From HR to the Top

By Susan J. Wells Jun 1, 2003

HR Magazine, June 2003 HR's stock -- and opportunities to advance into the top ranks of management -- are on the rise.

Whoever says that HR can’t be a route to the top hasn’t seen the recent—and encouraging—data on the subject.

In 2001, 30 HR professionals climbed into the ranks of senior-level management, according to a study of the career moves of 537 HR managers by Drake Beam Morin (DBM), an HR and career transition consulting company in New York. Of those 30 HR professionals, 11 secured spots at the very top of organizations, as chief executive officers.

The trend is no flash-in-the-pan; it’s inevitable and will grow, says Sherry Cadorette, president of DBM North America.

Cadorette says that one of the factors helping drive HR’s ascent into the executive suites is a heightened awareness that employees are one of a company’s strongest competitive advantages. “I don’t come in contact with leaders anymore who don’t value and recognize the critical nature of their people to their business,” Cadorette notes. “HR can do a lot less self-selling now; their role is no longer questioned.”

Cadorette isn’t alone in this view: Senior executives agree that HR issues are the top priority for their businesses, according to two separate reports released in April by Accenture.

The first report—a global study of nearly 500 business leaders—found that “changing organizational culture and employee attitudes” is the No. 1 business issue on the executive agenda.

In the second report—based on interviews with 200 senior executives in the United States, Europe and Australia—executives listed workforce-related issues as four of their top five strategic priorities. Perhaps equally encouraging for HR professionals, 74 percent of executives said people-related issues are more important to a company’s success now than they were a year ago.

This increased focus on workforce issues—and the perception of HR as an up-and-coming profession—is shared by five individual executives who’ve risen to the top ranks of management after lengthy careers in the HR field. However, each of those executives, as well as noted experts in the field, agree that there’s work to be done if increasing numbers of HR professionals are going to rise to the top levels of corporate management. (To read the comments of these five HR-executives-turned-top-leaders, see “Five Who Have Made It.”)

Stuck in the HR Groove

While it can be a tremendous asset, HR experience alone probably won’t serve as a springboard to the top corporate posts. Most of the HR executives and experts who spoke to HR Magazine said that gaining a variety of business experiences is vital to achieving a senior post, and that a lack of such experience can slow the upward progress of talented and ambitious HR managers.

In fact, the reason that more HR professionals aren’t moving into top leadership roles may be that corporations are reluctant to give HR professionals the cross-functional experience they need, suggests Edward Lawler, Ph.D., director of the Center for Effective Organizations at the University of Southern California and a professor at the university’s Marshall School of Business.

Each year, the center asks 150 companies to identify the degree to which they move HR professionals around the organization to gain experience in different positions or areas of responsibility. “Since 1995, there has been no increase in tendency or willingness on the part of companies to rotate HR out of HR,” Lawler says. “It hasn’t changed at all.”

The Society for Human Resource Management’s 2002 Global Leadership Survey seems to bear out Lawler’s findings. Less than half (48 percent) of 426 HR pros polled said their organizations used “stretch” assignments to help promising leaders gain new skills and experience.

It’s a problem that Lawler feels is blocking advancement paths. “You don’t often get to be CEO by staying in HR,” he says. (For more information on how HR professionals can gain experience outside of HR, see the HR Magazine March cover story, “Putting HR in Rotation.”)

John Boudreau, Ph.D., a Cornell University professor and director of the university’s Center for Advanced Human Resource Studies, agrees that “in most organizations, experience outside the typical HR role is going to be key” to reaching the top executive ranks. “On the other hand, CEOs of the future—and even now—are seeking to draw more heavily on talent resources. And, at the end of the day, decisions about people will drive competitiveness.”

That, he says, should make HR’s experience even more valuable for leadership roles.

HR and CFO: Partners

One way HR professionals can take advantage of the increasing corporate emphasis on managing talent—while simultaneously developing their skills outside of HR—is to work more closely with chief financial officers (CFOs). Developing a relationship with a CFO can be vital, both for short-term effectiveness and long-term skill development.

Why? The role of CFOs in managing human capital is changing, which demands a corresponding change in the relationship between corporate finance and HR, suggests a 2003 study of 180 senior financial executives at large companies by Mercer Human Resource Consulting and CFO Research Services in New York.

“Historically, there’s been little love lost between finance and HR in most companies,” says Rick Guzzo, Ph.D., a human capital strategy consultant with Mercer. “However, the changing business landscape makes it necessary for these two areas to come together in new, more collaborative ways.”

For one thing, CFOs are feeling increasing pressure from boards, investors and analysts to show just how people assets are being managed in their companies. And they need answers: Companies spend 36 percent of their revenues on human resources—such as pay, benefits, training and other expenses related to their workforces—yet only 16 percent of financial executives polled really understand the return they’re getting on this huge investment, the study shows.

