What is the primary role of your CFO?
Chances are, if you asked that question of 25 CEOs, you would hear similar answers: managing the financial actions of the company, financial planning, financial risk management, record-keeping, financial reporting and similar responsibilities. What if you asked the same question about the CHRO? Other than consensus on the role of leader of the HR function, the responses likely would vary widely—if the CEO thought the role extended beyond functional leader at all.
As CEO and CHRO for Medtronic, we see this lack of role clarity as a significant missed opportunity. A close partnership characterized by aligned priorities and clearly defined roles is imperative to driving Medtronic’s business strategy. Leading an effective and efficient HR team is important, of course. But it’s table stakes. Your CHRO should play an active role, along with his or her executive peers, in driving business results.
How, exactly, should that happen? The lack of CHRO role clarity was the driving factor behind the CHRO Global Leadership Board’s (CGLB) work to examine the role in the context of today’s business environment and establish a global standard of excellence for it. Working with a research team from Gartner and with input from highly successful CHROs and CEOs across a range of industries, board members developed a model that defines what they see as the high water mark for the role CHROs can and should be fulfilling within their businesses. At Medtronic, this model serves as both a framework and consistent reminder of the importance of priority alignment for us in our work together. Let’s take a look.
The World-Class CHRO
Serving as the HR functional business leader is the foundation of the CHRO’s role. CHROs also are expected to either come into an organization with, or quickly acquire, business acumen specific to the company they are serving, as well as to work with executive peers to shape and influence business strategy. These three areas of expertise are considered non-negotiable: they are essential for success in this—and any—C-Suite position.
The five pillars that sit atop the model’s foundation outline the key responsibilities that define a world-class CHRO (see table, below). These pillars require the CHRO to step beyond HR functional management to truly lead the business in the critical areas of talent strategy, enterprise change and company culture, as well as to serve as a trusted advisor to the CEO and the board. The CHRO role as outlined by this model is much richer and more complex than that of a functional leader, and we believe it captures the full potential of the CHRO and what the CEO should expect from him or her.
It’s important to know that this model wasn’t developed in the echo chamber of HR professionals. It was tested, validated and adjusted after extensive interviews with current and former CEOs of large-cap companies across a range of industries globally. The model’s advantages are many. It provides role clarity for CHROs and the CEOs they work with, leading to closer priority alignment and clear expectations for performance. It is flexible across industries and companies of all sizes and is applicable whether you are in growth or contraction mode. It’s also flexible internally; the CHRO’s time allocation can easily shift to support business needs. And the model is aspirational. Very few CHROs enter the role with strength and experience in each pillar—but the model defines a world-class standard for how the CHRO role is performed by leading practitioners today and in the foreseeable future. And, increasingly, CEOs are demanding that level of expertise from their CHROs.
Model In Action
At Medtronic, the world-class CHRO model guides our work together in support of the company’s business goals. For example, early in both of our tenures with the company, there was a need for a focus on succession planning for several key roles within the company, and that is where Carol spent much of her time as the board’s leader of human capital. Then, Medtronic completed an acquisition that doubled the size of the company overnight. While we didn’t abandon talent and succession planning, we made an immediate pivot to assess our organizational design, to ensure it fulfilled and aligned to our overall business strategy and supported the upcoming integration. At the same time, Carol’s focus shifted to that of enterprise change leader, driver of culture and purpose, and HR functional expert during a lengthy period of acquisition planning and integration. The model accounts for the flexibility that is required to support the dynamics of a rapidly changing business landscape.
We believe the CHRO’s role as the board’s leader of human capital is one of the role’s most interesting and important evolutions. The human capital pillar charges the CHRO with identifying external trends that impact the business and bringing them to the attention of the CEO and the board. In today’s environment of rapid-fire information sharing, this role is key. For example, Carol recently helped us navigate the new expectations brought about by the #MeToo movement in a way that not only supports our ethical responsibilities but also helps to drive the culture we are committed to at Medtronic.
Culture is another area that requires us to be closely aligned. We’re fortunate that our company mission has remained the same over 60 years, through leadership changes and as the company has grown into a global presence. Our leaders and employees are passionate about our mission. To maintain that focus and passion as our industry and company continue to change and grow, we have to ensure that there is a clear connection between our mission and our words, deeds, actions and incentives, among other things. We need to make sure that our leaders are behaving in ways that uphold the mission, and that we hold them accountable to deliver against that intent through performance and incentives. Operationalizing culture at scale is a daunting challenge and, while the CEO bears ultimate responsibility for this, the CHRO’s role in connecting the dots for employees at all levels cannot be underestimated. We believe the driver of culture and purpose role is a critical one, and it is one where we are aligned and intently focused.
These are just a few of the many examples of the model at work within Medtronic. Clear expectations and focus alignment, along with trust in and respect for each other, are the hallmarks of our partnership.
