The critical bond: HR and the CEO

by | Aug 12, 2019

When a CEO and CHRO work together effectively, the whole business feels the impact. But the same can be said for those who don’t work together well.

Imagine a scenario where an organisation’s chief HR officer and chief executive officer engage in a popularity contest. The CHRO is jealous of the CEO and vying for their job; the CEO feels threatened and is accused of bullying the CHRO. Trust is eroded, the relationship crumbles and, as a result, everyone in the organisation suffers.

This example, albeit extreme, shows just how bad things can get when HR and the CEO don’t align on important matters. It’s a case HR expert Susan Sadler CPHR observed first-hand in one of many HR/CEO relationships, good and bad, she has witnessed during her extensive HR career.

There are many reasons these relationships can fail: a stubborn leader, a personality clash, an assumption that HR doesn’t add enough value or an organisation rooted in the past. But one thing is sure: when the CEO and HR lead are on the same page, it makes a world of difference.

Leadership afterthought

While CEOs may preach an equal playing field among the executive team, that’s not always the case. Those who are closest to the money will be placed higher up the ladder (CFOs, finance directors, heads of sales etc.), leaving HR near the bottom rung. 

We can all agree that HR is undeniably important, but being a leadership afterthought is still a reality for many HR professionals, and it’s worth looking at why this is the case.

“Rarely do we hear people asking, ‘Should the finance director be at the executive table?’ But often we hear this about HR. I see myself as a member of the executive team, with a technical expertise in HR, in the same way a finance director is a member of the executive team with a technical expertise in finance,” says Sue Jennings, HR director ANZ for international biopharmaceutical company AbbVie.

Sadler, who is the founding director of Red Wagon Workplace Solutions and an AHRI vice-president and state councillor for South Australia, says the ability to make a case for the people department is incredibly important. 

“What HR can do to influence business growth or contribute to cost-down strategies isn’t necessarily understood or accepted by CEOs because HR professionals aren’t always very good at explaining the value they add, but the value of the finance function somewhat speaks for itself,” says Sadler.

“For an effective HR/CEO relationship, it needs to be ‘all in’ from both sides. You both have to welcome constructive challenges from each other and be open to debate. But you need to be prepared to do that behind closed doors and have a united front when you go out and speak with staff.”

“If you don’t share respect for each other’s different skill sets, it can become very transactional; you’re never going to get the most out of the relationship.”

She says that when HR professionals lay the foundations for a respectful relationship with the CEO, they have much more leeway to incite change or call out bad behaviour than a finance manager would.

Sadler also believes senior HR professionals need to ensure they have an understanding of the work their senior counterparts are doing, such as basic financial knowledge, in order to demonstrate how HR can support and strengthen those functions.

“You’ve got to have that ability to think and contribute at the same level as other senior leaders and speak the same language. If you want to operate and play at that level, you need to realise you have shared accountability for achieving business objectives, even outside of the HR jurisdiction. The shared accountability of a senior leadership team is much the same as you would see with a board of directors.” 

Sadler’s advice here is familiar. As a certified HR practitioner she is well acquainted with AHRI’s Model of Excellence, a globally benchmarked model for HR behaviours and capabilities that undergirds HR certification in Australia. 

What Sadler outlines is a path HR can take to get leaders to see their value, but what does the relationship look like once it happens?

“It wasn’t warm and fuzzy people and culture stuff. It was making tough decisions around redundancies and restructures. It’s the kind of stuff we needed staff to see us doing as a team. HR are the glue that bonds it all together.”

Combining Forces

A common problem for growing companies is figuring out how to maintain the connection between senior leaders and an ever-increasing number of employees.

“In a large organisation, if you’re in a senior position, you don’t have as much contact with frontline employees,” says Sadler. “The information from staff that eventually gets to you tends to be filtered. So HR, CEOs and operational managers need to be working closely together to make sure they have a finger on the pulse of the employees.”

The local arm of AbbVie was facing just this issue. General manager ANZ Kirsten O’Doherty already knew how important people were to an organisation, so she didn’t need convincing to give HR a respected voice. Her strategic relationship with Jennings meant they were able to come up with a simple solution. 

After analysing the results of an internal engagement survey, they noticed employees were seeking an avenue to regularly address their concerns; they wanted a direct line to their CEO. Together they set up a program called Conversations with Kirsten where each month a group of 10-15 randomly selected employees have lunch with O’Doherty and talk about anything and everything.

“People love it. They’re very open about what they love and the stuff they think needs to be improved. It’s a new form of feedback group,”says O’Doherty.

This simple act of allowing space for conversation not only allows employees to feel heard by the executives, it also generates innovative ideas that can help the business, and it costs no more than their time.

“As an executive team, we ask, what are the things that keep our culture strong? What areas do we need to do more work on? So while HR might be coordinating many of those things, it’s owned by the business.”

Jennings adds: “I’ve worked in other organisations where engagement was seen as HR’s responsibility. At AbbVie, one of our greatest strengths is that the engagement results are owned by all of the executives. And the minute they’re owned by the executives, it becomes a business issue.”

Drawing on a positive experience of her own, Sadler recalls her relationship with one CEO who really valued HR’s contribution.

“Along with the CFO, we did amazing things. We were like the three amigos. We were working in an organisation that was really struggling financially, but with input from the three of us, we were able to pull it back together.

 “It wasn’t warm and fuzzy people and culture stuff. It was making tough decisions around redundancies and restructures. It’s the kind of stuff we needed staff to see us doing as a team. HR are the glue that bonds it all together.”

But when there are cracks in the relationship, it’s felt by everyone.

“Rarely do we hear people asking, ‘Should the finance director be at the executive table?’ But often we hear this about HR.”

Sadler shares another example where the relationship started strong but came undone when the HR manager told the CEO that, legally, they weren’t able to demote a particular member of staff.

“The CEO didn’t like being told they were wrong. It broke the relationship completely and the HR manager got managed out the organisation,” says Sadler.

“This is an extreme example, but it’s not isolated. I’ve had young HR practitioners say to me that they want to stand up to certain decisions and offer advice, but fear it won’t be well-received and could cost them their job.”

While she acknowledges the bind this puts HR in, Sadler says in certain circumstances it’s important to push back on the CEO, even if that’s to the detriment of the relationship.

“If you have knowledge of an illegal wrongdoing, you can be held personally liable. That can be far more serious than losing your job.”

Her overarching advice is to have broad knowledge of all facets of the business and a deep knowledge of HR.

“The only way you’ll get leaders to understand the value of HR is by demonstrating it in a way they can understand.

“For example, while HR isn’t all about recruitment, it is an area that the CEO understands as important. There is a huge dollar value associated with it. So it’s a great opportunity to come out with a strategy that meets business needs at a number of different levels and allows you to talk in a commercial language about the results you can achieve.”

Value Recognised

Not all executives treat their HR team as an afterthought. Those interviewed in this article are testament to that. And a recent study by Stanford University, which interviewed 85 CEOs and CHROs from Fortune 1000 companies, found that 96 per cent of respondents viewed their HR department as vitally important. 

However, it’s not just about how HR is perceived by the business, but how HR views itself. It’s true that the executive team has a responsibility to bring HR into the fold, as Jennings says, HR needs to ensure it’s being a valuable business partner. “I’ve struck HR professionals who’ve held a very different view of HR’s role,” says Jennings. “And I think those people don’t do HR a great service, because the minute we’re not relevant to the business, we’ve got a problem.”

This article originally appeared in the August 2019 edition of HRM magazine.