Your organisation needs you: HRD to CEO
Jenny Roper, March 19, 2018
The number of HRDs moving into CEO positions or similar is still woefully small. We explore what might be holding HR back
Back in 2014 Dave Ulrich and Ellie Filler revealed some startling – and exciting – findings. Filler, a senior client partner at Korn Ferry specialising in placing chief human resources officers (CHROs), had enlisted the help of University of Michigan professor and ‘father of modern HR’ Ulrich to investigate the CHRO role within the C-suite.
They studied proprietary assessments administered to C-suite candidates over more than a decade, examining scores on 14 aspects of leadership grouped into three categories: leadership style, thinking style, and emotional competency. They then assessed the prevalence of these traits among different types of executives and compared the results.
The findings surprised even Ulrich and Filler. Except for the COO (chief operating officer), the executive whose traits were most similar to those of the CEO was the CHRO.
The case, seemingly, was made. The perennial debate around why more HRDs don’t make it to the top spot (along with that wider one around HR influence and credibility) could finally be put to bed. The research showed many CHROs have what it takes to become the next chief exec in their organisation. The floodgates of HRDs moving to CEO positions could now open.
Several years on, however, and such a bursting forth has yet to occur. The most recent estimates, courtesy of 2013 research from Mullwood Partnership, put the number of CEOs moving from HRD roles at about 5%, compared to half coming from the three key backgrounds of finance, operations and marketing. (The other 50% come from 23 backgrounds, including legal, IT and strategy, and of course HR.)
Founding director at Mullwood Partnership Jo Sellwood-Taylor tells HR magazine that she believes “it’s probably a very similar percentage” today unfortunately. “Sadly I don’t think the debate has shifted,” agrees Helen Pitcher, chair of Advanced Boardroom Excellence. “I would estimate the number of CEOs coming from HR backgrounds at less than 10%.”
Ulrich himself sounds a slightly more positive note. “They are coming,” he muses, citing the example of Mary Barra from General Motors, who became CEO in 2014 after previously being VP of global HR. “But these are anecdotal,” he concedes.
Signs of change
Nonetheless, there does seem to be something of a sea change underway. In HR magazine’s own research conducted for this piece the most surprising finding perhaps was that 65% of respondents from HR backgrounds said they would consider becoming CEO. This placed our HR respondents not too far behind those with non-HR backgrounds; 72% of whom said they’d be keen.
Sellwood-Taylor agrees this finding is consistent with her own experiences over the past few years. “One of the things we’ve found since we did our research is there’s definitely more of an appetite,” she says. “The biggest barrier back then was appetite but we’ve definitely seen a shift, particularly over the last couple of years.”
Anna Penfold, a consultant at executive search firm Russell Reynolds, muses that a fair amount of activity is occurring at the level of HRDs taking the reins of businesses that are predominantly HR-focused in terms of their commercial activities: “You see a human capital consultant at Mercer for example becoming CEO in the same way a lawyer becomes a partner of a law firm. There are shades of grey between that and an HRD becoming CEO…”
Anecdotal, qualitative research for this piece revealed that HRD appetite for CEO-ships might just not be happening in every sector or in FTSE 100 companies yet, with many taking deputy or interim CEO roles for example rather than straight-up CEO ones – as those profiled across these pages show.
So the beginnings of a groundswell are definitely there, with the conditions just right for the HR lens to be highly valued among top teams. “I would hope we’re on the cusp of this changing because of the breadth of essentially HR issues boards are grappling with today,” says Pitcher, citing executive pay, sustainability and diversity issues, reputational risks and approaches to corporate governance.
Martyn Phillips – who moved from HRD to retail director to CEO at B&Q, and is now CEO at Welsh Rugby Union – describes the way business today has moved into a “collaboration phase”. “Brands are realising they can’t do things on their own anymore – that plays into HR’s expertise of what effective collaboration looks like,” he says.
He describes how the advent of technology means focus is “now much more on the consumer experience” and so inevitably on the people in an organisation driving and improving that experience.
The success of most organisations in today’s economy is ultimately all about people, agrees Kevin Green, former HRD at Royal Mail and outgoing CEO at the REC (stepping down this month to pursue non-exec and consultancy work). “If you think about how businesses compete in today’s economy a lot is around intellectual capital, brand, design, innovation… underneath all that it means they’re a people business,” he says.
“The biggest businesses in the world – Apple, Google, Facebook – if you look at their balance sheets what have they got? Nothing. What makes them successful is hiring the right people and creating the right culture.”
