Why CEOs Should Lead Human Capital Strategy

The business world has never been more awash in human capital “best practices”—initiatives ranging from talent management programs to detailed and comprehensive culture schemes. These ideas are increasingly trending because of their enormous potential to accelerate performance and unlock value, even in sectors where growth has slowed.

In response, many chief executives are enthusiastically greenlighting such initiatives. Unfortunately, too many are delegating them to their human resource departments—and they may not be happy with the outcome.

While HR traditionally serves as the department responsible for implementing all-things people focused, it is a mistake to conflate robust HR practices with a human capital strategy. This flawed arrangement siloes and separates critical thinking from the leaders and discussions that set top priorities, identify central challenges and propose strategies for growth, making it far too difficult to strategically align people-focused initiatives with big-picture strategy, which is imperative to success.

A true human capital strategy is always aligned with and designed to drive an enterprise strategy. It spurs integrated planning that ensures an organization’s human core is working in lockstep to pursue its big-picture goals with maximum efficiency and effectiveness. It aligns strategically conceived tactics (i.e., training, compensation, culture-building) with overarching objectives and corporate narratives, influencing the instruction, motivation, communication and performance of key talent.

This holistic approach to human capital planning requires top-down consideration and ownership. Specifically, an organization’s chief executive should serve as its sponsor and assume responsibility over people- and culture-focused work, with the benefit of a CHRO or strategic human capital advisor.

A CEO-led model best ensures such efforts constitute human capital strategy versus mere human capital spending, placing authority with the executive responsible for aligning work with big-picture objectives. For example, while other leaders might convey enthusiasm for feel-good, morale-boosting programs, CEOs are best positioned to determine whether they exist in a vacuum, serving in essence as just “nice ideas,” or positively connect to identified drivers of organizational success.

The model further prevents critical people-related issues from being lost amidst other priorities and makes it possible to reallocate resources, if needed, to support vital business areas. For example, market-driven strategy adjustments that make the success of certain teams suddenly more vital might require organizations to better empower and motivate key team members. With oversight over top business strategy, CEOs are best able to recognize such needs and push for solutions before gaps surface.

Putting the CEO in charge of human capital strategy further sends a clear, positive message about how organizations value people and recognize their potential—not an insignificant benefit in today’s business climate that places a higher premium on leaders and cultures that balance efficiency with humanity.

While CHROs and human resource departments shouldn’t oversee human capital strategy, they play the critical role of implementing it and associated tactics, from performance and talent management to engagement initiatives. This work is fundamental and requires expertise, finesse and close collaboration with chief executives. Fully supported and empowered CHROs are most able to advance these efforts, ensuring human capital work initiated in the C-suite doesn’t terminate there.

The CEO-led approach to human capital strategy evokes a shift that’s taken place since the early days of personal computing and e-commerce, when companies were first adding IT functions to their organizational structures. While it was once commonplace for the C-suite to delegate decision-making concerning technology, corporate crises ranging from cybersecurity attacks to digital disruption ultimately made it best practice for companies to include issues of technology as a priority for its most senior leadership team.

These organizations had to face catastrophes in order to prompt a change of thinking. The evolving nature of work is spurring challenges that can turn equally catastrophic. Employers today face intense competition for highest quality talent; swift market changes that frequently demand expensive workforce adjustments; and a new normal in which employees play an activist role, willing to publicly criticize their organizations.

These challenges are too great to brush aside. The most savvy CEOs will recognize their ability to help organizations face them as sponsors of well-devised human capital strategies.