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The East African : Dec 15th 2014
The EastAfrican 50 BUSINESS DECEMBER 13-19,2014 MANAG E R Why fi≥ms should conside≥ human ≥esou≥ces bosses fo≥ CEO’s position F or decades, the corporate human resources department was seen as a back-office function, a cost centre focused on mundane administrative tasks such as managing compensation and benefits plans. But, over the past 15 years, El- lie Filler has noticed a dramatic change. Filler, a senior client partner in the Swiss office of the executive recruiting firm Korn Ferry, specialises in placing chief human resources officers (CHROs), with global companies. For years, many of the HR chiefs she recruited reported to the chief operating officer or the chief financial officer and complained that they lacked real influence in the C-suite. Today, she says, they often report directly to the CEO, serve as the CEO’s key adviser and make frequent presentations to the board. And when companies search for new CHROs, many now focus on higher-level leadership abilities and strategy implementation skills. “This role is gaining impor- tance like never before,” Filler says. “It’s moved away from a support or administrative function to become much more of a game-changer and the person who enables the business strategy.” Surprising evidence To investigate the CHRO role within the C-suite, Filler worked with Dave Ulrich, a University of Michigan professor and a leading consultant on organisation and talent issues. In looking at several sets of data, they found surprising evidence of the increasing responsibility and potential of CHROs. First, in order to understand the importance of the CHRO relative to other C-suite positions, including the CEO, COO, CFO, chief marketing officer and chief information officer, Filler and Ulrich looked at salaries. To identify the best performers, Desired outcome “The challenge for CHROs is to ... acquire sufficient technical and financial skills, in early education and in career steps along the way, if succession to CEO is a desired outcome,” they write in a white paper about their research. Indeed, some companies, including Zurich Insurance, Nestlé, Philip Morris and Deutsche Bank, do put high-potential executives through a developmental rotation in a highlevel HR job. According to the research- ers’ data, 42 per cent of highperforming CHROs are female — more than double the share in the CMO position, the next highest (16 per cent). One implication: If more companies envisioned CHROs as potential CEOs, the number of female CEOs could dramatically increase. In their white paper, Ulrich and Filler also report on what CEOs and CHROs have to say about the changing nature of the top HR role. Several CEOs see the CHRO as C-suite consigliere. “It is almost impossible to COMMENTARY HARVARD BUSINESS REVIEW “Except for the COO, the executive whose traits are most similar to those of the CEO is the CHRO.” they found the top decile of earners in each role. Then they averaged the annual base compensation of each group. No surprise: CEOs and COOs are the highestpaid executives. But CHROs are next, with an average base pay of $574,000 — 33 per cent more than CMOs, the lowest earners on the list. “Great CHROs are very highly paid because they’re very hard to find,” Ulrich says. The researchers also studied proprietary assessments administered by Korn Ferry to C-suite candidates over more than a decade. They examined scores on 14 aspects of leadership, grouped into three categories: Leadership style, or how executives behave and want to be perceived in group settings; thinking style, or how they approach situations in private; and emotional competency, or how they deal with such things as ambiguity, pressure and risk-taking. The researchers then assessed the prevalence of these traits among the different types of executives and compared the results. Their conclusion: Except for the COO (whose role and responsibilities often overlap with the CEO’s), the executive whose traits were most similar to those of the CEO was the CHRO. “This finding is very counter- intuitive — nobody would have predicted it,” Ulrich says. The discovery led Filler and Ulrich to a provocative prescription: More companies should consider CHROs when looking to fill the CEO position. In the modern economy, they say, attracting the right talent, creating the right organisational structure and building the right culture are essential for driving strategy — and experience as a CHRO makes a leader more likely to succeed at those tasks. The advice comes with some caveats. First, Filler and Ulrich studied only the best performers, so they are pointing to a small subset of CHROs as having corner-office potential. They do not see a path to the top job among people who have spent their careers in HR; instead, they are touting the prospects of executives who have had broad managerial experience (and profit-and-loss responsibility) that includes a developmental stint running the HR department. They emphasise that any CHRO who aspires to become a CEO must demonstrate capabilities in a host of skills required of top leaders. Fo≥tune tends to favou≥ bold ent≥ep≥eneu≥s By RICHARD BRANSON Special Correspondent WHEN I was a child, my mother told me that I would miss all the shots that I did not take. Her words did not make complete sense at the time, but after almost 50 years in business, I have come to truly understand what she meant: You cannot rely on luck, but on the other hand, fortune favours the bold. I believe that what people re- fer to as “luck” is one of the most misunderstood and underappreciated factors in life. Businesses and entrepreneurs that are generally considered to be more fortunate or luckier than others are usually those that are prepared to take chances and experiment with new approaches — and often to fall flat on their faces. When I was watching the final round of the British Open golf championship on TV some time ago, one of the leaders chipped his ball out of a deep bunker. His shot was too high, but the ball clipped the top of the flagpole and, amazingly, dropped right into the hole. “Oh my goodness, what a lucky shot!” exclaimed one of the TV commentators. Another, a retired American champion, snapped back: “Lucky? What do you mean ‘lucky?’ Do you know how many thousands of hours we all spend practising shots like that? Let me tell you, he worked long and hard on getting that lucky!” The same sentiment was more eloquently expressed once by Gary Player, one of the all-time golf greats, who famously declared, “The harder I practise, the luckier I get.” Like that golfer at the British Open, I have also been accused of being merely lucky when it comes to business. However, I, too, believe that a lot of very hard work has played a major part in any luck that has come my way. If you try, try, and try again, eventually you may be successful. I must admit to sometimes struggling to figure out where coincidence stops and good luck begins, or how just happening to be in the right place at the right time can so dramatically play into one’s path through life. One thing that’s clear, however, is that entrepreneurs who play it safe for fear of failure are the ones who just never seem to get as lucky as the risk-takers. achieve sustainable success without an outstanding CHRO,” says Thomas Ebeling, the CEO of the German media company ProSiebenSat.1 Media AG and a former CEO of Novartis. “[The CHRO] should be a key sparring partner for a CEO on topics like talent development, team composition [and] managing culture.” Peter Goerke, the London- based group director for HR at Prudential, agrees with Filler and Ulrich that although deep skills in marketing or finance might once have given CEO aspirants a significant competitive advantage, today a broader set of people-focused skills can be more useful. “Succession to a CEO role requires a balance of technical and people skills,” he says. “For all C-suite roles, and often at least one level down, there has been a gradual shift in requirements toward business acumen and ‘softer’ leadership skills. Technical skills are merely a starting point.” US golfer Dustin Johnson plays at the British Open Golf Championship.
Dec 8th 2014
Dec 22nd 2014