If you are looking to strengthen your CEO/CHRO partnership to drive business results, consider the following:
CEOs: Ask for and expect more from your CHRO
• Expand your thinking. If you limit your expectations for the CHRO role to just the classic “pay everybody the right amount on time and make sure we have good benefits,” you’re missing 90 percent of the opportunity. The model outlines the many areas in which a world-class CHRO can and should provide leadership value.
• Identify the critical skills the CHRO needs in support of your business. Leading a function and leading a business require different skills. Today’s CHRO role requires a wide range of strengths beyond the expected people management and coaching skills. The ability to use data and analytics to drive strategy and organizational design is key, along with a structured way of thinking. People-assessment skills are critical; we believe they are one of the most important strengths a CHRO can have. Deep understanding of organizational dynamics is important, as is the ability to identify the impact of external and internal trends to the business. And the CHRO must be comfortable challenging the status quo so he or she can serve as a true advisor and partner to the CEO and the board. These are the talents we consider vital to the CHRO role at Medtronic, but every organization is different. The model is customizable, setting the stage for the CEO and CHRO to work together to identify the specific skills and areas of focus that best fit the company’s current state, desired state and leadership culture.
• Use the model to drive discussion and alignment. It’s a great tool for candid conversations about priorities. Many CEOs don’t have a clear idea of where CHROs spend the bulk of their time. This model offers a framework for a contracting discussion about where the CHRO should focus, given the business model, the cycle the business is in and other factors. That discussion should lead to expectation clarity and provide a clearer framework for performance evaluation.
• Demand more. Without question, the HR function has its roots in administration and what was once called “personnel.” And, in many companies, HR is responsible for a great deal of operational execution, such as talent acquisition, employee relations, payroll and benefits administration. But the CHRO role must evolve. There are so many factors in today’s environment that impact business success: social media, customer and employee activism, changing employee expectations of jobs and the work environment, the gig economy and many more. The CHRO is uniquely positioned to be able to help companies navigate these murky waters. Understand that—and help your leadership team and board understand it as well.
• Ask the right questions. Whether you are evaluating a current CHRO or interviewing a prospect, ask yourself the following questions: Do you trust her? Is he looking three to five years ahead to determine talent strategy? Does she have a firm grasp on business dynamics within your industry as well as your company? Is he able to connect the dots between your company’s mission, values and every other aspect of the business? If the answer to any of these questions is no, you have a right to expect more.
CHROs: ask for and expect more from your CEO
• Don’t underestimate the impact of your role. Research indicates that many CEOs are unclear about where CHROs spend their time, as well as where it should be spent. If you’re spending the bulk of your time running the HR function, you’re missing a real opportunity to impact your business strategy and drive business results. Use the model as a starting point for a conversation with your CEO about where you can add value—and then develop a plan to do just that.
• Ensure HR priorities are aligned with business priorities. Research shows that approximately 60 percent of CEOs are rethinking the HR function. Understanding what your CEO is thinking and where his or her priorities lie should guide where you spend the bulk of your time. Make sure the two of you are aligned and check in frequently to make sure you remain aligned.
• Build and maintain a strong bench. The pillars outlined in the model require a lot of time and effort. But the day-to-day needs of the HR function never go away. As CHRO, your role is to ensure you have a strong HR bench to keep those very important functional areas that directly impact employees moving smoothly. Build that bench, empower it and focus the bulk of your attention on the aspects of your role that directly drive business success.
• Know where your strengths and weaknesses lie. Expectations of today’s CHRO are higher than ever and will continue to increase. Understand where you already provide value, and where you need to grow. The CGLB has developed a self-assessment diagnostic against the competencies in the model that is helpful to both aspiring CHROs and sitting CHROs who might be operating only in part of the model. Take advantage of this and other tools and use the results to guide conversations with your CEO about growth opportunities.
Partnership In Action
Strong partnerships generally offer personal satisfaction. But they drive business results as well.
In 2014, Medtronic entered into an agreement to acquire Covidien, a move that essentially doubled the size of the organization, expanded its global presence and positioned it as the world’s largest medical device company. An acquisition of that size is the ultimate test of the CEO/CHRO partnership, since it impacts nearly every aspect of the business. Working with our peer executives, we were able to bring two large organizations together relatively seamlessly, from a people, talent, culture and organizational structure perspective, while continuing to deliver on the financial commitments we made to our external stakeholders and to ourselves. That could not have happened without a strong partnership driven by clear expectations, focus alignment, trust and respect.
Generally speaking, the more you expect, the more you get. The tenets of the model for a world-class CHRO help strengthen the CEO/CHRO relationship and add value to the organization. However, it doesn’t happen overnight. It is an exercise in shifting key responsibilities for the function, educating the board and sometimes peer executives, and in overall change management. In other words, it is a multi-year process. But in our experience, it is well worth the effort.
Special thanks to CGLB members Kevin Cox and Nazneen Razi, who provided background and insights into the development of the model and its implications for business success.
For more information about the Model for a World-Class CHRO, check out the page: Becoming a World-Class CHRO: A Practitioner-Defined, CEO-Validated Model and review a webinar that provides an overview of the model and highlights ways it can be leveraged and support and resources on the horizon.