People Before Strategy: A New Role for the CHRO

The CEO should make the human resources leader a true partner.

by

Ram Charan,
Dominic Barton,

and

Dennis Carey

by

Ram Charan,
Dominic Barton,

and

Dennis Carey

From the Magazine (July–August 2015) · Long read

Artwork: Do Ho Suh, Cause and Effect, 2009, acrylic, stainless steel, aluminum frame. Installed at HITE Collection, Seoul

Summary.

Although people drive every organization’s success, research shows that most CEOs undervalue their HR function and their chief human resources officer (CHRO). No wonder, then, that managing human capital is a top challenge for companies.

To address it, say the authors, CEOs must redefine and elevate the CHRO role. They should spell out their expectations in a new written contract, focusing on three contributions that the CHRO, as an expert on talent (both in-house and at the competition), should be making: predicting the outcomes of strategically deploying human resources, diagnosing people-related problems that are hurting the company’s performance, and prescribing actions on the people side that will create value. Administrative tasks, such as managing benefits, might be delegated to others. And the CHRO should be assessed by actions that deliver revenue, margin, brand recognition, or market share.

With a new mandate from the CEO, and with appropriate business training, the CHRO can contribute to the organization just as powerfully as the CFO can. Indeed, the CEO should partner with the CHRO and the CFO in what the authors call a G3—a triumvirate to steer the company. Although reshaping the HR function could take three years or more, the authors’ experience with companies such as GE and BlackRock suggests that it’s well worth the effort.

HBR Reprint R1507D

Idea in Brief

The Problem

CEOs consistently rank human capital as a top challenge, but they typically undervalue their chief human resources officer and view HR as less important than other functions.

The Solution

The chief human resources officer must become a true strategic partner to the CEO.

The Approach

The CEO must rewrite the CHRO’s job description and create a core decision-making body comprising the CEO, CFO, and CHRO.

CEOs know that they depend on their company’s human resources to achieve success. Businesses don’t create value; people do. But if you peel back the layers at the vast majority of companies, you find CEOs who are distanced from and often dissatisfied with their chief human resources officers (CHROs) and the HR function in general. Research by McKinsey and the Conference Board consistently finds that CEOs worldwide see human capital as a top challenge, and they rank HR as only the eighth or ninth most important function in a company. That has to change.

A version of this article appeared in the July–August 2015 issue (pp.62–71) of Harvard Business Review.

Ram Charan serves on seven private and public boards across the globe and is author or coauthor of 36 books and several HBR articles on corporate governance. He is the co-author of Boards That Lead: When to Take Charge, When to Partner, and When to Stay Out of the Way.
Dominic Barton is the global managing partner of McKinsey & Company. He is a coauthor of Talent Wins: The New Playbook for Putting People First (Harvard Business Review Press, 2018).
Dennis Carey is vice chairman of KornFerry and co-founder of ONYX, an invitation-only community for current and former CEOs of the world’s most influential corporations. He has recruited directors and CEOs for many of the most prestigious companies in America, served on several boards, taught corporate governance at the Wharton School, and co-authored seven books on strategy, talent, and risk. He founded the CEO Academy and ThePrium, both of which are best in class forums for corporate leaders. He has held post-doctoral fellowships at Harvard and Princeton.

People Before Strategy: A New Role for the CHRO

Idea in Brief

The Problem

The Solution

The Approach

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