Shifting Business Environment Drives Change in CHRO Decision Making
Chief Human Resource Officers (CHRO) oversee one of the most critical components of the organization: its people. What makes one organization more successful than another? Often, the largest differential is the workforce, which is made ever more complex and challenging than other business functions because of its human factor.
In the cost cutting environment we recently emerged from, human resource (HR) executives had to mitigate fallout from layoffs and hiring freezes, work tirelessly to align the overall business strategy with the needs of the company and counteract low employee morale in order to remain competitive and above water. Since early 2013 and to date, with falling unemployment rates and market growth, there has been a notable shift occurring in the human resource landscape.
To better understand and track the movement, Korn Ferry’s Human Resources Center of Expertise surveyed 103 CHROs and human resources leaders from the Korn Ferry database of top U.S. companies. The CHRO Pulse Survey asked key business questions across a number of topics: HR role shifts; talent development and acquisition; board involvement; CEO oversight; and business alignment. The survey’s objective was to determine the leading issues CHROs and HR executives face and to create a baseline of sentiment to be tracked annually.
In times of growth, talent becomes paramount. However, such growth and business expansion demands HR to critically examine their current employees’ skills, strengths and responsibilities. Often, this can result in paradoxical hiring challenges and spotlight poor talent strategies. According to the Korn Ferry survey, 37 percent of CHROs identified competitive pressure on the business, followed by gaps in the existing workforce (15 percent), as the factors most responsible for driving increased complexity in the HR role compared to five plus years ago. Surprisingly, benefits and health care reform was only noted by 2 percent of respondents as largely contributing to an increase in byzantine job struggles.
The Korn Ferry survey also revealed that concerns over employee engagement (30 percent) and aligning the HR strategy to the company strategy (28 percent) are the two forefront issues keeping CHROs up at night. This, of course, is further evidence that HR executives are highly cognizant of the fact that a sound workforce strategy includes alignment with the overall business objectives–this cannot be overlooked, especially when the overwhelming majority of CHROs (76 percent) agree that their CEOs and boards are asking them to take on more bottom-line responsibility. This fact is strongly influencing some of the more taxing pressures on CHROs.
While M&A activity poses resource allocation considerations, cultural challenges as well as compensation and benefits issues, among a number of other hurdles, only 4 percent say M&A integration keeps them at night. This could be a result of the respondents not currently undergoing this type of transaction. However, solid, stabile economic growth often leads to stronger M&A activity, making it an area to watch.
According to the Korn Ferry survey, the biggest talent challenge that CHROs believe CEOs face when trying to optimize their workforce is ensuring talent capacity and workforce deployment (29 percent). However, ensuring leader speed-to-performance in pivotal roles on a global scale (25 percent), creating globally agile organizations (23 percent) and ensuring a global leadership talent pipeline (22 percent) follow closely behind. While low redundancy rates in the workforce and proper resource allocation are fundamental to maximizing talent, the increasingly global business environment also has put an emphasis on building a nimbly mobile workforce. Beyond cross-border partnerships, international supply chains, and those companies with an already established global reach, some companies — like Netflix – will be launching for the first time into foreign markets, requiring executives to focus more acutely on workforce gaps and opportunities.
In recent years, boards have grown increasingly powerful, vocal and instrumental in company policy and strategy. Their influence is without a doubt shaping many private and public organizations. The Korn Ferry survey found that, when asked where their Board of Directors’ interest has been focused the most, specifically in regards to HR, 49 percent of respondents say executive compensation, followed by succession planning and overall talent issues (41 percent), while risk management (4 percent), broad-based compensation (4 percent) and benefits and health care reform (3 percent) are HR areas that are not priorities at the board level.
While the turned economy has provided new growth opportunities, it has also spurred new talent needs. CHROs’ talent strategies should hinge on mitigating overexposure to rapid growth. Strategic vision and thoughtful, data-driven workforce planning will allow CHROs to focus on cultivating and maximizing the current workforce, while growing where necessary. Strong HR leadership that is built on business acumen and focused on HR’s return on investment in relation to the larger business goals can result in a strong competitive edge.