Because people issues can be the key to competitive advantage, HR’s strategic role in the years ahead arguably will be one that’s equal to that of the CFO, the research suggests. Partnering now with financial leaders will make HR better poised to assume that loftier status.

Another reason to move quickly to partner with CFOs is that they have enormous sway, especially during lean economic years.

“In bad economic times, CFOs rule!” says John Sullivan, Ph.D., an HR consultant, speaker and professor of management at San Francisco State Uni..versity. “CFOs act as a strong filter in determining which programs are funded by an organization.”

Sullivan adds that “ impresses them and all senior managers like P&L [profit and loss] experience. Few have a chance at the top without it. You have to have it to be taken seriously.”

To make it to the top, HR must form an alliance with the CFO to build the business case and learn the CFO’s language, Sullivan says. He recommends temporary job rotations, in which finance professionals mingle with HR and vice versa.

Another strategy: “Pick a single HR program that the CFO is skeptical about—just ask them—and focus on proving the business impact and high return of that one program,” he says.

Be sure to speak the CFO’s language by relying on the measures and indicators that CFOs themselves use. Those measures, Sullivan says, include the following:

  • Return on investment.
  • Payback period.
  • Risk assessment (or failure rate).
  • Cost per unit of service.
  • Competitive advantage.

Lastly, but very importantly, demonstrate how HR programs improve productivity. “Lowering the people dollars required to produce a unit of output/production is the key to instant recognition,” Sullivan says, “but 99 percent of HR departments never even measure it.”

HR Needs Development Too

In the move to reach the next rung on the corporate ladder, HR professionals should not downplay the importance of traditional business development opportunities, say experts.

In the past, the way companies traditionally prioritized their spending on professional development may have slowed HR’s rise to the top echelons of business, says David Dotlich, Ph.D., a partner at CDR International Inc., a leadership education and senior-level development firm in Portland, Ore.

“Companies don’t invest heavily in HR development; it’s often the last to get development dollars,” says Dotlich. “People don’t want to seem like they’re taking care of their own at the expense of others.”

Dotlich sees that view changing, however, as the importance of strengthening corporate leadership and maintaining talent pipelines take on new meaning in today’s economic climate. To meet today’s standards of corporate governance, company boards, for example, are spending more time developing succession plans for senior management and grooming future replacements. Companies are raising the bar and have high expectations for the role HR leadership should play, he says.

Case in point: An HR career-advancement program conducted by CDR is drawing more corporate interest. The two-week program accepts eight high-potential HR managers for rigorous training, coaching and business leadership sessions addressing both HR skills and general business skills. CDR says many companies have participated, including Johnson & Johnson, Knight-Ridder, Nike and Washington Mutual.

“It’s been hugely well-received,” says Dotlich, former corporate vice president of HR at Honeywell International.

Cornell’s Boudreau says that seizing such opportunities is vital and HR professionals must be more aggressive in asking for training in the business management skills they need.

“In many organizations, career development for HR folks is geared toward HR functions, but that’s different than developing HR people to be top-level collaborators,” he says. “The whole opportunity may hinge on a company’s comfort level with career development that lets them get the experience and exposure in the broader parts of the business. It’s a fair question for HR to be asking their company leaders.”

What It Takes

So what can HR managers do to achieve the broad experience that will help propel them to the top? Above all, experts agree, HR professionals need to enhance their business awareness, which means understanding how every aspect of HR management affects other functions.

Then, be prepared to take some detours from a straight-line career path, says Dotlich. His advice: Take chances with your career. Get out of your comfort zone. “You have to be willing to collect as many experiences as you can and, as you move up in HR, be willing to even move laterally if you have to,” he says.

The goal is to develop a defensable point of view on the whole business. “HR always has a point of view on HR, but not always on the business,” Dotlich says.

This insular view can work against HR professionals in another way as well, adds DBM’s Cadorette. She believes HR professionals must avoid the natural tendency to focus too much attention on the employees’ point of view.

“Defining yourself as an employee advocate only will limit you, in my view,” she says. “Your filter is going to be too narrow if you do.” Your goal should be balanced—meeting not only employee expectations but also addressing financial and customer issues.

When moving up is at stake, you’ll be judged on the ability to differentiate between developing programs and making a real bottom-line contribution, she says. The only initiatives that will survive boardroom scrutiny are those that promise prompt and effective response to industry challenges and opportunities.

As a result, the traditional HR focus should be meshed with a much wider view of the company’s key relationships—not only with employees, but with investors, customers, suppliers, partners and potential clients.

“It comes down to this,” says Cadorette: “Are HR pros great individual participants, or are they companywide leaders?”

Susan J. Wells is a business journalist based in the Washington, D.C., area, with more than 17 years of experience covering business news and workforce issues.

Web Extras

SHRM article
Five Who Have Made It
(HR Magazine)


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