Today, a day in the life of a world-class CHRO is much different from in years past. Now, a top-level HR leader may spend discussing digital transformation with the CEO preparing for a complex meeting with the compensation committee chair, pouring over data analytics, and monitoring high-potential executives.
Welcome to the new class of CHROs. The expectations from CHROs have increased manifolds, which have also impacted their pay and benefits.
In this interview with Sambhav Rakyan - Global Business Leader – Data and Software & Head of Talent and Rewards, Willis Towers Watson India share insights around the CHRO salary trends.
Q1. The role of CHROs has evolved over the years - from just managing the talent management practices to leading the organizational strategic agendas. How this progression in their role has impacted their pay?
A:Most organizations now look at their people as their biggest ‘assets’ – if they are engaged and performing well, then the company will do well. Our research has found that high-performing organizations often have employees who are highly engaged. We see that this increasingly has a lot to do with the evolution of the HR role over the last decade.
HR has evolved from being a largely administrative and operational function to now taking on a more EX (employee experience) role. This is similar to how companies work to understand and anticipate the needs of their customers better. Leading companies are mining their own employees’ data in order to understand their workforce’s preferences better. The practice is enabling them to know their people better, how to keep them motivated, and create an environment that fosters inclusiveness and personal growth. They are also looking into the future structure of the organization, where they are developing a better understanding of the business by working with other functional leaders in the organization and contributing to the business strategy. Organizational agility has become a significant factor in staying relevant in the future of work, and this has helped HR leaders to earn a seat at the table in most corporations.
This evolution has, of course, helped to impact CHRO pay as well positively. For most organizations, it is now catching up with the pay of most other top functional executives, except for the highest-paid roles, which are usually the CEO, COO, and CFO. In many APAC-based organizations, CHRO median TDC is at par or catching up with that of CMO and CIO.
In the Asia Pacific region, the impact that the new breed of CHROs is making on the landscape is showing in the stable growth of ATDC for CHROs, especially in the regional hubs – at 16.4 percent for HK and 12.7 percent for Singapore over the past three years.
Q2. What are some of the external factors that are impacting the pay of a CHRO?
A:The workload, required skillset and strategic impact of HR practitioners are all increasingly leading to CEOs and Boards to look for more strategic and creative HR leaders and to hold them to higher expectations once in place.
For instance, companies are increasingly shifting from organizing themselves around functions to organizing themselves around tasks. As they do this, they must be more flexible in both how they organize (because different tasks require different organizing structures) and where they source the needed skills to complete each task. These skills – especially highly technical or hard to find skills - are often only found in non-traditional workers such as part-time workers, contract workers, consultants, online talent platforms, and even AI. These changes make sourcing, organizing, and engaging the talent required for the business far more complex and challenging.
Adding to this, the increasing focus on HR and people issues from investors and regulators (particularly in financial services) and how companies now need to work through complex issues like gender neutrality, pay parity, inclusion, and diversity, and shareholder’s say on pay among many others. HR is also in the driver’s seat as organizations embrace the future of work and upskilling and reskilling of traditional and non-traditional employees to meet all these challenges, which hold profound ramifications for the organization’s future survival, growth, and profitability.
Q3. What are some new trends in the non-monetary rewards offered to CHROs?
A: Although pay at the executive level tends to be comprised mainly of monetary rewards, we do see some trends emerging in non-monetary forms of rewards for senior leaders, including in HR. Some organiZations are offering job rotation, such as reassigning high potential HR leaders to business roles to provide them with a better understanding of business fundamentals and the changes happening in the business environment. This is an essential benefit for CHROs, as this would enable them to understand the business and how it works truly.
Another example is the emphasis on executive programs such as MBAs to become more commercially attuned. We also see many CHROs using executive coaching and mentoring support.
Also, most CHROs get experiential learning on foundations/CSR initiatives as we increasingly see HR heads dual hatting the organization’s volunteering and philanthropic activities.
Q4. Are CHROs’ pay also based on ‘Say on Pay’ strategy, i.e. a firm’s shareholders having the right to vote on the remuneration of executives?
A: The prevailing practice in most regions is that ‘say on pay’ votes apply to those executives who are specifically named in the proxy or annual report. This would include the CEO and in some markets, the CFO. Otherwise, the executives named in the financial filings varies from company to company but can consist of the CHRO.
Generally, most large and complex companies will structure pay, including incentive plan designs as well as pay policies and governance for all key business and functional leaders on similar lines.
Q5. What are some of the trends in CHRO’s pay that you have observed in the last few years and your predictions for upcoming years?
A: CHRO pay is coming to par with the pay levels of other top functional leaders. This is especially true for companies with a complex human capital agenda that is central to the delivery of the strategy. Future HR leaders will work even more closely with the CEO and the Digital strategy team in “value transformation.”
We see that it is positively trending because of the role’s impact on the success of an organization’s human capital strategy. The profiles of CHROs are also evolving. Many of today’s CHROs come with deep technical HR expertise and experience in the business. And there is a new breed of young CHROs who are heading digital start-ups; they are tech-savvy and able to provide both business and HR perspectives.
Q6. How does the C&B structure of CHROs differ across the regions?
A: CHRO pay difference per region is primarily driven by relevant laws and some regulatory/taxation limitations per market.
For most organizations headquartered in the US and UK, the LTI component is a significant part of executive pay. This is especially true for CHROs based in the US, where base pay comprises 32 percent of TDC, while LTI comprises of 46 percent. LTI tends to be north of 140 percent of median base salary, while it is closer to 90 percent for CHROs based in the UK.
In most Asian markets, guaranteed cash takes a more significant portion of CHRO pay. Across the region, LTI for CHROs averages at only 27 percent of base salary – with Hong Kong providing 43 percent, the highest in the region. This practice is not unique to CHROs in that region; rather, this is common for executive pay in most Asia Pacific markets.
However, data from the last three years shows that growth in Total Guaranteed Compensation has been slower than Actual Total Compensation and Actual Total Direct Compensation, implying that there is an increase in STIs paid out and LTIs granted.