2020 is shaping up to be the year of the CHRO. Already in March, The Economist announced: “The coronavirus crisis thrusts corporate HR chiefs into the spotlight.” The magazine noted that heads of HR now have more responsibilities and a greater impact on companies’ outcomes.
The pandemic alone cannot explain this phenomenon. Analysis by Gallup reveals a broader trend: CHROs are better equipped to make decisions and lead than anyone else in the C-suite. So much so that companies should be promoting the CHRO to CEO, argued Jeremie Brecheisen, Senior Managing Consultant, Gallup, in a recent MERIT webinar.
Read on for Jeremie’s data-packed analysis of the rise of CHROs and tips on how HR professionals should lead their companies out of the crisis.
CHROs see clearly where CEOs have blind spots
Have you encountered Jacindamania? Jacinda Ardern, the prime minister of New Zealand, practises a compassionate, people-focused leadership style that is winning her an international following. Recently, Ardern has been praised for stemming the Covid-19 epidemic in her country. Her warm, humble approach inspires her nation – and pretty much everyone else – to trust her.
Jacindamania is the result of Ardern being an outlier when it comes to a global problem in politics and business: the leadership trust gap. 2018 Gallup data shows that two thirds of people worldwide believe corruption is widespread in business. Overall, people have little faith in leaders, with exceptions such as Ardern. Her skill in overcoming the trust gap shows what CHROs could do for their companies.
Employees have good reason to distrust their CEO, noted Jeremie from Gallup. The average CEO’s background has prepared them to prioritise efficiency above all else: “They are focused only on cost.” For example, one of the main drivers of growth for large companies today is mergers and acquisitions (M&A). While M&As improve efficiency, 70-90% of them do not achieve a substantial rise in revenue, according to McKinsey data from 2018. Cost-cutting is different from actually creating value.
The result is subpar business outcomes. “There are so many companies that do not know how to grow organically. They don’t know how to get their own new customers. Most of them have to buy new customers. Because they’ve ignored the emotional needs of both their customers and their employees for so long that now that’s just a price war they’ve created in their industry, and there’s no value war,” cautioned Jeremie.
The solution? Companies need a new kind of leader – perhaps someone who could inspire their own version of “Jacindamania”. Cost-cutting is not what creates value – people are. And nobody knows people better than the CHRO.
CHROs can create real value
Today’s CEOs often make the assumption that the human side of the company – culture and wellbeing – is separate from the hard facts of financial reports. This has only been exacerbated by Covid-19: right now, “development is taking a back seat. Engagement is taking a back seat. Culture is taking a back seat. Because everyone is in ‘survival mode’,” Jeremie said.
However, a closer look shows that a company’s human capital and the numbers on the bottom line are not disconnected. In fact, Gallup has found that engagement levels predict performance – and do so with even greater certainty during a recession. In an economic situation like the present one, companies with the lowest engagement stand only an 8% chance of achieving above-average business results. On the opposite end, companies with the highest employee engagement (in the 99th percentile) are over 90% likely to achieve excellent results.
In difficult times, engagement is what can differentiate you from the competition. Workforces that feel motivated and connected to their purpose are better able to meet rising challenges and solve problems in innovative ways. Thus, prioritising people and culture is a smart investment in the company’s future.
“It’s really important to understand that if you have CEOs who do not … create trust, who do not have the courage to invest in culture during survival mode, they are only hurting themselves. They are reducing the probability of having above-average performance. And therefore, you need to make sure that your CEO has better skills. They need HR skills,” Jeremie advised.
CHROs can take the difficult decisions required during a crisis
CHROs can see that the factors driving a company’s success go beyond reducing cost and creating efficiency. For example, they understand the value of preventing burnout and fostering a learning culture. They are also able to take into account varied viewpoints when making decisions and designing strategies.
The challenges standing before organisations in the wake of Covid-19 are numerous and complex. Jeremie outlined some of the major ones:
- Redefining the company’s purpose and values;
- Sustaining culture with dispersed teams;
- Succession planning;
- Instituting a systematic decision-making process;
- Reengaging employees after they return from remote work.
In each of these cases, CHROs can propose balanced solutions that serve all stakeholders – customers and employees included. CHROs are able to sustain engagement in uncertain times and increase their companies’ likelihood of achieving great business results. Without their leadership, success is less likely.
Even if CHROs do not become the CEO, companies should reimagine career development and executive education so that CEOs receive training in HR, while HR leaders also receive training in business. That would combat the dangerous assumption that HR concerns are divorced from bottom-line outcomes. CHROs know how to create real value. They should use their expertise to lead companies out of this crisis.
For more data-based advice from Gallup on how CHROs should lean in and take on a stronger leadership role, watch the webinar recording here.
By Ani Kodjabasheva