As a retained executive recruiter in Minneapolis, I have had the great fortune to work with a number of companies hiring their first strategic human resources leader. Surprisingly, these companies have not been start-ups or small companies - all were long standing, reputable companies with over $100M in revenue. For varying business reasons, each had decided it was time to elevate the human resources function.
These projects are some of the most personally rewarding, not because HR searches are inherently more enjoyable, but because of the incredible impact the right HR leader has on a business.
What is a Strategic Human Resources Leader?
So what does it mean to have a strategic HR function? And how do you know if you have one on your team? Let me use an analogy that most business owners grasp very quickly - the different between a Controller and a Chief Financial Officer.
A capable Controller is excellent at providing a look in the rear view mirror. What happened last month, last quarter and last year are well-documented and reported. However, a Controller (in the true sense of the word) has trouble looking forward. On the other hand, a true CFO is able to not only assess the numbers of the past, but also build scenarios and models for the future. I've heard this described as the ability to tell the story behind the numbers.
The truly strategic HR leader (a Vice President of Human Resources or a Chief Human Resources Officer) is similar. They are able to develop answers to questions like:
- To have twice the revenue we have today, what would our employee population have to look like?
- What skill sets will we need in both leadership and individual contributor roles, and how many of these skill sets can we develop in-house, versus hiring from the outside?
- What will our overall labor and training costs be, and ultimately our overall ROI on investment in these employees?
As you can see, the type of HR leader who can handle this level of accountability is a whole different animal. They need a strong understanding of the other functions of the business (finance, operations, sales and marketing). They must have strong working relationships with other senior leaders and truly be relied upon as a key adviser to the CEO. Basically, this person needs to be a business person first, and a human resources person second.
Why Human Resources Needs a Seat at the Table
As a function, HR is often the last to be given a seat at the table. In an article in the Harvard Business Review, People Before Strategy: A New Role for the CHRO, the authors write: "it is time for the HR function to make the leap...and become a true partner to the CEO."
They go on to state: "rather than being brought in to implement decisions that have already been made, the CHRO will (should) have a central part in corporate decision making." The authors point to companies like General Electric, Tata Communications, Black Rock and Marsh as examples of companies who have achieved phenomenal success due, in large part, to their emphasis on human resources.
I agree wholeheartedly. I cannot think of many companies where employees and payroll are not the single largest line item on the P&L. When thinking in those terms, not having a strategic HR leader seems a big short-sighted, if not outright foolish. And while CFOs are good at overseeing the financial aspects of HR, they are simply pulled in too many other directions to really focus on the people aspect of the business.
Elevating the Human Resources Function
Certainly as a CEO or business owner, you need to be the catalyst for elevating the HR function and making sure it receives the respect it deserves; however, there is also a change that needs to happen among HR professionals. It is no longer good enough to be a executor - making sure HR policies are followed, payroll gets out on time and open jobs have a reasonable fill rate will no longer garner an A-rating.
Today's HR professionals have to be willing and able to take a seat at the table and really behave as an adviser to the CEO and a peer to the senior management team.
The previously mentioned HBR article describes the truly strategic HR leader as one who has the ability to predict outcomes, diagnose problems and prescribe actions that will add to the business. This means being able to simultaneously look inward, outward and forward.
The good news for CEOs and business owners is that many of today's HR professionals want (and are capable of) this level of accountability. Many are complimenting their undergraduate degrees with MBAs - and a number of larger companies are rotating HR people into other functional areas to give them more exposure to the overall business, heightening their ability to lead cross-functionally.
If you find your company has plateaued, continues to stall on initiatives or just has trouble executing on strategy, your HR function probably needs to be elevated. I have found that when companies really evaluate the cost of turnover, poor hiring practices, productivity per employee and their overall leadership capabilities, upgrading the HR function becomes a no-brainer - the cost of doing so pays for itself in short order.