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HR People Are From Mars, CEO's Are From Venus! By Dr. John Sullivan who can be contacted at www.drjohnsullivan.com ---------------------------------------------------------------------- 1. Introduction Have you ever noticed that VP's of HR almost never become CEO's at their own firm's? Think about it! Their failure to move up is partially caused by the dramatic differences between how HR people and CEO's think and act. it's almost like they are from different planets. HR professionals have been fighting for years to gain the respect of CEO's and managers. Many HR professionals have gained a degree of respect as business partners. Now, however it's time to raise the level of HR recognition even further. That means moving beyond the business partner level to become "business leaders". 2. Competitive advantage HR In order to make that transition, it is essential that senior HR professionals begin to look at themselves as others see them. If you take a step back and look at HR as an outsider would, you will see that HR people talk, think and respond to issues differently then a CEO or CFO would. It's not difficult to see the difference. Just read HR publications and visit HR websites. Compare the topics, terminology and focus to those found in mainstream business magazines like CEO, CFO and Fortune. You will see a profound difference. CEO's see business as a battlefield and they expect HR to provide the strategies and the talent to give the firm a distinctive competitive advantage. I call that role "competitive advantage HR". In stark contrast, HR is devoid of "warriors". CEO's are generally people that draw their "mentality" from military, business school and competitive sports experiences. HR generally gets over 50% of its employees from the social sciences, where cooperation and helping the "less fortunate" is taught rather than competition. "Our #1 opportunity is to build a competitive advantage, not to build benefit plans for our organization" --VP of HR Cisco I've met/ worked for over 100 VP's of HR and dozens of CEO's over the last few years and although there are clearly exceptions, I've found that CEO's and HR executives are like oil and water. And I see little shrinkage in the immediate future in the chasm between CEO's and HR executives. One can argue that CEO's should become more like "us". However, it's more realistic to assume that if HR professionals are truly to become "business leaders" that they must learn to think, talk and act more like senior management, rather than vice versa. This article is designed to make you think. It is by design critical of many in the HR profession (even though generally HR people don't take kindly to criticism). I realize you can't easily generalize about all HR professionals but my research and observations have shown that we are in fact different. I don't believe it's in our DNA but rather it's a result of a history of promoting people with a lack of line management experience and business degrees. I've been in HR for over 30 years. I've served as a Chief Talent Officer for a Fortune 500 company, a professor in a business school and a CEO. During that time, I've found that when you interview or observe CEO's you find that they are dramatically different then "we" are. They are generally aggressive types that try to make a big splash and enjoy the direct line of fire while too many HR executives are happy as staff officers. Unfortunately, if we choose to remain comfortable as part of overhead" we may also be simultaneously degrading the importance of the "people function" to the level of purchasing, accounting and shipping. If VP's of HR are to become future CEO's and business leaders we need to look at our perspective, our thinking and our language and then dramatically shift it so it comes more into alignment with the approach taken by senior business executives! The differences between the "focus" of CEO's and HR professionals are dramatic. This differentiation can be characterized into 12 different "degrees of separation". They include: # 1: COMPETITIVE ADVANTAGE CEO's are highly competitive. They continually focus on the opposition and look for ways to gain the upper hand. They want to win, and win big. For example, Jack Welch the CEO of GE expects each and every business to be #1 or #2. or he will sell it off! This means CEO's constantly do side-by-side comparisons both in business practices and results between their firm and the top ones in their industry. CEO's continually strive to improve his or her own firm, while simultaneously "hurting" the competitor. HR executives couldn't be more different. For example, the VP of sales constantly tries to steal away customers from the competitor. In contrast, HR is reluctant to steal away the competitors' top talent because of "ethical concerns" or for fear of retaliation. Few HR managers have done a side-by-side competitive analysis comparing "us to them". And almost no one in HR does a monthly comparison of their results (for each HR function) with the results of each of the direct competitors as well as the top firm in the field. HR executives also tend to have a preference toward "cooperation" and they often look at things only from the positive side. They need instead to learn how to identify the competitor's weaknesses and yes, even take actions that directly harm the competitors. This is especially true in the talent area, where there is a "war" for talent going on. HR action steps: >> Do a function-by-function comparison of "our" and "their" HR. Compare our people results, not just our practices >> Identify and design a plan to exploit