The right stuffOn 17 Jul 2001 in Personnel Today Related posts:No related photos. Previous Article Next Article Comments are closed. Why is it so hard for HR directors to become a natural choice as a company’sCEO? In the last part of our three-part series on CEOs and the boardroom HR,Godfrey Golzen examines why true HR professionals are so often ignoredHR management is in danger of falling victim to flawed logic – namely thatall CEOs have to be good at managing people, HR managers are good at managingpeople, therefore HR managers are destined to be the next generation of CEOs. That may be so, but it doesn’t necessarily follow. Our profile of the top 20senior executives in the past two issues of Personnel Today show that a growingnumber of CEOs have spent a considerable amount of time in HR roles, but theyare still in the minority. Even fewer have moved directly from HR into the topspot, so does this mean that “people are our most important asset”is, for most organisations, rhetoric rather than reality? Not really. For one thing, in some of the most important companies a spellin HR has become a necessary step on the way to the top. Donald MacLeod,European vice-president for headhunter Korn/Ferry International, reports that,as in a growing number of instances, the joint MDs of Mars in Europe, have bothhad long spells in HR. Indeed, KFI’s highly regarded European president, DickBuschman, is one of the few business leaders to have made a direct transitionfrom HR, though since executive search is a pure people specialism, that is notso surprising. The fact is, however, that most CEOs have moved up from management linepositions and often have a background in the “hard” skills ofmanagement. Clive Morton, author of the award-winning bestseller Becoming WorldClass, thinks the reasons may be psychological and cultural. “In Myers-Briggsterms, a typical CEO is a sensor and a thinker, whereas an HR manager reliesmore on feelings and intuition,” says Morton. “For a CEO, decisionsare approached from a right/wrong point of view. An HR person is more aware ofgrey areas.” That is often reflected in their education. Anecdotalevidence suggests a high proportion of CEOs have degrees in subjects such asfinance, engineering, science, maths or law, where answers are in black andwhite. “But why should HR people want to be CEOs anyway?” asks KlaasWassenaar, who runs the HR Leadership programme at the Rotterdam School ofManagement. This view is echoed by Ian Keenan, principal consultant at ER, aUK-based niche consultancy in HR. “People go into HR because they’re moreinterested in those issues than in the numbers.” What the Rotterdam programme is setting out to do is turn participants intobest-in-class HR managers rather than into CEOs. Wassenaar is concerned thatRSM’s research show that HR managers spend less than 5 per cent of their timeon strategic issues and that their general business awareness is low, which onthe one hand makes them targets for outsourcing initiatives, and on the othermakes them less-than-credible board members if they do move to top spots. “While HR managers are being promoted to the boards of companies, theirtraditional internal-facing, cost rather than revenue roles do not ‘cut it’with the board looking for new or succession CEOs,” says JohnMahoney-Phillips, group head of Human Capital Performance at UBS. “How many HR directors really talk in terms of ROI and can measure andquantify it?” At UBS, he says, traditional HR disciplines and measuressuch as assessment, performance management, succession planning and internalsurveys are crucial, but as a basis for developing a strategy for developingand deploying human capital, not as sets of processes carried out for their ownsake. The programme at RSM focuses on HR professionals who want to become HRbusiness leaders, not functional specialists, and that is ultimately the routeto the top – for those who want to take it. Mahoney-Phillips point out that inthe light of such an objective, HR people ought to welcome outsourcing as”a liberation from the lower added-value activities that so many HRMscomplain about”. He adds, “If anything, the lack of a passion to raise the game andtruly align people and business strategy is why HRMs are not making it to thetop – they should embrace outsourcing as one strategic shift in the value theycan add to the business.” Lots of others are now emerging, relating to taking a proactive view of whatthe mantra, “People are our greatest asset” really means. Examplesare provided in London Business School professor Lynda Gratton’s latest book,Living Strategy (FT/Prentice Hall). At GlaxoSmithKline (formerly Glaxo Wellcomeand Smith-Kline Beecham), for instance, the management team recognisescompetitive advantage in the immensely challenging environment ofpharmaceuticals lies not just in research capacity as such, but in thewillingness of research teams to share their knowledge – and in the creation ofincentives to further this end – a pure HR focus. In Motorola’s move into mainland China, the marketing people promoted theidea that creating and developing a cadre of Chinese managers, an HR task,would also yield invaluable insights for a marketing strategy. AtHewlett-Packard, operating in the front line of the war for talent, it wasdecided competitive