Leadership   //   May 1, 2024

‘Get profit-loss experience’: Inside the modern (and aspiring) CHRO’s toolkit

A new wave of chief HR and people officers are bedding in at companies, following high churn last year. And they’re going to need eyes in the backs of their heads, to solve today’s and future work needs. 

To say the role of chief HR and people officers has stretched over the last few years, would be an understatement. With the current headwinds organizations face today, CHROs are under pressure to exhibit strong business acumen alongside their more traditional remits surrounding talent acquisition and people management, so they can win over boards and answer strategic questions around how talent strategy and performance correlate to profit-loss, experts say. 

“They [CHROs] need to have an eye towards some of the strategic and higher level challenges that they’re now facing, looking up in their organizations in terms of how they can influence the CEO, the board of directors, the executive leadership team versus their traditional role, which would have been down into the HR function, and managing that as its own piece of the organization,” said Alexander Kirss, who leads the CHRO effectiveness team for Gartner’s HR practice, and is an expert in geopolitics, international security and political economy. 

CHROs have been spread thin for a while. Last year a ton of senior HR executives took early retirement or resigned as a direct result of the mounting pressures they had absorbed through the pandemic years. Starting with vaccination plans, response to social justice movements in 2020, trying to maintain culture and employee well-being during the period of enforced remote working, then the economic uncertainty of 2023, the avalanche of layoffs, managing return to offices, and driving performance without compromising staff sanity. 

Now they also have to get their heads around generative AI and how it can be ethically incorporated into organizations to help workers thrive, without causing mass panic. “Generative AI may seem like a technical problem, but at its core, it’s a talent issue,” stressed Kirss. 

It’s enough to overwhelm the staunchest of HR veterans. 

The result was high churn last year. In 2023, executive search firm Heidrick & Struggles placed 250 new CHRO and chief people officers in the Fortune 1,000, 66% of which were first-time candidates with no prior CHRO experience, according to data it recently shared with WorkLife. 

The role is “harder than ever,” said Jennifer Wilson, co-head of Heidrick’s global human resources officers practice. “It’s a highly pressured position with a range of expertise needed in the function – everything from compensation to talent acquisition, talent development, leadership development, performance management, employee engagement, employee health, and wellness, data analytics. It’s just such a wide-ranging role,” she added. “These are thorny issues because they’re people issues, and people aren’t straightforward.” 

So how does this new, and future crop of CHROs, who are still relatively new to the position, avoid the burnout their predecessors felt while also equipping themselves to excel in their roles? 

We asked a range of experts who specialize in HR and its place in the future of work, about how to meet these challenges. 

Gaining boardroom credibility

Making the jump from the number two spot, into the top HR position, is no cakewalk. Boards are ruthless and any lack of experience can be swiftly sniffed out and exposed by shareholders. 

Lack of board exposure and experience is the biggest risk factor for people stepping up into chief HR and people roles. “In terms of establishing one’s credibility, you only get one chance with the board,” said Wilson. “That’s probably the biggest risk factor of taking somebody in who hasn’t had that experience.”

While some CHROs try to train the next level of talent by bringing them in on conversations with the board around specific areas like diversity and talent, for instance, it’s rare, stressed Wilson. Most have been given little to no experience with boards. 

And boardroom environments can be far from friendly. Shareholders who use equity stakes in a corporation to put pressure on its management, to push short-term profits, won’t look kindly on a newbie who doesn’t hold up to their questions. These so-called “activist investors” can be a thorny adversary for any inexperienced CHRO. 

“They [activist investors] may pepper the CHRO with questions about the business and the strategy before the CHRO has even had a chance to get their arms around the business.”
Jennifer Wilson, co-head of Heidrick and Struggle's global human resources officers practice.

“They [activist investors] may pepper the CHRO with questions about the business and the strategy before the CHRO has even had a chance to get their arms around the business,” said Wilson. The CEO needs to be aware of that and protect a bit until they can get up to speed and until they’re prepped on what they need to do to be successful in the boardroom,” she added. 

