THE CEO PATH: Are HR heads ready for transition to CEO?
HR professionals are never put on a mat as hard as a line person, so the whole baptism by fire is weaker for an HR person compared to someone in operations
CEOs have a personality type that is quite different from those who are in HR by choice and the psychological transition from CEO to HR is the most difficult to make
Historically, heads of HR haven’t been contenders for the CEO’s post as they were perceived to be lacking in financial acumen and business knowledge. Are HR heads ready for the transition to the top job, now that organisations are open to the idea of CEOs from HR? People Matters gathers insights from industry leaders and experts on what it takes for a CHRO to become the top executive
A People Matters opinion poll of 71 HR heads across the country revealed that only 27 per cent were interested in taking up a business role and about 50 per cent wanted to continue in their HR role. Even more interestingly, only 29 per cent of the respondents served in a non-HR role for more than five years. The survey results are revealing: Half the number of HR heads didn't have a desire to aim for the corporate top post. This obviously affects the representation of the HR community on the list of CEOs. If 70 per cent of HR heads have less than five years of non-HR experience, it is difficult for them to make a case for their selection as CEO successors. As the saying goes, “If you haven’t served in the infantry, you will never become the General.”
The popular perception that HR and business are incompatible with each other because business is about numbers and results and HR is about people is dated. Financial acumen and technological savvy have become hygiene factors for CEOs today and their prowess is determined by their people management skills. In fact, as the People Matters–Monster.com CEO as the Chief Talent Officer Study 2012 revealed, 84 per cent of CEOs in India spend more than one-fourth of their time on talent-related activities. The fact is, you can’t grow a business, form a joint venture or make an acquisition if you can’t handle the people issues.
Finding, recruiting and motivating the right people and helping them succeed in a new business environment is HR’s forte and the evolving nature of the modern organisation, which is very people-intensive, has led to HR being results-oriented and driven, similar to other functions. However, this seemingly natural fit between an HR leader’s skills and the required capabilities for a CEO hasn't led to a spurt in HR leaders becoming CEOs. What is holding them back?
This cover story attempts to connect the innate qualities of HR people to the prerequisites for a CEO and the areas that need to be improved to make them candidates for the top job. We've also brought together the insight of those who've made the leap successfully and their advice for those who want to walk the CEO path.
The times they are a changin’
As HR professionals gain credibility for their business skills, running large HR budgets and driving complex organisational strategy and delivery, they have to fight the perception of being weak in finance and lacking the hard-nosed execution-focus that is the hallmark of a successful CEO. “Traditionally people who enter HR as a profession, if I speak from an MBTI perspective, are people who want to help others to achieve their potential, people who feel for others’ developments and capabilities. Often, they are also the people who forego mathematical training because it does not quite excite them,” says Ganesh Chella, founder, Totus Consulting and co-founder, Coaching Foundation India.
HR professionals are never put on a mat as hard as a line person. “They haven’t been pulled up on a month-on-month basis to account for hard deliveries and numbers like the sales guy or the production guy is. So the whole baptism by fire is weaker for an HR person compared to someone in operations, deliveries, sales, production and so on,” says Chella, candidly outlining why HR professionals find it difficult to be viewed as contenders for business roles.
However, the emergence of many large organisations with more than 50,000 employees and a rising demand from business to HR to design and execute through strong HR processes, hire hundreds of thousands of people, deliver HR services, drive discipline, handle complex rewards programmes, downsize, restructure, train people, etc has created great respect for HR people as experts in delivery in the last 15 years and their managerial worth is being recognised.
Today, there are many heads of HR who manage their function as business heads.Their execution challenges are akin to any other business function. These people are respected in their organisations and for them the transition to a line function should be relatively easy.
Ingredients of a successful CEO from HR
Is there a formula to become a successful CEO? The answer to this question is complex. We've all heard of certain universities and companies being touted as CEO factories but wherever in the world you are, the common ingredients shared by most high performance CEOs are working and progressing in well-managed organisations run by high caliber people; developing functional depth and cross-functional breadth in his/her career; the ability to think and act like a general manager no matter what kind of role; consistently knowing and staying close to the customer; embracing international experience; living through success and failure and learning from both; and consistently exhibit integrity.
