The CEO’s Successor – Why Not The Head of HR?

Human capital issues, talent wars, shifting economies, and a changing workforce have put extraordinary stress on human resources.  Strategic leadership, unquestioned integrity, superior operational management skills, and precise execution are critical components of a successful HR executive. Those same characteristics are critical criteria for success in the CEO’s chair.  The Chief HR Officer, however, is rarely, if ever seen as a credible successor candidate to the CEO.  Wouldn’t it be a reasonable argument that CEOs are the ultimate talent managers of their organizations?  Furthermore, why don’t the competencies, skills, and critical characteristics of an effective Chief of HR translate to Chief Executive?  Haven’t the experiences and development opportunities readied HR chiefs for the top job?  As we answer these questions, the real issue to study is: how do we change the current situation?  What needs to be done to change the field of HR to attract and ready the most talented and ambitious candidates for the top job?  What do boards have to do to put the HR executive in a true parallel position of importance to the CFO or COO?

As a general rule, HR has historically been an afterthought as a place for the most talented professionals in the organization.  I have made my living in executive search for over 20 years, and I have found that the most challenging (and now in highest demand) search is for the HR leader who is a “true business partner.”  This has proven challenging because the landscape of HR throughout history has not focused on producing this strategic, business-focused leader.  This paradigm is changing rapidly, but many companies still look at this role as largely administrative, and therefore, it is typical to see HR roles significantly under-hired.  This doesn’t make any sense.  The economy of the United States, for example, is now dominated by service firms of all kinds.  People remain the largest item on most P&L statements, and we now realize that the ways in which we manage, motivate, and retain talent is typically the critical hinge between business success and failure.  The investment community is now recognizing that they gain significant deal leverage when talent and leadership skills are accurately weighed in evaluating and nurturing portfolio companies.  The talent management aspect of business success is as impactful as financial management.  Interesting, then, that CFOs have often been seen as a breeding ground for CEOs.  Finance, as a cost center, has gained relevance at the table because CFOs rightfully have demonstrated their critical value.  Since talent and people are the most critical assets companies have, why is the person assigned to find, develop and position this asset for success – the Chief HR Officer – still not thought of as an equally critical lieutenant to the CEO?

One answer is the stigma associated with HR.  Thankfully this is changing, but we are still not far removed from a time when the overwhelming majority of corporate sentiment identified HR as being soft and lacking in strategic substance.  And in many ways, the old HR did little to refute this reputation.  As stated by Joseph McCann, Dean of The Sykes School of Business, “many board members do not expect regular interaction with HR, fewer yet view the HR function from a truly strategic perspective and the CHRO as a strategic business partner” (“Seven Questions Boards Should Ask Chief HR Officers,” Human Resource Planning, March 2006).  Anne Marie Law, the SVP Global HR for VeriSign acknowledges in a personal interview that, “HR executives must be held to the same high standards of accountability as the CFO and CEO by the Board.  There needs to be strategic tension in order to improve the execution value and standard of credibility to the HR function.”  Boards are gaining intensity and interest in focusing on HR, and many companies fully realize the tremendous impact HR has on the organization.

The ultimate solution, then, is to market and develop roles in talent management and human resource as among the most important and thus attractive to top talent.  Putting the best people in a position to manage and drive the human capital space within the company requires clear direction from the Chief Executive and the Board so that it is among the most critical leadership tracks within the organization.  Human capital issues, talent wars, shifting economies and a changing workforce have put extraordinary stress on human resources.  The talent, competencies and expectations required to solve these issues are fundamental to the talent, competencies, and expectations needed to direct the entire organization.