A large part of gaining willing boardroom ears will be based on an HR chief’s ability to tie what they know about talent trends, and data-informed employee behaviors, to conversations around profit loss/growth, stressed Kirss. “It’s how can the CHRO bring their independent perspective and really drive the strategy in those strategy reviews, in a much more proactive sense, rather than [the more traditional] reactive [position of]: ‘I’m trying to show my value to the business so I don’t get my cost cut,’” he added. 

How to get the right skills and experience 

Traditionally CHROs have had their eye on succession planning for the CEO rather then themselves. That means that the jump from a senior HR role to a chief HR role can be incredibly steep. Plus, often the day-to-day remit of managing the HR functions is pretty all-consuming, meaning those leading it can struggle to get the time to develop their skills to pave the way for the next rung on the ladder. 

Experts encourage those looking to that next rung, to pursue mentorships to gain that next layer of leadership experience. Or they could make a lateral move into a job – or a secondment – that gives them direct profit-loss experience, added Kirss. 

Several workplace experts who speak regularly with CHROs, also said that the most successful ones build strong external counsels comprising other HR and business leaders. Now they’ll need to add technology leaders in too, to help inform them about the right way to incorporate AI into workforces, they said. 

People currently in chief HR and people officer roles should look to their own succession planning more, to ensure that the layer below them is equipped to step into those more senior roles when the time comes. One way to do this would be to expose heads of specific functions – for instance the head of total rewards – to speak to the board of directors and the compensation committee about the total rewards issues, said Kirss. “That’s a great way for a leader who wants to be a CHRO or aspiring CHRO to get that experience. Unfortunately, it’s still rare,” he added. And that’s largely down to the fact they have historically (inadvertently) deprioritized their own succession planning. 

“Generative AI may seem like a technical problem, but at its core, it’s a talent issue.”
Alexander Kirss, who leads the CHRO effectiveness team for Gartner’s HR practice.

But it’s not just that. Even if a CHRO is keen to push forward their direct reports to speak with the board, getting a slot is tough. Kirss describes this as the “delicate dance” of boardroom dynamics. Even CHROs get limited time to speak in front of boards, so bringing in their number two isn’t always an easy task.

Eye to the right metrics 

Granted, the phrase ‘a happy workforce is a productive one’ is so well-known it’s borderline clichéd. But in reality, a lot of organizations fall short of putting in place the right cultural structures that truly leverage their talent this way. If done right, the direct line to profit growth is crystal clear, experts say. And there is growing evidence to show just where the leaks are. 

For instance, a large proportion of transformation projects fail because business leaders aren’t always listening to their people, according to a new report from EY, done in collaboration with the Saïd Business School at the University of Oxford. This could be due to a lack of psychological safety within businesses, meaning people don’t feel confident raising red flags, for fear of being shot down or penalized in some way. But it can be even simpler than that: leaders aren’t watching the right metrics.

The pressure of performance management is being felt beyond CHROs to all other executive leaders including CEOs. But rather than monitoring metrics like budgets and KPIs leaders need to focus more on the behavioral signs of their employees, like decreased engagement, increased negative emotions or interpersonal conflict – all of which can help detect when an issue is emerging, according to the EY report. Human emotions can be early warning signals, and when paid attention to, can increase transformation success by 12x, claims the report, which surveyed 846 senior leaders and 840 workforce members in June and July 2023. Respondents represented companies with over $1 billion in annual revenue across 16 industry sectors and 23 countries.

In a nutshell, for years businesses have tried to assess why and how major projects may have failed by looking mainly at the hard metrics: what about the technology failed, or the process or protocols around what they’ve tried to implement. But they’ve failed to dial up their soft skills enough to appreciate how much the human, emotional state of employees can influence a project’s outcome, stressed Kim Billeter, EY’s global and Americas people consulting leader.

“We need to be saying, what are the new adoptive skills, soft skills that people need to now be able to do this transformation differently, with the emotion of this persona,” she said. “[By considering]…the emotional sides of things and getting to key behavioral indicators versus just KPIs which is more milestone and more measurable in terms of the traditional sense,” she added.