHROs agree that's a change from just a generation ago, when the human resource department was seen as off to the side of the organizational chart, dealing with benefits and other plans not central to overall strategy.
Dick Antoine, the long-time HR chief at global consumer giant Proctor & Gamble -- who's now retired and runs the National Academy of Human Resources -- recalls how his weekly Sunday night in-home get-togethers with P&G's CEO A.G. Lafley were featured in a Business Week cover story 10 years ago and became the stuff of HR legend. But today, Antoine says, a close working relationship like that one tends to be the rule, not the exception.
In his Sunday night meetings with Lafley, the conversation often centered on one thing: frank discussions about the company's talent, which often involved going through and reviewing piles of performance reviews of the Cincinnati-based firm's top 200 employees. "We talked about the senior leaders of the company -- which one had the potential to take one of the top jobs and why," says Antoine, who often rang the CEO's doorbell with data such as scorecards on the rising executives to back up their candid and freewheeling conversations. Again, the two men were arguably well ahead of the trends spelled out in the new survey, with present-day executives reporting that this kind of tight focus on developing C-suite talent is what often brings today's CEO and CHRO together.
Today's conventional wisdom maintains that developing a candid personal relationship with the CEO and the firm's inner circle isn't just a part of the HR chief's job, but is arguably the most critical part. Pamela Kimmet, now the senior vice president for human resources at Atlanta-based Coca-Cola Enterprises after a stint at the former Bear Stearns, devoted an entire chapter of the recently published book, The New Chief HR Officer: Defining the New Role of Human Resource Leaders, to the topic. She writes you won't "have the impact or the success for the company that you and your HR team desire if you aren't able to cultivate a special and genuine relationship with your CEO." She offers tips such as learning when and how the CEO likes to meet, whether he or she prefers detailed reports or simply the "headlines," and whether the boss likes to be the first to know about a problem, or wants it vetted beforehand.
In the HRE survey, CHROs make it clear that oversight and expertise in the talent-management function -- perceived largely as grooming and training the next generation of top corporate leaders -- and consulting with members of the executive team, including the CEO, are the critical roles that have come to define their jobs nowadays.
Asked specifically to give their top three answers to, "On what kinds of issues do you, as CHRO, spend the most time?" respondents listed "talent management" (35 percent) and "consulting with/coaching other members of the executive team" (33 percent) as their second and third highest-ranked answers, behind the broad category of "employee relations," which was first, at 37 percent. The other top issues for the HR executives were hiring and recruiting (30 percent), leadership development (30 percent) and healthcare (24 percent).
It's clear their motivation comes from the top. When the CHROs were asked for their top three responses to, "What areas of HR is your organization's CEO most concerned about, based on what you know?" the runaway winner was leadership development, at 47 percent, followed by talent management (38 percent), employee engagement (31 percent), healthcare (27 percent), and hiring and recruiting (25 percent).
Not only have there been broad, fundamental changes in the role of the CHRO, the job has also changed in response to external events.
John Boudreau, professor at the University of Southern California and research director of its Center for Effective Organizations, says he believes the financial crisis and recession that occurred in 2007-08, and the disastrous consequences of risky or ill-advised decisions by senior executives, may have given more urgency to the trend of focusing on upper-management development.
Increasingly, Boudreau says, top HR executives are delegating the more quotidian tasks such as benefit-plan management to a chief of staff, to free up more time for strategy sessions and discussing the top talent with the CEO. "There is an evolving, maybe an increasing, tendency toward that priority for the CHRO -- of working with his peers, or upward," Boudreau says. He adds that top HR executives are seeing new patterns of career development that some have said looks more like a lattice -- with ambitious employees moving across department and talent boundaries -- than the traditional ladder and that CHROs need to develop leadership programs that recognize this.
