Are you prepared to be disrupted?

Benko Disruption

Posted by Cathy Benko on May 14, 2014

In our recent Deloitte Review article, Disrupting the CHRO: Following in the CFO’s footsteps, my co-authors and I explore the transformation of the CHRO role in the era of talent scarcity — which is proving to be a bumpy road. There are a number of reasons for this: the shift in corporate value creation, for example. In the 1960s, 60 percent of value was derived from tangible assets, while today, 85 percent stems from intangibles such as intellectual property, brand, and people. This increased reliance on knowledge work is at least as important as the need for companies to attract and retain technical talent and other STEM specialists—and both imperatives are raising the stakes for CHROs.

Executives are finding that lack of abundant skilled talent is becoming a critical inhibitor of their ambitious growth plans, while many HR organizations, after years of under-investment, are by necessity focused on operational, regulatory, and tactical concerns that can easily consume their capacity, creating a widening chasm between strategic demands for talent and the CHRO’s capacity to deliver creative, strategic solutions. Deloitte’s Global Human Capital Trends 2014 report shares some sobering statistics about HR’s perceived effectiveness. In the survey, 75 percent of business leaders believe that HR is just getting by or underperforming, and only 7 percent of HR managers themselves feel their teams consistently deliver programs that have business impact. What’s more, less than 8 percent of HR leaders believe their teams have the skills needed to excel in today’s world. As a result, some companies today are looking outside their own HR function for leadership, hiring either executives without traditional HR backgrounds or CHROs from other companies to fill the role. Indeed, from 2008 to 2011, less than 40 percent of newly appointed CHROs came from inside their organizations.

It’s a cautionary tale for CHROs or anyone aspiring to assume the role within today’s steeper, faster-paced “race to new relevance.” Today’s aspirants can’t take the decades-long journey that transformed their CFO colleagues into influential leaders and strategists. What’s clear, though, is that the shift in the HR role is already occurring. Examples include the leader in a multibillion-dollar services group who is exploring ways to up-skill her thousands of product-savvy services personnel to become more advisory in their customer-facing approach; what’s notable is that she didn’t even think to confer with the company’s Chief Learning Officer.

In another example, the head of strategy for a large media company assumed the added role of CHRO. While uncommon, the reasoning is compelling. As he and the CEO marshaled the company through several strategy-led reorganizations, they realized that the talent component of their change endeavor was so strategic that coupling the leadership responsibility was just good business. In my own career, I became Chief Talent Officer (CHRO equivalent) at Deloitte LLP having been a cross between a strategy and technology principal, and my successor was also appointed from our strategy & operations service area.

These are all examples of what disruption looks like. It’s having business unit leaders initiate their own projects to source new talent or undertake their own engagement-type surveys of organizational health. It’s HR being left out of key meetings or discussions about the organization’s strategic path. It’s leaders from outside the HR discipline being appointed to the top role, or new people being brought in, to serve as change agents for talent.

Ready or not, the disruption is here. So what should you do?

Those that don’t create the future live in a world that is not of their making. In other words, now is the time to take control of HR’s future. You can begin to transform yourself and the HR function into a next-generation business-relevant asset.

  • Assess where your/HR’s time and resources are going. If you’re waiting for more time or more resources, they aren’t coming. Instead, focus on knowing where and how your energy is being spent and whether those activities are high, medium, or low value. The CHROs we talk with invariably say they spend too much time being Stewards and Operators and not enough time being Strategists and Catalysts. The same goes for the HR function as a whole — how the CHRO spends his/her time is a proxy for how HR prioritizes its time. So what are the myriad projects HR has going on and how are they delivering strategic and high impact?
  • Change your measurement mind-set. Most HR leaders I know can tell me “HR by the numbers.” How many training hours delivered. How many transactions processed. How many hires acquired, and the like. While necessary, these are table stakes. Meaningful measurement looks at outcomes and impact, which indicates that CHROs need to recalibrate how they think about their return on investment. One way to gauge the current and future trajectory of an organization’s talent platform is to evaluate HR’s project/program portfolio: How well does each directly align with the strategy of the business? The portfolio of project investments will yield the organization’s future growth.
  • Become more data-driven. My colleagues at Bersin by Deloitte tell me that the analytics capabilities of HR are far behind those of finance, operations, sales, and marketing. Clearly, HR is collecting data (see above) — but data-rich is not insight-driven. In order to avoid data overload, CHRO’s should work backward from desired outcomes, rather than data mining in the hope of unearthing some unexpected gem of insight. CHROs should generate and syndicate clear problem statements specific to their industry and company situation, then deploy analytics to tease out the root causes. The use of analytics to design, defend, and activate a growth-oriented agenda will be a source of newfound credibility and a hallmark of great HR leaders.

Disruption is a reality for many of the HR leaders I work with — whether they realize it yet or not. If you want to emerge from that disruption, as CFOs already have, stronger, more valuable, and more prominent in the organization, now is the time. Action is the greatest measure of intent. What do you intend for the future of HR?

Cathy Benko is a vice chairman and managing principal at Deloitte LLP.

One thought on “Are you prepared to be disrupted?

  1. I could not agree more with the analysis on HR and the sad truth that most HR departments are underperforming. Without going into al of the various reasons why, primary of which is, the lack of metrics used to measure HR contributions to the organization. HR must prove in business terms how each and every HR makes an impact on stockholder equity and earnings per share. The best way to do this is to develop a HR strategic plan that mirrors the business plan of the organization. Unless and until HR professionals understand that CEO will only invest in areas of the business that produce the results that the board and the stockholders require, the recognition they seek will always escape them. This is not a new message but for some reason, the HR function is slow to respond. In some organizations this can be fatal and in others it only means poor or marginal results that drain corporate resources.

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