Article: CHROs as CEOs: A trend that’s likely to accelerate?

Leadership

CHROs as CEOs: A trend that’s likely to accelerate?

Building a successful leadership team is a people-skill, and can make or break a successful execution of business strategy. CHROs should be good at this, and hence, the popular perception that roles of HR and top business leadership are incompatible may be changing now with HR leaders becoming the go-to candidates for the top job.
CHROs as CEOs: A trend that’s likely to accelerate?

“Thrilled to see a CHRO make a pathway to CEO!”, “Happy to see CHROs move into CEO positions”, “This is great news for HR professionals! you just made the CEO position real for all of us at HR! way to go!” These were some of the exultant messages for Leena Nair as people rushed to felicitate the former Unilever chief human resources officer (CHRO) on social media soon after she was named global CEO of French fashion group Chanel last month. 

Nair, who spent three decades at the London-headquartered consumer goods company and was a member of Unilever Leadership Executive, had the rare distinction of being its first female, first Asian, and the youngest-ever CHRO. Her stunning elevation has inspired the HR community across the globe to aspire for the CEO's role, historically denied to them as they are perceived to lack the smarts for it in terms of financial acumen and marketing genius.

Given this long-held prejudice, is Nair's stellar rise a one-off, or does it indicate organisations are becoming increasingly open to the idea of CEOs from the HR domain? And are HR chiefs ready for the transition to the top job?

People Matters gathers insights from experts on what it takes for a CHRO to become the top executive and why they can succeed in this crucial role.

A Notion That Is Common, But…

The common notion is 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. So, when executives are groomed for the top position in a company, they are usually from the finance, sales, or marketing departments, and it is rare to see HR managers being considered.

Thanks to Nair’s appointment, however, the popular perception that HR and business are incompatible with each other - because business is about numbers and results, and HR is about people - may be changing now.

A research by Korn Ferry, a US-based management consulting firm, cites three aspects for being successful in the CEO's role: Leadership Style (how CEOs behave and want to be perceived in group settings), Thinking Style (how CEOs think and decide) and Emotional Style (how CEOs deal with emotionally-laden situations like managing conflict or taking bold risks).

“CHROs, when embedded deeply into the business over time, become naturally adept at these as they more often must rally people around a cause, resolve interpersonal conflicts, bring out the best in others, and take hard people calls when needed... this is some of what is key for any CEO,” says Sandeep Bhalla, Partner & Head Consulting India, Korn Ferry.

Bhalla says that the role being played by a person currently should not be a gating criterion for selecting someone for a mission-critical role like a CEO. Though technical experience in a particular domain or industry always helps, a CEO’s role is all-encompassing and there will always be aspects wherein a person would need to be agile enough to adapt, he adds.

“Also, given the disruption in all parts of the technical value chain, be it sales, supply chain, finance, technology etc., the technical know-how or experience is becoming less mission critical as people move up the ladder and it’s more about how leaders show up in different situations,” he notes.

Gurprriet Singh, managing director, APAC Regional Leader of Leadership & Succession, Russell Reynolds Associates, concurs. He says that CHROs or any other CXO/function head can be a CEO as long as they demonstrate the capabilities, traits, and leadership style required for the role.

“We have to estimate whether the candidate can meet the job description effectively. Building a high-functioning leadership team is a people-skill. It will make or break successful execution of the business strategy. Ostensibly, CHROs should be good at this. However, there is a need for CHROs to be more strategic, assertive, courageous and decisive,” he adds.

Most think that one needs to have sales experience to become a successful CEO, but a perception shift is necessary to acknowledge that CHROs can also become CEOs, Sandhya Suri, Head - HR & Communication, Tesla Power USA Inc, says. “CHROs are enablers, the entry and exit for all employees is already a capability. Lean team hiring, better concept and ability to enumerate and extract ROI and control budgets, and there you have it. I head HR, Admin and MARCOM in my organisation. What's there to stop me? All I need is to map and fill the gaps with a competent team. The success of an organisation greatly depends on this,” she adds.

HR Leaders Become Critical Amid VUCA

HR function has been stereotyped as a back-office job for decades and the domain prejudiced to be focussed on hiring and firing the workforce, planning and organising cultural activities, holding seminars, arranging health and welfare activities of employees, maintaining a cordial professional relationship between labour and management, etc. However, HR leaders have always been the strongest pillar supporting their organisations in times of crises.

“In the last two years when the business was disrupted during the pandemic, HR leaders held the fort to keep the businesses up and running through their exceptional people skills. In the process, CHROs naturally emerged as strong business leaders and played a vital role in effective leadership,” says Ashwini Prakash, managing partner and board director, Singapore and India, at executive search and consulting firm Stanton Chase. 

With the changing market trends, intangible assets have become more valuable and companies are putting people before profits. “Business models have been realigned keeping people in the centre and everything is now customer, employee, stakeholder and community-centric. In the VUCA (volatile, uncertain, complex, ambiguous) world, HR leaders with strong people and adaptive leadership skills are becoming the go-to candidates for the top jobs,” she adds.

Until now, CEOs were expected to be champions at profit and loss, finance, operations, process, and strategy. But in a business landscape upended by the pandemic, emotional quotient and people skills have become an absolute necessity.

“Hence, CHROs become the natural choice to pick up top jobs at organisations. The much-anticipated shift is taking place now and this is just the beginning and one can expect to see more CEOs coming from the HR background,” contends Prakash.

However, what is also true is the fact that we still do not see many CHROs taking up the CEO role or even being considered for it.

Bhalla of Korn Ferry says a part of this is the perception that the CHRO role does not provide a natural experience into strategic thinking for business, understanding external perspectives, and anticipating future business trends.

“But if a person’s personality traits incline towards these, then these are aspects that can be managed very effectively with the right team construct under the CEO. The recent appointment of Leena Nair makes many from the business and HR fraternity reflect on these aspects and we can only hope we see more of such best companies do this in the future,” he adds.

A lack of breadth in terms of functional experience is another major reason for the extremely low percentage of CHROs taking up the CEO job or being considered for the top position. “They become too specialised and insular to their functional roles, identity and skills,” Singh of Russell Reynolds says, adding that today’s CHROs need to evolve.

Comfort Zone Can Be Discomforting

Not many HR professionals are interested in taking up a business role, with the majority wanting to continue in their HR roles. More interestingly, a very low percentage of HR professionals serve in a non-HR role for more than five years and not many HR heads 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 a majority 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 a general.”

Clearly, a lack of ambition can be a limiting factor insofar as an HR leader can have a fair shot at the CEO role. Thus, a mental shift needs to take place, a reorientation of sorts. 

“Once this happens, more HR professionals may aspire and therefore, prepare themselves with the necessary skills and experiences to take the CEO role. At this point in time, a lack of role models doesn’t encourage either HR professionals or decision makers to consider this as one of their top options,” says Singh.

However, he says that this is set to change, with the younger HR professionals (35-40 age group) being business savvy, courageous, strategic and capable of managing heterogeneous teams.

“Leena has done incredibly well and brought this to centrestage. However, let us not forget that there are other examples that aren’t as high profile and therefore don’t get noticed. Amit Malik became CEO of Aviva India about a year ago. Sunder Ramachandran is now country head for Sri Lanka/Maldives for GSK. I am sure we will find a few more who’ve made this transition and are probably the leading edge of a trend that will become more prevalent in the years to come,” he adds.

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Topics: Leadership, Leadership Solutions, #Outlook2022

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