Many Factors Involved
Susan Meisinger, author, speaker, consultant and former president and CEO of the Society for Human Resource Management, agrees that CHROs are demanding and getting more of their boss' time than ever before -- but she argues that this has been driven as much by external events as by the evolution of management philosophy. For example, she cites federal-regulatory changes on stock options and other forms of compensation, the massive needs for downsizing or realignments that were created by the recession of the late 2000s and the complexity of the Affordable Care Act -- all changes that require major policy decisions and discussions between a CEO and his or her HR chief. Her message is backed up by the survey results showing healthcare as the fourth-ranked concern for CHROs, right behind talent-management issues.
During the 2008 crisis, Meisinger says, "[CHROs] had to decide, 'Do we lay people off with the same benefits, or do we take away a layer of benefits so we're not cutting as many bodies?' "
She speculates the frequency and intensity of such discussions probably drew CHROs and CEOs closer together in that era of crisis.
Cascio agrees the financial crisis was a huge factor in the amplified role of human resource chiefs, because massive corporate restructuring placed a heavy emphasis on staffing decisions, to make sure the right person is in the right job. To make better decisions and grow closer to the CEO, Cascio says, it's critical for CHROs to develop a deep familiarity with other parts of the firm such as sales or marketing. "Getting outside of your comfort zone is important," he says.
Mara Swan, ManpowerGroup's executive vice president for global strategy and talent, carries a title that demonstrates how far her responsibilities at the multinational professional-services firm have expanded beyond just traditional human resources.
Swan, who arrived at the Milwaukee-based firm in 2005 after heading up HR at Miller Brewing and at Coors, says her boss -- chairman and CEO Jeffrey A. Joerres -- doesn't want to know the gritty details of the training programs she runs, but he wants her help on getting the most dollar value for the firm's big-picture strategic vision.
"We had a classic function," Joerres says of his HR department before Swan was hired in 2005, "and there was nothing wrong with a classic department. But when I was talking about the strategy and about having an impact in the field, I was getting back 'too classic' in the responses." (By "classic," Joerres says, he means traditional training and recruitment practices rather than unique ideas aligned with ManpowerGroup's newer strategies.) 'We'll put a training program in place' -- OK, I got that. I was looking to step it up a notch."
Indeed, Joerres may have realized he got what he was looking for -- or arguably more -- the first time the two went out for lunch. As Swan recalls, her new boss may have been taken aback a bit after voicing his dismay over the existing executive-training programs, when Swan told him the answer wasn't merely a training program but for a more forward-looking strategy to which HR programs could be aligned. She was saying ManpowerGroup could move forward if it overhauled its whole strategy -- with her helping to shape it -- rather than her adjusting to what was in place. "I told him I will get the outcomes if we set the stage -- he was a bit disarmed," she says.
But clearly, her approach worked, as eventually, Swan was handed a much broader portfolio that includes not just human resources but public relations and marketing. She says the notion that the CHRO is largely a confidant or sounding board to the boss -- or a kind of corporate "horse whisperer," as she jokingly calls it -- may be a tad overrated. Her job, as Swan sees it, is not so much to give advice as to get results, and she says the most meaningful compliment she's received while at ManpowerGroup didn't come from Joerres, but from a large global client who said they could see how Swan's strategic insights had resulted in better, faster results. "I don't care as much about what the boss thinks as the people who are paying for our service," she says.
Grainger CEO Ryan and CHRO High agree that a CHRO proves his or her value to the organization by showing how to guarantee the right people are in the right place to execute a new brand, a new international market or a whole new strategy for the firm.
"The CHRO who really makes a difference is the one who understands [the importance of the role] to derive the function of excellence," High says. "The real job of the CHRO is to make sure that you are a business leader."
Antoine, the retired P&G CHRO and NAHR head, says he believes change accelerates -- and the future of CHRO-CEO relationships will continue to move in the same direction, with an even greater emphasis on personal ties, candid advice and developing talent for the top strategic jobs. In his words, the CEO will continue "to rely on the CHRO to find out what is really happening in the company."