This logic certainly holds true when applied to the public and third sectors. Indeed perhaps even more so – again taking the individuals profiled here as examples. “I do think there’s more representation of HR at CEO-level in the third and public sectors,” says Jo Land, deputy CEO and group director of OD at Avenues Group, a not-for-profit organisation that supports people with autism, learning difficulties and brain injuries.
“Many third sector organisations have their people agenda at the core of what they do and in my experience this means that the role and remit of HR is often mission-critical.”
The temptation in the public sector over the last few years, however, has in some instances been to appoint finance people to the top positions, reports Shokat Lal, assistant chief executive at Rotherham Metropolitan Borough Council and former assistant director of HR and workforce services at Coventry City Council.
“That’s simply because of all the budget stuff,” he says. “But in the public sector where organisations know the vast amount of savings and changes they’ve got to make, most people hopefully realise now that you can’t do that without good HR interventions. It’s not slicing budgets but the transformation work that will do that.”
The right skills and characteristics
Concurring with Ulrich and Filler’s findings, partner at EY Dennis Layton points out that those with an HR skillset and experience also frequently possess the right characteristics to make good CEOs. “Personal brand stuff becomes so important at that level, and personal triggers and awareness,” he says. “It’s about: can you park your ego and make it about collaboration? One of the key factors in CEO failure is ‘stuff about them’.”
The other failure factors uncovered in work Layton carried out in a previous role at McKinsey were: CEOs not having enough of a differentiated strategy from competitors (something a human capital-focused approach can overcome, he points out); and CEOs having “the wrong approach to working with the culture of the organisation… having the wrong team and being slow to refresh that team.” The opportunity for HR on all counts, points out Layton, is strong.
Another encouraging factor spelling a potential shift in the HRD to CEO debate, he says, is the increasing importance with which the HR function is now viewed by others in the organisation. Spurred by the realisation of how vital matters of human capital now are to organisational success, many ambitious prospective corporate movers and shakers are seeing a spell in HR as de rigeur.
“What I see as a big trend are moves like the head of sales becoming head of HR; with an idea that this might, in some organisations, be the route to success,” says Layton. “People now see HR as a springboard given the quality of what we do,” agrees Phillips. “I think in 2010 marketing was a very hot profession for example. But now we’re seeing a shift.”
What this encouragement also provides, however, is a cautionary note for ambitious HR directors. While people issues and skillsets are being appreciated as of crucial relevance to decisions made at top tables, this doesn’t mean it’s automatically going to be ‘HR lifers’ eventually given the top job. Take the aforementioned General Motors’ Mary Barra, who by no means fits this category, having also been VP of global product development and VP of global manufacturing engineering, among others.
HR professionals might find themselves pipped to the post by other, more rounded business leaders who have ‘stolen’ the HR piece for themselves.
Not necessarily the best job
Of course many in HR would be (and are) quite happy with this state of affairs – a crucial point to recognise. “Being the leader is lonely and risky,” points out Green. “Because if the business doesn’t perform well it’s the chief exec who gets the blame. You get up early, you get home late and it’s every day. You don’t get to switch off.”
Many simply love leading HR functions, and there’s certainly nothing wrong with that. “The question is whether CEO is the ‘ultimate’ role for everyone,” says chief people officer at Metro Bank Danny Harmer. “Yes it is the most senior executive job but that doesn’t make it the best. I absolutely love the challenge and opportunity my job offers and the difference I am able to make. I would be very hard to be persuaded away from such a brilliant, fast-changing and interesting landscape.”
She adds that, as above, an HRD’s sector is an important factor: “For example could I be the CEO of a bank? Probably not. There are technical aspects to the role that I simply don’t have enough experience in.”
Many in HR are most passionate about staying in the function because of the ability, as expressed by Harmer, ‘to make a difference’, agrees Rotherham’s Lal. Many would feel their ability to hold the senior leadership team to account and champion the employee voice at board level compromised if they progressed to CEO – as evidenced by the fact that 33% of HR professionals who said they wouldn’t ever aspire to be CEO in our survey cited this very factor. (Additionally, 46% said they just generally wouldn’t enjoy the role and 41% that they wouldn’t enjoy the role’s accountability).
“There are a lot of people who love speaking on behalf of the workforce and almost being a conduit of change between the organisation and the workforce,” says Lal. He would encourage them to realise that in some instances, however, this can be done even more effectively ‘from the inside’.
