1. The CEO-CHRO disconnect: reality or perception?

The CEO-CHRO disconnect: reality or perception?

Anirban Ghosh, Sreedipto Bhattacharyya & Gloryson Chalil

Published: February 9, 2015 12:06 AM

While discussing about the progression of HR as a function, we talk about its evolution from being merely transactional in nature to one of a transformational agent. But how often we hear that today’s HR is more like a business partner helping the organisation gain competitive advantage through its various initiatives—be it through compensation and rewards, policies and processes, engagement and empowerment, or be it on the strategic front? As organisations embrace the idea of business partnering, the HR managers’ quest for having an active role in the running of businesses has begun. In a similar vein, talent management not only requires the CHRO but also the participation of the CEO. People in the top management of any firm should be individually accountable but collectively responsible. They have a collective responsibility for all the critical resources be it capital or brand or talent and they also still remain accountable for their respective functions. But do CEOs have faith in what the CHRO has to put forward? Are CHROs given equal importance to put forward their ideas as the other CXOs while strategising for the business or are they still thought to be caught up between internal matters as a ‘process-oriented generalist’?

In a recent HBR article, a well-known business advisor and speaker, Ram Charan, created a stir by making blanket statements like “splitting up the HR department” and “…it’s a rare CHRO who can serve in such an active role (trusted partners). Most of them are process-oriented generalists. They are focused on internal matters. What they can’t do very well is relate HR to real-world business needs.” The article pointed it is time for line to take up more HR-related activities and do away with the HR department as such. According to him, functions like compensation and rewards can directly report to the CFO and those related to leadership and people development can directly report to CEO, thus doing away with the CHRO role completely.

We have to understand that it is the perception about the HR department and not the relevance of the HR functions that has manifested itself through the article. Agreed that HR transformation is the new lingo being used by HR and business leadership who are striving to improve HR services to keep pace with the developments in more mature markets, but how far is this transformation of HR into business partner being perceived as successful? According to the Roffey Park survey published back in January 2009, 50% of 479 line managers thought business partnering was less than successful and another 25% said it was ineffective. Is this just a perception? If so, what is the reality? How long are we going to take to complete the transformation of HR into a strategic business leader? Maybe the leadership needs to be more proactive. A Deloitte report some time ago said this is already happening (CEOs are empowering CHROs to bring HR into the 21st century and take responsibility for business-HR alignment) and we should see CHROs as the key decision makers and sponsors of the transformational initiatives. But a perception change has to be brought. We have to understand what led to such an attitude. If the functions are so important, the ones carrying it out should be too.

However, a positive spillover of Ram Charan’s article is it provoked many HR practitioners and strategy experts to think differently and has already created a global forum for discussing the issue. The contention is not about splitting HR, it is to streamline the transformational journey so as to make it more effective. The initial movement of HR transformation in India dates back to 1974 when TV Rao and Udai Pareek started working on their concept of a new HRD system. Post that many initiatives have since materialised in the top management institutes.

But have the HR professionals evolved equally as the HR function itself? In the quest for an answer, Ram Charan may have been “both unfair and simplistic” as observed by Dave Ulrich, but experts have tried to share similar experiences which time and again question the credibility of HR professionals. Even if HR professionals try to negate it, the question is: Does the CEO believe in the capabilities of the CHRO as he does in that of his CFO? Does he give equal importance to the CHRO while deciding on the business strategy of the organisation or is CHRO merely a silent partner on the Board of Executives? Not always are the CEOs to be blamed, the HR professionals also need to take up the role of a strategic partner.

Are all HR professionals in the Indian context equally qualified and capable or are they merely ‘process-oriented generalist’? We have come across insights from global leaders where such inappropriate perceptions of the CEOs about their HR department have been questioned. But then are HR professionals themselves not equally responsible for it? People without proper academic and professional knowledge are entering into the HR profession. Due to lack of skills and abilities, they often fail to meet the expectations set by their line counterparts. This leads to mistrust of the line managers and they question the credibility of HR. The more the HR fails to meet the business expectations, the more this mistrust grows. Some management institutes have tried to groom their HR students in a way that they understand business as effectively as any strategist understands. This is a step towards the integrated HRD path envisioned by Rao and Pareek. However, a lot needs to be done and more quality professionals need to take up HR as a career.

Strategy thought leaders have believed that for any company to become successful, its organisational structure should trickle down from its strategy. If structure is a consequence of strategy, it becomes imperative for the HR department structure to follow the same principle and get aligned to strategy. Once such alignment is achieved, we can have a “Strategic HR Partner” for each Strategic Business Unit (SBU) of the organisation and who will be equally responsible for the success of that unit as his or her line counterpart. The line managers can decide on ways to achieve business results but they need someone to assist them on how the HR capabilities of the organisation or the SBU can help them realise it. This is where the strategic HR partner, who understands how to cater to business requirements using the strengths of HR capabilities, can come in handy. These strategic HR partners can directly report to the CHRO who himself is a strategic partner in same rank as that of the CEO, COO or CFO. As the CEO is considered as the face of the company to the external stakeholders, the CHRO should endeavour to become the credible face of the company to its internal stakeholders.

Gloryson Chalil is an XLRI professor. Sreedipto Bhattacharyya & Anirban Ghosh are part of his research team.

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