How HR Can Add Value to the CEO

An article last year in the Harvard Business Review began like this:

Recent complaints about the HR function have touched a nerve in a large, sympathetic audience, particularly in the United States. The most vocal critics say that HR managers focus too much on “administrivia” and lack vision and strategic insight. (Why We Love to Hate HR...and What HR Can Do About It, HBR, July/August edition, Peter Cappelli)

 
 
HR adds value to the CEO when it assumes a more strategic role.

This lead-in reminds me of an experience I had about a year ago at an HR conference for which I was asked to be a panelist. The focus of the conference was how human resources can become a greater asset to the CEO of the business. During one of the sessions I attended, conducted by a prominent CEO from the area, I looked around the room at the audience as the chief executive made his presentation. I had been taking copious notes and was curious to see how others in the room were responding to the message. I saw maybe two or three other people likewise taking notes. That's it. The rest sat just passively listening.  Later, during the panel discussion I participated in, I pointed this out to audience. I did so in response to a question posed along the lines of, "How can human resources get 'a seat at the table' with the CEO... so we're more a part of the strategic team." After pointing out what I had observed in the previous breakout, I suggested that human resources needs to learn how to add value--and that starts by understanding what the CEO is concerned about and focused on. I reminded them that the chief executive they had listened to in the previous session had suggested he was looking for a business partner, not an HR professional.  

Ram Charan, in the July/August 2014 HBR issue, put it this way:

I talk with CEOs across the globe who are disappointed in their HR people. They would like to be able to use their chief human resource officers (CHROs) the way they use their CFOs—as sounding boards and trusted partners—and rely on their skills in linking people and numbers to diagnose weaknesses and strengths in the organization, find the right fit between employees and jobs, and advise on the talent implications of the company’s strategy.

But it’s a rare CHRO who can serve in such an active role. Most of them are process-oriented generalists who have expertise in personnel benefits, compensation, and labor relations. They are focused on internal matters such as engagement, empowerment, and managing cultural issues. What they can’t do very well is relate HR to real-world business needs. They don’t know how key decisions are made, and they have great difficulty analyzing why people—or whole parts of the organization—aren’t meeting the business’s performance goals."

Reading and referencing these accounts makes me feel just a little sorry for human resource professionals. I know many who do an excellent job and carry out their duties admirably. However, too few of them understand what it means to add value to the business and how they can go about it.

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With that in mind, let's discuss how HR can add value to the CEO of a company.  I'll offer five ways that I believe address the umbrella issue of strategic purpose. My focus will be on those issues that impact talent and compensation, although other related areas should also be considered.  I believe these are contributions any CEO would find valuable.

  1. Understand the Company's  Performance Framework. This means you gain a clear perspective of how shareholders view the present business in relation to its future. You have a good grasp of the business model of the organization (how it drives revenue) and strategy (how it competes with its model in the market place). You know what roles need to be fulfilled if that model is going to succeed and where the gaps are. You know what skills and talents will be needed to fulfill those roles.
  2. Build a Talent Strategy.  With the aforementioned performance framework in mind, map out a talent strategy that addresses the gaps that need to be filled and what it will take to address them.  Know what the talent trends in business are and what kind of people it's going to take to fuel the growth the shareholders have envisioned.  Anticipate what kind of value proposition that kind of talent is going to be looking for and how it aligns with your current offering. Identify gaps in your rewards package and research the best way to fulfill them. 
  3. Create a Meaningful Value Proposition--one that both shareholders and employees can embrace. Shareholders are concerned with return on every dollar invested in the business. A large amount of money is poured into compensation every year and most business leaders are concerned that it isn't held accountable to an ROI as other, large capital deployments are. Learn what it means to measure productivity profit in the business and how to make incentives self-financing.  Understand what it means to build a wealth multiplier organization and operate under a philosophy that ties value sharing to value creation. Learn what shareholders believe is the point at which addition value (beyond that created by their capital work) is being created by the people in the business. Then share the wealth creation and sharing philosophy with employees and demonstrate their pathway to participation in company growth and productivity.
  4. Build Line of Sight in the Organization.  This occurs when employees can make a clear connection in their minds between the vision of the shareholders, the business model and strategy that fulfills that vision, the employee's role in the business model and what's expected of him in that role and how he will be rewarded if he fulfills those expectations. When line of sight increases, so does accountability and results. When employees understand the context in which they are working, greater engagement results. Engagement improves productivity and execution--both of which add value to the business.
  5. Promote a Total Rewards Approach. Ultimately, there are four issues that the best talent is always evaluating about its association with your company. If you are in human resources, you should pay attention and promote all four of these elements and ensure the company as a whole (and the CEO in particular) is making each a priority.  
    • Compelling Future--a great employee wants to relate to where the business is going, embrace its value system and believe the future company can't be realized without his or her unique contribution.
    • Positive Workplace--premier talent seeks to work in an environment that respects and utilizes its unique abilities, where communication channels are open and problems can get solved. It also wants the nature of the work it is doing to be meaningful and have other engaged, committed people with whom to associate.
    • Personal and Professional Development--people of high capabilities want to know that their association with the business and its resources will make them better; that their unique abilities will improve as a result of their involvement in the company
    • Financial Rewards--individuals want to have a sense of partnership with the business. That kind of relationship is codified, in large measure, when the compensation system provides an opportunity to share in the value they help create.
If human resources will pay attention to these five areas of focus, its value to the organization will soar.  It will add value to the CEO and he or she will come to view those who operate in these terms as key partners in building the business. 

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Article Categories: Ceo, Human Resources, Ceos And Pay Strategy
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