advantage could only be sustained by getting HR involved increating a culture of commitment and involvement other companies would finddifficult to imitate. The technology itself was just another commodity. “One doesn’t think of Jack Welch in the context of HR, but it issignificant that at every stage, having put the processes for change intoplace, he spends an enormous amount of time going round and talking topeople,” says Keenan from ER. The speed of advance in technology has, paradoxically, put people at theheart of strategy. At the same time, it has opened a Pandora’s box ofopportunities for HR managers who want to make it to the top. “Those whowant to and can combine HR skills, experience and competencies with commercialawareness assuredly will,” says Sarah Barwell of Courtenay, a specialist Britishrecruiter of top HR talent. She warns, however, that top talent from otherfunctions, aware of the possibilities of HR, are now also seeing it as a stepon the road to the top – a view unheard of even three years ago. The fact is that as the result of technology, HR issues are appearing infunctions where they never appeared before. Witness the example quoted byProfessor Gratton – research, market entry strategies and maintainingcompetitive advantage – HR is included in these areas. But they are embedded inthe very structure of new economy organisations, in particular because theseare based on networks, alliances and partnerships, both between people on theinside and external, and to an increasing extent global stakeholders, such asfinancial institutions, members of the supply chain and customers. That is whyCiticorp chairman John S Read is quoted in the McKinsey Quarterly as saying,”Our global human capital may be as important a resource, if not moreimportant, than our financial capital”. CEOs of leading-edge companies are aware of these new strategic scenariosand of crucial roles that HR managers could play. The trouble is that notenough are doing so. “When they get on the board, in many cases they’renot really at the top table,” says Linda Holbeche, director of research atRoffey Park, a British business school that is developing a global strategic HRnetwork. One reason is that they are not used to taking rapid-action executivedecisions. “Take management development. It’s a vital process and needs a lot ofthought on how to integrate it with business strategy. But it’s not somethingthat happens fast. And there’s also the fact that a lot of HR work consists ofprocess, administration and checking,” Holbeche says. These latter elementsof the job are just the ones that are being outsourced. “HR managers needto think beyond outsourcing and look at ways in which they could play a fullrole as business partners,” she adds. So what can HR managers do to achieve the credibility they need andcurrently lack, to get to the top? Above all they need to enhance theirbusiness awareness, which means understanding how every aspect of HR managementimpinges on other functions. One CEO, for instance, insists his HR managersshould be able to justify every proposal in terms of measurable forecasts ofcosts and benefits and certainly financial skills is one of the areas where HRpeople tend to be weakest. Many HR people are critical of the standard content of their functionaltraining on the grounds that it does not develop the overall business awarenessthat you need to be credible at the top. That is a situation that a number ofbusiness schools are seeking to correct. The Rotterdam School of Management,Cranfield School of Management, Roffey Park Management Institute and CityUniversity all offer HR-related MBAs and executive programmes. They are a big commitment in timeas well as money, but there is a price to be paid if you want to get to thetop. For contact details of suppliers mentioned here go to www.personneltoday.com/directorySkills that HR managers need:In an Andersen survey HR directors questioned by the human capital divisionat Andersen felt the following skills and competencies were crucial to carryout their role effectively– Interpersonal skills– Communication skills– Vision and creativity– Leadership– Change management skills– Strategic perspective– Cultural fluency– Business and market awareness– Technological literacy– Project management experienceGetting ahead in today’s business environmentIf you want to get ahead in the new business environment, then take note ofthe following trends– Invisible assets, particularly knowledge, are replacing tangible assets asthe foundation of competitive advantage– There are fewer people, but more are brought in on a project-by-projectbasis – more like a film crew than regular employees. That raises other issuessuch as trust and the importance of communication– Human capital – the basis of competitive advantage – is a scarce resource.In order to attract and retain it, companies have to become the employer of choice. That takes HR into the areas ofemployer brand and reputation management on a global scale– Cultural sensitivity is all-important, not just in the obvious areas ofwhat might be called etiquette, but in how HR policies and core values, likefairness, are perceived in different parts of the world – and particularly inthe notoriously tricky aftermath of mergers and acquisitions.