For decades, human resources has been at best an afterthought at many companies, or, often enough, the butt of jokes. Look no further than the derision that The Office’s Michael Scott felt toward Toby, his much-maligned head of HR. As Michael declaimed to Toby, “Why are you the way that you are? Honestly, every time I try to do something fun or exciting, you make it not that way. I hate so much about the things that you choose to be.”
Of course, poor Toby was just doing his job, which at most companies during the 20th century meant handling the mundane and irritating aspects of running a business, things like assigning cubicles, picking benefits plans, and dealing with the details of hirings and firings and disgruntled employees. Maybe human resources planned the Christmas party and picked gifts for people’s work anniversaries. HR was neither glamorous nor welcome inside the C-Suite.
“Ten years ago they looked at you for policy help. They looked at you when there was a problem or an associates relations issue or termination or separation or ‘I need to find this role or recruit.’ Nuts and bolts stuff,” says Tim Massa, senior vice president and chief people officer at The Kroger Co.
This vision of human resources, and the people who run it, was always a bit of a stereotype and is now, quite simply, out of date. The CHRO role has evolved radically over the past decade. Superficial changes like the prevalence of the CHRO or chief people officer titles are indicative of the growing importance of HR in not just the day-to-day functioning but the commercial success of enterprises large and small. “Now we’re trying to create more general managers across business, and you’re seeing more and more HR leaders become general managers because they can ebb and flow and can be that connector across the business,” Massa says.
Decisions CHROs make about who is hired and retained and how they are deployed have a direct impact on companies’ ability to deliver on their strategies. Accomplishing this requires CHROs today to try to “transform relationships” by “moving from transactional company-to-colleague to personal,” says American Express chief colleague experience officer Monique Herena. While culture, competitive pay and benefits matter, Herena says CHROs and companies must understand that employees’ experiences are “made up of many moments that can have a really big impact and contribute to business outcomes in a positive way when done well.” The CHRO role has transformed from a “getting things done” mindset to “listening and understanding what matters to colleagues at all levels.” (This theory, that employees thrive or fail based on a series of discrete experiences within a company, led American Express to rename their Human Resources function Colleague Experience Group.)
Far from being just the people who manage benefits and employee paperwork, CHROs are now in the position of ensuring that their companies are able to quite literally do business. And with the Covid-19 pandemic and a national reckoning over social inequities, CEOs and boards increasingly rely on CHROs for strategic guidance and leadership in times of stress and white-hot competition.
“A Fortune 250 CEO gave me a call in April 2020 and said, ‘I have had more strategic and really important conversations with my CHRO in the last eight weeks than I’ve had in the prior eight years,” says Society for Human Resource Management CEO Johnny Taylor. “Whatever progress we’ve seen or changes in the last 10 years was put on steroids in the last two years.”
A Changing World
While the CHRO role may be evolving faster than it ever has before in response to the ever-changing threat posed by the coronavirus, the evolution has been brewing for years. Technological change radically reshaped business, beginning with the rise of the internet and the first dot-coms in the 1990s. By the mid-2000s, the knowledge economy was on its way to becoming the economy; businesses that had once been insulated from technological change found themselves competing with upstarts and increasingly the companies that could win highly skilled, high demand employees had an edge. “We were shifting to a knowledge-based economy, which meant people were going to be more important than ever,” Taylor notes. “So once you’ve optimized everything you can with machines and automation and all of that…we’ve gotten to the point where the real differentiation is going to occur. The companies that win and the companies that lose are going to be largely dictated by who wins the talent game.”
In other words, for tech giants and industries that depend on constant innovation, such as finance or entertainment, the battle to win employees was already at a fever pitch even before Covid swept the world. The pandemic, however, thrust even laggard industries into the knowledge economy. No longer could retail stores take a gradual approach to the e-commerce transition. Services that had previously been delivered in person had to transition to remote overnight. The scale of the response to the pandemic by businesses and the speed at which it had to be executed meant suddenly companies were all competing for the same, limited number of knowledge workers. On top of that, they had to protect and retain frontline workers. In both cases, CHROs were and are the key decision-makers.
The pandemic was an accelerant on changes in human resources. “We cannot be the HR department of 10 years ago, even five years ago, where we didn’t have automated processes for our employees,” says Linda Curran, global head of human resources at commodities and trading firm StoneX Group. StoneX, which operates in 70 locations across five continents and is deeply connected to agricultural and other commodities around the world, relies not just on its own highly skilled workforce, but has to interface with workers across a myriad of industries. “Where we find the businesses, our model is that we want to keep providing more and more to our customers,” Curran explains. “To do that, we need to have employees in those locations, and so that’s created this draw from us as the HR department to really hone in on those processes that need to be digitized and need an online presence and automation.”
Between advances in technology, competition for knowledge workers, the shift to remote and hybrid work, and the pressures caused by the coronavirus—manifesting in terms of labor force disruptions, rising wages, high quits rates and ever-present safety concerns—CHROs are increasingly being treated as leaders within the C-Suite.