“Obviously there are people who absolutely love the day-to-day of working in HR,” says Lal. “But if they really want to be influential they shouldn’t be fearful of taking the bigger job. Because you can then make sure HR is on the agenda and is in the DNA of the organisation…”
“I think sometimes people in HR feel they don’t want to make those tough choices the business does. But if there are going to be hard choices don’t you want them to be made by the people who stay up all night worrying about them?” agrees Layton.
His concern is that, while many are doing a great job of leading their organisations through soft leadership exerted from within senior HR roles, there are others who would relish the top spot but don’t have the confidence, right experience or the backing from their business.
The knotty question is what’s holding people back more: their confidence in their capabilities as an HR professional and the transferability of those abilities, or perceptions among senior circles that HRDs on the whole don’t have what it takes?
Pitcher says it’s a bit of both, and something of a chicken and egg dilemma. “I was doing an evaluation feedback recently to a client board. I knew the HRD in another organisation, and when they were there they were confident, articulate, had presence… but that had been beaten out of them in their current role,” she reports, regarding the critical role perceptions of HR in different organisations can play.
“I was very lucky to have a CEO willing to let me have a go at operations,” concurs Phillips, regarding his sideways move from HR to retail. Indeed a sizeable 47% of the HR professionals HR magazine surveyed who said they wanted to be CEO cited ‘the perception of my function among senior leaders in my organisation would prevent me getting there’.
The elephant in the room is gender. This was mentioned by many of the respondents to HR magazine’s survey. “There is a gender issue with females (myself included) continuing to focus on what we believe we cannot do, while our male counterparts are not even considering or voicing any such development areas,” commented one.
So with HR still dominated by women, there is a possibility that perennial, broader issues around gender inequality at senior levels and lack of confidence among many women could be decisive factors.
Lack of experience
But dependent as HR professionals are on open-minded boards and senior teams – and confidence and gender issues aside – there is a huge element of HRDs often still not having the requisite experience in other areas of business, and not being sufficiently interested in gaining it. Close behind the above perceptions factor in HR magazine’s survey came: ‘Lack of experience outside of my current function to date’ (46%), followed by ‘I wouldn’t feel confident enough in my ability on the financial side of things’ (39%).
“I think there are people who really wouldn’t mind having a go at being chief executive, but then they’ve got very limited experience,” says Green. “Some of that’s got to be driven by individuals themselves wanting and demanding it.”
For Green this all goes back to debates around whether HR is predominantly attracting the right kinds of people. Greater hunger to lead and take risks is a quality people functions would benefit from regardless of how many HRDs eventually become CEO, he says.
“I instinctively always wanted to lead,” he muses. “When I was young I’d always end up captain of the football team. I’m probably innately competitive. The issue I would raise is: don’t we want more leaders in HR? Even if they never become chief execs don’t we want people prepared to drive change?”
“HR still doesn’t attract enough top-quality people,” agrees Phillips. “It’s the whole ‘where does talent meet opportunity?’ thing. I think the majority of the talent goes to other areas besides HR.”
This is a wider issue of the way HR brands itself and the difficulty of breaking a Catch 22 scenario; where HR isn’t always the first career that top talent thinks of.
But a pragmatic first step HRDs can take, whether they missed the boat or were just never interested, would be to ensure tomorrow’s HR leaders are developed into more rounded business people, says Green. Then those who might have the hunger and capability won’t be held back by lack of financial, operational or perhaps data nous.
“Early in their careers HR people should do an operations job, a marketing job, a job in finance; otherwise it becomes too late. Get HR people to run one of the smaller businesses within the group,” he says, adding the call to arms: “I would say [HR stepping up] is now or never. Because the environment is just right.”
The time is now
Not all HRDs will be interested in becoming CEO, with plenty of good reasons. But the issue of why such a relatively small number follow this path merits debate. Not least because it brings issues of HR capabilities and credibility, and questions around developing future HR talent, into sharp relief.
Ultimately this is a critical issue to address because it could inform the landscape of corporate governance in future – and how ethically this is shaped. This if nothing else should make HRDs sit up and reconsider the opportunity, says EY’s Layton.
“Combining empathy with business acumen is a nuclear weapon,” he says. “Work doesn’t always factor in the human cost. So having people in leadership roles who are interested in people, who understand culture, who can pick a good team and who are self-aware is critical.
“I’m hoping more make the leap in a world where work still doesn’t work for a lot of people.”
Check back over the next few days to see our profiles of those who’ve progressed to CEO, deputy and interim CEO and MD roles