your competitors, weaknesses >> Target the competitors' top talent for poaching >> Develop plans to continually improve our people practices faster than our competitors can "copy" them >> Include in the design of all new programs a continuous improvement component to ensure that the program provides us with a continuing (measurable) competitive advantage >> Hire HR people who are highly competitive and that have both business degrees and line experience (i.e., production, sales, product development or marketing) # 2: REVENUE NOT COSTS CEO's are laser focused on increasing revenues (top line growth), profit and the stock price. The measure everything in either dollars or numbers. HR executives seldom see the relationship between HR and profits, revenue and the stock price. When they do focus on money it's almost always on cost savings. For example saving HR costs (when they make a less than 1 percent of the total company's revenues) are unlikely to have any strategic impact on the business. For example, HR often measures the cost of the hire (COH) when the COH is generally less than 5% of the revenue generated by each employee during a year. Beware; it's not acceptable to focus on only half of the business equation (expenditures). HR needs to focus on the "other" more important half. generating revenue, profit and increasing the stock price! For some reason HR never takes the time to measure the revenue generated by hiring and retaining top performers compared to the revenue generated by a newly hired average performer. In contrast to the relatively minuscule HR budget over 60 percent of the total variable costs of most corporations go to people costs (salaries and benefits). However, HR routinely fails to measure or demonstrate the return on investment (ROI) that great people practices can yield. Everyone knows in his or her mind that recruiting, incentivising and hiring top talent can dramatically increase revenues but HR has failed to quantify that impact. "This would include... running (HR) operations based on return on investment" --CEO of Cisco Systems HR action steps: >> Quantify the revenue generation differential between top and average performers >> Calculate your "people profit ratio" (which is the number of cents of profit generated for each dollar spent on people costs) >> Identify and target the jobs and employees that generate the most revenue and profit >> Calculate the ROI on each HR function and focus on those with a high return (and drop those with a low return) >> Shift HR resources and emphasis to programs that have a positive business impact rather than putting resources into administration, processes and other low value areas # 3: METRICS, RESULTS AND SPEED CEO's "think big and act fast". Senior managers are driven by the need to continually produce results. They live in a world driven by quarterly results. Failure to meet the quantifiable quarterly expectations of the industry analysts and investors will have an immediate negative impact on the stock price. HR must also realize that great hiring and retention among top executives is closely watched by analysts and thus impacts the firm's stock price. In contrast HR people often think tactically and move at deliberate speed. HR professionals frequently acknowledge the need for speed and metrics but in reality they seldom count more than program costs. HR professionals often even consider "having a program" as an indication of success rather than focusing on actual results. Most of the HR metrics that do exist are done at year-end rather than monthly. They also almost always leave out the most important components... quality and the impact on productivity and profit. If HR professionals are to be recognized as business leaders, they must continually measure and distribute their monthly results (as they relate to attraction, retention and people productivity) among all managers. Feelings and intuition must be replaced by data driven decisions. "Senior management will create the opportunity for HR to take on this new role as strategic business partner but HR must step up the challenge-and do so in Internet time". --CEO Cisco Systems HR action steps: >> Stop measuring and rewarding "process efficiency" and effort. Instead measure and reward only results and business impacts >> Compare our results to the best in our industry/ class, not to the average >> Require every major HR program to have monthly continuous improvement goals and metrics >> Always include quality and manager (employee or applicant) satisfaction in any priority thing you do >> Develop an HR "dashboard" as well as a single over-all HR index which measures the overall effectiveness of our people effort >> Monitor people productivity (dollars spent on people compared to the dollar value of their output) >> Eliminate barriers, silos, excessive meetings and the need to "build relationships". Replace them with incentives for working together and project completion # 4: FOCUS ON TOP PERFORMERS Top executives commit their time and resources to the products, services and customers that have the highest return on investment (ROI). They focus on developing new products with a high return and they drop the low return products. In addition, when it comes to employees, they prioritize their time and focus on top performers. HR, in direct contrast, spends most it's time on bottom performers. It develops rules, policies and training for the average employee, rather than focusing on the needs of higher return top performers. HR, instead of firing poor performers, tries to "fix" them or give them "another chance". |
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