CHROs Need to Move From Influencing to Being Actively Engaged in the Business

For a CHRO to be successful in today’s world, having the ability to influence will not cut it. Given the highly matrixed operational models most companies work in, the ability to influence is a “must have” skill at all levels and no longer exclusive to the top HR roles.

Major changes in the marketplace are pushing companies to operate much differently than they have before:

• Data and information are flowing at a greater speed than in the past.
• Not all critical decisions need to be directed to the CEO; the hierarchical decision-making model is obsolete.
• Price and margin wars are no longer subtle.
• The world is more geopolitically and economically volatile.
• The move from “learning organizations” to “knowledge organizations” is more of a challenge, as employees treat employment as contracts; tenure is becoming less important.

In the past, a good CHRO was considered a sounding board for the CEO—a trusted advisor who also had good relationships with the rest of the executives and could manage sticky issues. While those qualities still hold true today, they are not sufficient. I believe that when Ram Charan challenged HR to be split into two, he did not question the role of the CHRO but the value proposition a CHRO offers in the complex environment in which we now conduct business.

Change has always been around us, but the pace and complexity of change is nothing we have seen before. Yet it is something all CHROs must contend with. In order to add value, a CHRO is expected to be “actively engaged” in the business. But what does this mean? It means that CHROs need to know a tremendous amount about the business and the context surrounding it, just like the CEO. CHROs must understand:

• Economic trends and what they mean for their industry and the markets they
  serve
• The immediate and long-term impact of geopolitical issues
• The competitive landscape for their company, not just focused on talent
• The performance and potential of their company’s inline and pipeline of products
• The products and product mix that will differentiate them from their competition
• Key business processes, including how the company conducts business, whether changes should be made to these processes, and why this provides/may provide a competitive edge
• The company’s financial performance and analyst reports
• What changes in the landscape mean for their talent needs

Being steeped in the strategy and operations of the company helps a CHRO actively participate in strategic discussions, deliver on immediate and long-term goals, and add shareholder value.

A CHRO needs to begin with understanding the strategy of the company. In order to deliver on the multiyear strategic plan, a company needs to determine how it wants to operate efficiently—its key business processes. This operational framework determines the company’s capability and capacity requirements and forms the basis for the development of organizational structure, workforce planning, and skill requirements. This model needs to be regularly revisited and adjusted. This avoids having to make major shifts that can place the company at greater risk. We have to ask ourselves: How can a CHRO develop an organizational structure that is meaningful or will yield business results if he or she doesn’t actively participate early in the process?

Every company revisits its strategic plan annually. Current-year performance and any adjustments to the strategic plan shape the operating plan for the next year. Of course, market conditions and other aspects mentioned above will play a key role. With changes coming at us with speed and intensity, every company is asked to test how they conduct business. Changes to any of the elements above will require reevaluating the organizational platform—capability requirements, organizational structure, and talent needs.

The role of the CHRO is rapidly changing. For CHROs to succeed, they need to be comfortable speaking the language of the business. They need to be actively organization engaged in every aspect of the business and not limit themselves to “supporting” the company. With talent being one of the top three priorities of most CEOs, CHROs need to embed themselves and participate in the business.

Below are some areas that a CHRO should intimately understand in order to align strategy and execution and deliver on the company’s short- and long-term objectives:

• The company’s multiyear strategic plan and annual operating plan
• Its financials and how various factors impact financial performance
• Its portfolio strategy and multi-generation portfolio planning; pipeline management for both inline products and funnel; margins for various products; and how the product mix creates advantage in the market
• The company’s position in various markets and its plans to maintain or grow share (e.g., through price increases, geographic expansion into new markets vs. new clients in existing markets, and penetrating existing accounts)
• For manufacturing and other capital intensive industries, capital and inventory management, supply and demand planning, and how well they align with revenue forecasting
• Who your competitors are and how are they performing

There is a direct link between managing a company’s talent game plan and each of the factors listed above. For example, understanding a company’s growth plan will determine the type of salespeople the company will need in each area in the short term and long term. This will help drive talent acquisition, development, and management strategy. 

Of course, each company will have it is own set of unique and critical areas that a CHRO will need to deeply understanding. Knowing the HR playbook is the baseline—but knowing the business, knowing the markets the company serves, and knowing its customers and products are also essential. Customizing the company HR playbook in the context of these factors to realize the long-term strategy creates a world-class people platform that is essential to every company. And it’s what every CEO looks for from his or her CHRO.

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