How to Make the Most of your Chief HR Officer

When Humana set out to hire a new chief human resources officer last year—to replace a 13-year veteran who was retiring—the $37 billion, Louisville-based health insurance giant didn’t ask applicants only about their HR credentials. “We wanted a CHRO who had a strong business mind and experience in operations,” says CEO Bruce D. Broussard. “We find that the closer the individual is aligned to the operational and strategic direction of the organization, the stronger partnership they have with the executive team.”

Indeed, the person Humana ultimately picked in January, Tim Huval, was the senior vice president for consumer service and operations at Bank of America, not the HR chief. Before that he had been a manager in HR, information technology and credit card operations. He also had a master’s degree in public administration. By contrast, his predecessor, Bonita C. Hathcock, started out in sales and marketing at Xerox, but spent most of her career in HR.

In adding line-management experience to the CHRO job description, Broussard was simply making explicit what increasing numbers of CEOs have been assuming in the last few years. “HR has become more and more part of the inner circle of the management team, and an important aspect of strategic planning,” says Kenneth Beck, the CEO of CEO Connection, a New York City-based networking group of 8,000 chief executives of midmarket companies ($100 million to $3 billion in sales).

The CHRO’s role has become not only strategic but also intensely personal, as CEOs increasingly turn to these executives for advice on everything from corporate culture to conflict in the C-suite and career coaching. The growth of social media has also enhanced the human resources director’s responsibility as an intermediary with the work force. Some CEOs, in fact, see no reason to limit their HR guru to HR.

The rise in HR’s importance can be traced to several recent trends. First, the economic downturn forced executives to analyze their staffing needs in close detail, including the impact of personnel changes on corporate strategy. Then, as businesses finally started rebuilding their shrunken workforces, they faced a talent crunch: The Baby Boom generation was hitting retirement age, shrinking the pool of available labor, just as increased globalization heated up the competition for good workers. On top of all that, new laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act have pushed corporate boards to pay more attention to HR issues like executive pay and performance.

Umpire, Advisor, Counselor and Coach

As the keeper of the personnel files, the HR director has traditionally been the chief executive’s confidential advisor when it comes to matters like hiring, firing and promotion. But now that function has expanded, and the CHRO has become an all-around sounding board for the entire executive circle.

“It’s a very difficult role, of being an umpire, a trusted advisor—kind of the conscience of the team,” says Manuel de Miranda, head of the HR practice at the Zurich-based executive search firm Egon Zehnder. “This is the one the CEO can most trust to answer questions like, ‘How did you think the meeting went? How do you think this individual reacted when I mentioned that element of the strategy?’”

Broussard says that when he first came to Humana in December of 2011, the then-CHRO, Hathcock, “was able to give me a very strong perspective on the executive team and the senior leadership team.” And when two Fortune 100 clients were working on CEO succession planning last fall and summer, de Miranda says, the only managers in the room with the board were the CEO and the human resources chief.

One reason for this reliance on the CHRO is that presumably an HR expert is well-trained in “people skills.” In addition, some experts say, the HR person can usually be neutral—neither defending an operating department against criticism, as a division head would do, nor gunning for the CEO job, like a chief operating officer or chief financial officer. “The CEO probably looks at the CHRO as the one who is least threatening to his own position,” de Miranda suggests.

Ironically, however, this trend may be happening precisely when the HR chief is more likely to be “threatening” the CEO—or at least, gaining prestige.

For instance, “an increasing number of heads of HR are being asked to serve on company boards,” says Kim Shanahan, managing director of executive recruiter Korn/Ferry’s human resource practice. Among them, she cites Dr. Mirian M. Graddick-Weir of Merck & Co., who became a Yum! Brands director in November 2011, and J. Randall MacDonald of IBM, who joined the Delphi Automotive board in November 2009. Shanahan also says that “compensation for CHROs at Fortune 500 companies has been steadily increasing over the past three years.” According to the website Salary.com, the four highest-paid HR chiefs take home more than $4 million in total compensation annually.

W. Edward Walter, CEO of Host Hotels—a $5.8 billion real estate investment trust that owns such top-brand properties as Ritz-Carlton, Four Seasons and St. Regis hotels—says it might be hard for even the best HR executive to run a company like Host, “which requires an understanding of finance.” But a service business, “where it’s all about the people,” or a CHRO “who’s been involved in an industry for a long time”—why not?

Translating Twitter

It may seem less obvious why the burgeoning use of social media should make the CHRO more of a corporate player. “It used to be that the CEO didn’t necessarily hear what was going on lower in the organizational chart,” Beck of CEO Connection explains. “Now you can reach him directly. The company has a blog, and the communication flow is so different. It’s unfiltered information.”

Even if rank-and-file workers are not e-mailing the CEO personally, they can certainly post lots of interesting comments on Twitter, Facebook and the corporate blog, and the CEO had better be aware of them. While the chief information officer is in charge of the technical part of such websites, it’s the HR chief who is best positioned to know the undercurrents behind the postings.

With or without social media, “I need [an HR chief] who has a very effective ear to the ground in terms of the undercurrents of what’s going on in the company,” says Walter.

Another way technology has impacted the HR job is that developments like call centers have absorbed some of the most mundane HR chores. That leaves the managers free for more high-level tasks.

Walter says his HR chief, Joanne G. Hamilton, now attends all the executive meetings about major investments—not to make investment suggestions, but “to better evaluate the talent, to see the talent in action.”

“Best-in-class CEOs are really relying on their HR head much more,” Shanahan sums up. “If they’ve seen or worked with strong HR leaders, they can never go back.”

EXECUTIVE EDUCATION

Here are some programs recommended by CEOs and HR experts:

Cornell University, ILR School of Executive Education

• Targeted to veteran HR executives who might be in line for promotion, this program aims to “increase the talent pipeline for the top HR job”
• When: Two sessions totaling 4 ½ days (usually in March and November)
• Location: Hotel Sofitel New York, 45 W. 44th St., NYC
• Cost: $9,950
• Contact: 607-255 5324, [email protected]

University of Michigan Ross School of Business, Advanced Human Resource Executive Program

• The program aims to help senior HR executives worldwide “innovate align, and integrate HR practices to advance overall business strategy”
• When: Two-week sessions offered three times a year—one in late winter-early spring, one in summer and one in fall
• Location: Ross School of Business Executive Learning and Conference Center in Ann Arbor, MI
• Cost: $23,500
• Contact: Cheri Alexander, 734-763-3154, [email protected]

Of course, none of this replaces a graduate degree. “You see a lot of HR managers with MBAs now, rather than masters of HR management—and from the same name-brand schools that everyone else goes to,” says Myrna Hellerman, a senior vice president at Sibson Consulting in New York.