Massa sees his role now as being as much about change management and organizational transformation as driving productivity and accountability. CHROs “have to have a certain amount of financial, technical and data acumen,” he says. Curran echoes the sentiment, and argues that managing through change so that employees see “development opportunities and career opportunities” even as the company and its strategy evolves is one of the most important skills for CHROs today. Communication, she believes, is the key to successfully navigating change. “One of the biggest hurdles around change is people just not understanding what’s happening and why it’s happening. Once you as a leader understand the why and communicate that to your employees, you will find…the change comes a little bit quicker.”
Boards are also increasingly holding CHROs accountable for the performance of companies, a substantial change from 10 years ago. Much of this has to do with the rise of ESG and activist investors. As governance issues and diversity and inclusion policies and campaigns have gained in importance for investors, CHROs have been under the spotlight. “The role, especially if you’re in a public company, has become more influential with the board of directors,” says Massa. “I do a lot with the board chair in terms of our ESG efforts, environmental sustainability as well as diversity and inclusion. And obviously the whole talent strategy.”
“The role has become increasingly strategic,” says Herena. “Now more than ever, CHROs have a critical seat at the table and are trusted advisors to the CEO, the board and the business. As a CHRO, you have to closely link your talent and culture strategy to the company strategy, or you just will not be able to drive the same level of impact.”
The pressure from boards and ESG investors on human resources executives is real and nearly universal. “Boards are freaking out because for the first time the activist community has put pressure on the investor community, the capital markets, and have said, ‘This should matter,’” Taylor says. “Think about a CEO who has never historically had to think about that.” The outcome, according to Taylor, is the elevation of CHROs within the C-Suite and in the eyes of the board. One consequence of this higher profile, of course, is greater scrutiny and turnover among CHROs who are not up to the challenge. This means that CHROs today are faster to respond to changing circumstances and more deeply involved in strategic decision-making than ever before.
Tactics for Success
Even as the pressure of the CHRO role has increased, a few tactics for success have emerged.
Become a businessperson: Whereas in the past human resources executives more often saw themselves as partners to business leaders like CFOs and CEOs, Taylor believes they now need to act as full members of the business and transition from thinking in terms of labor planning to work planning. “The traditional way of thinking about labor is out the door,” Taylor says. “The work may be done across the world. It could be outsourced. What business leaders want to know now is: How will the work get done?” That means sitting down with the CFO, for instance, and saying, “Right now you’ve got 30 people doing accounts payable and accounts receivable. There is now technology that will get that down to three. There’s still a human being involved, but as opposed to me doing labor planning, let’s actually do work planning.”
Focus on well-being: “We do a lot of store visits,” Massa says. “We walk the stores to make sure all the standards are in place, but we have also embedded what we call a ‘people walk,’” to better understand how frontline employees are faring and what their needs are on a daily basis. This means a lot of listening and additional effort to make sure the organization is responsive to employee needs. “We put a lot of focus on helping our leaders get centered on their well-being. If they’re not centered, they can’t be good with others. They need to be a role model for telling others that it’s okay to take a vacation or not answer your email nights and weekends, but they can’t be if they’re not trying to take care of themselves,” Massa says. During the pandemic, this has meant providing extra support to workers using resources that already exist within the company, such as store credits to buy groceries, increased wages for those on the frontlines and $100 incentives for vaccines at Kroger store pharmacies.
Build trust: With success increasingly defined in terms of talent acquisition and retention, building trust within an organization has become incredibly important, Curran says. “We need diversity and talent. We need diversity in experience. And we need employees to trust us and for them to feel included and like they’re in a trusting environment,” she says. While this has always been a priority in building corporate cultures, it has taken on greater importance as companies grapple with transitioning to new models of remote and hybrid work. “As an organization, we need to look at ourselves and say, ‘What do we need to do to be better at providing employee services and providing services around an employee lifecycle?’” Automation of processes for ease of use, efficiency and clarity is key.
Be data-informed: Executive teams are constantly making decisions and adapting practices and policies to meet changing conditions. CHROs need to be focused on the future of work, Herena says, and manage through change by building strong relationships with key stakeholders throughout the company. “Do your homework by gaining a deep understanding of the intricacies of your business in the areas of financial management, data, analytics and digital,” Herena says. “Develop an informed point of view on your culture, talent and systems.” Oftentimes it falls to CHROs to encourage engagement and to set the tone for how employees across an organization will respond to changing conditions.
The pace of change for businesses keeps accelerating, and the tactics for handling these changes will shift as well. The pandemic remains a moving target, and technology continues to evolve. And the future will bring challenges that are not even visible yet. But one thing seems certain going forward, say leading CHROs: human resource leaders need to think strategically. The companies that succeed are those with CHROs who are already trying to understand the future of work and how they can guide their teams through this world of constant change.