Commercial acumen, understanding of the business context, natural orientation towards numbers, appetite for risk taking and a strong execution focus are the prerequisites to being a successful business leader or a CEO, according to Chella. He goes on to add that CEOs have a personality type that is quite different from those who are in HR by choice and the psychological transition from HR to CEO is the most difficult to make.
Our research revealed that while HR practitioners have client interface experience, they don’t have the essential business development experience. They are likely to be novices at investor management, capital structures and raising capital for the company, even if they have managed P&L responsibilities.
However, HR professionals have some unique strengths that can be leveraged in the current business scenario. Our conversations with CEO coaches drove home the point that being in HR gives one an overall view of the organisation because one is not bound by one’s function/role. The other factor that works in favour of HR is that the ability to understand the people side of the business, in terms of supply and demand, development, career, motivation and aspiration is a great strength. Anil Sachdev, Founder & CEO, School of Inspired Leadership, asserts, “The biggest strength of HR professionals is their high emotional intelligence and people connect that they can use not only to align people inside the company but also to align with external stakeholders.”
With changing organisational dynamics and technical competence being easy to replicate, the strengths that HR professionals bring to the table are becoming increasingly valuable to business. The change though slow is visible. Few years ago, HR heads who were fighting to have a seat on the board are now chairing remuneration committees, dealing with one of the most challenging aspects of business. If they are able to demonstrate that they have a grasp on the intricacies of the business and are masters of their craft, CHROs can make a credible case to be given a CEO role. So what have the HR heads that have been able to make this transition done differently?
Building the road to the corner office
“In HR, nine out of 10 things are under your control because our area of influence is within the company. But, business is driven by many factors that are not under your control.” “HR rarely works under intense performance pressure from quarter-to-quarter. HR gives you a 70 degree view of the business whereas when you are a CEO you need to have a 360 degree view.”
These opinions, along with others, were shared by the 11 CEOs we profiled for this story, nine of whom come from an HR background and two who moved to HR from a business role. Their advice is unequivocal: The roadmap to the CEO’s office needs to be worked on from the very first years of an HR person’s career. Experts advise that once you realise that you want to be in a business role, start consciously learning about the business you are in and ensure that you take on roles that make you accountable for results, month-on-month. Actively try to correct the perception that HR professionals are domain-centric sermonizers rather than business collaborators who are accountable for results. Pursue multi-functional experience even if it slows down your promotions, requires a lateral move or a downgrade.
A deeper understanding of how business makes money, garnered through cross functional experience while keeping in mind the lines of business, can be leveraged for significant P&L responsibilities later.
The next stage is to transcend functional boundaries and be an active participant on management committees, factory committees, leadership committees etc. “Often HR people serve on management committees but rarely do they comment on subjects outside their functional area. HR professionals should know enough to make a meaningful point, not on an HR issue relating to business but on a business issue,” says Chella.
The most important foundation for a CEO bid is credibility in the current role. OD Alternatives Consultants Managing Director Santhosh Babu says, “HR professionals who make the cut are those who have high credibility in their company, because they don’t work in the silo of HR, but collaborate with the business and think strategically while performing their core role.”
HR professionals who are successful in business are the ones who have grown with the firms they have worked in, have seen the firms evolve and have been part of that evolution in their own right. They have been truly business partners from an HR perspective.
Examining the careers of the HR leaders who've moved from HR to business, one underlying thread is that all of them earned it at the back of their credibility and track record within the organisation.
The transition of HR leaders like John Hofmeister, Dr Santrupt Misra, Pratik Kumar, Ajit Isaac and Navnit Singh from the HR to CEO roles shows that the career progression, while difficult and with little precedent, is very much possible. It remains to be seen how many will follow in their footsteps.