Making HR a True Business Partner: Operating Excellence and the CHRO’s Path to the C-Suite Table
Editor’s Note: This is the fourth of five articles in our Jack Bucalo series “Making HR a True Business Partner.” Join HR Exchange Network to receive our newsletter and access all of our content, including articles, columns, videos, reports and more.
Almost every Chief Human Resources Officer desires the same goal – membership at the C-Suite table as an equal business partner to the finance and line executives – but few achieve it. Most CHRO’s fervently hope for a CEO (and/or President, as the Chief Operating Officer) who appreciates the worth of the function and will grant them such a seat. However, most CEOs and COOs do not have the necessary vision of the function, as it is the least known of all the functions that report to them because they have had little meaningful strategic or operating HR experience in their own business careers. As a general rule, the CEO and COO will be looking for the CHRO to “chart their own path” to the function’s legitimacy as an equal business partner. As a result, the CHRO must accept the fact that he or she must EARN their way towards achieving such a goal, as it will not likely be handed to them because of their job title. Therefore, the very real question becomes, how does the CHRO earn it?
It is fair to say that throughout the business world, Human Resources is primarily considered an administrative function, in stark contrast to Finance and the line organizations who play a major role in helping the company to achieve its annual business objectives, profitability and strategic plan goals. Historically, HR leaders have been known for having little or no pragmatic financial, operating, strategic or business sense, while being considered theoretical thinkers. In recent years, some HR organizations have utilized a path for trying to gain the CEO’s respect for the function – HR analytics. However, these analytics are very costly (and many HR functions cannot afford them) and must measure the correct metrics in order identify actionable items that will have a positive impact on effectiveness and hopefully profitability. Even when the correct metrics are identified and yield some meaningful results, they will typically have an indirect impact on profitability while having the distinct disadvantageof keeping HR off in its administrative world – away from the hectic and risky operating side of the business.
Before defining this new path, we should clarify the term “operating excellence”. Each CEO and/or COO will typically direct the following OPERATING functions: Sales, Marketing, Manufacturing, Operations, Information Systems, Purchasing, R & D, among others; along with Finance and HR. Each of these functions are responsible for achieving certain annual quantitative business objectives and portions of the company’s strategic plan. CEOs and COOs desire to achieve OPERATING EXCELLENCE in all of these functions as the main vehicle for them to respond to their market and customer needs, achieve profitability and realize progress towards their strategic plan goals. Therefore, they are looking for any meaningful help to do so. Now, here’s a new path. If HR can tap into this operating mainstream by offering various value-added HR services that facilitate the line executive’s ability to achieve their annual business objectives, it can also help the company achieve its overall financial and strategic objectives while having the CEO and COO recognize the HR function as a combined operating and administrative one. To accomplish this task, HR will have to retool its Learning and Development staff and programs away from the conceptually-oriented interpersonal and leadership development skills that line management typically views as not being very important and towards being a major change agent/facilitator for meeting the company’s pragmatic annual business objectives and strategic plan goals.
To get started, the CHRO should meet with the CEO, COO and line executives, preferably at the start of the fiscal year, to fully understand their annual business objectives and strategic plan goals. Then, he or she can determine how HR can provide some appropriate value-added HR services. Here are some examples of typical business objectives and how HR can act as a major operating change agent.
Improve earnings per share from “X” to “Y” dollars per share and cash flow by “Z” dollars.
1. With Finance management, implement a Cost Control/Productivity workshop to identify potential profit improvement opportunities.
2. With Inventory and Manufacturing management, implement an Inventory Reduction Workshop to identify items that can be eliminated, reduced or replaced by less expensive ones.
3. Train Sales personnel how to collect outstanding receivables to bring in more cash.
Reduce the time-to-market for the redesign and launch of the company’s main product line by 25%.
1. With Engineering and Marketing management, implement several task forces to reengineer and streamline the entire design and launch cycle.
2. Implement a Project Management Workshop to help ensure that the reengineering project and subsequent product development projects are achieved on time.
Increase sales for product “X” by 20% through the introduction of a new technology.
1. With Sales management, update the product’s Sales Incentive Plan to recognize the new technology and its increased profit impact.
2. Assess the competency level of all Sales personnel with the new technology and retrain as needed.
Improve the company’s customer service image to exceed industry standards.
1. With Customer Service management, survey outside and inside service experts and executives to catalog the key service principles, processes and measures needed over the next two to four years.
2. Determine the key skill areas required for success and assess the levels of competency of current personnel.
3. Hire new personnel as needed and train the CS personnel on the new principles, processes and measures.
4. Establish on-going workshops designed to continually improve CS innovation, including new sales generation, if appropriate.
Develop about 30 business presidents who possess sound general management skills and can operate a $30 million per annum or larger business.
1. With a reputable business school, develop and implement a General Management seminar that covers Strategic Market/Product Planning, Financial Management, Product Development, Customer Retention, Leadership and other required subjects.
2. Enhance Succession Planning to ensure that all succession candidates have an annual Development plan that is approved by the CEO and COO.
As HR acts as a major change agent in meeting the company’s major business objectives, it is having a direct impact on profitability, rather than the indirect impact that might be achieved through the use of HR analytics.
When the CHRO tackles these tough business objectives with the CEO, COO and line executives, they will think of that person as an equal business partner who has earned their respect because of HR’s actions to help them and the company to achieve its business objectives while still performing its administrative duties. When this occurs, the CEO or COO will welcome the CHRO to the C-Suite table. Conversely, if the CHRO does not get directly involved in the operating and financial side of the business, he or she will likely never sit in that much-desired chair.