Core CEO / General Manager Skills
The doom cycle won’t be broken entirely unless top HR professionals develop the skill sets required to become CEOs. While the dimensions and flavor may vary by industry, there some core skills any CEO must have:
a) Strategic acumen – the ability to make strategic choices about issues such as the direction of the company, which businesses to be in, which markets to pursue, which products to have in the portfolio, where to locate production facilities, and options for reducing costs while growing a business. Implicit in this is the ability to connect dots, i.e. to be able to look at the interconnections and broader implications of a decision on multiple dimensions of the business. Implied in this is a keen understanding of the drivers of their organization’s business model.
The challenge here for HR professionals is to get out of the narrow functional mindset that most of them tend to have, and be able to look at the non-HR implications of business decisions. For example, most HR people won’t look beyond staffing needs or compensation needs when a new growth strategy is being developed. Going beyond the narrow functional mindset would be to engage in a discussion on the growth drivers, or on operational choices such that they reflect the HR executive’s holistic business perspective.
b) Analytical ability (including financial literacy) - Most HR executives find detailed discussions on financial statements and data as painful as running up a steep hill. However, unless HR executives become financially literate and are able to quickly grasp the implications of financial and operational metrics, their chances of getting the corner office is lower than zero.
c) Communicating effectively with a wide range of constituents – employees, shareholders, directors, members of the board, analysts, customers, government bodies, media, community leaders, suppliers, etc. This would be an area where most top HR people would be effective with most groups – except perhaps in dealing with analysts – but this is a coachable skill.
d) Managing change and embracing conflict – Willing to adapt to rapidly changing circumstances and being able to make hard decisions while embracing conflict if necessary.
This is another area of challenge for top HR people –they tend to be resistant to change and unwilling to embrace conflict; often successful HR people tend to be conflict averse because they think that is the right way to operate in an organization. HR people rightly or wrongly have a reputation for being “politicians” or focused on compliance i.e. “policing”. This mindset among HR folks has to change.
e) Managing and motivating people – immediate subordinates as well as those around them. I won’t go into details here as the point is self explanatory.
Clearly, all of the above skills are acquired skills. Nobody is born with these skills. At the same time, HR professionals struggle with some if not all the skills mentioned above. Particular areas of difficulty are related to strategic acumen, financial literacy and numerical facility. I have seen senior HR professionals struggle with financial statements or with detailed data analysis – and not in terms of being able to read them – but in terms of being able to understand their implications and being able to make choices.
For example, in a discussion with a senior HR manager, I came to the realization that the person had never developed a business case that involved NPV analysis; nor had they ever looked at the breakdown between fixed and variable compensation costs one level below to understand the relationship between cost and performance. In another discussion during an M&A situation, the HR manager dealing with the organization integration had little appreciation for dimensions of strategy and was looking at structure as creating boxes on an organization chart and putting names against them. They failed to take a strategic view of the acquisition and ended up doing a disservice to themselves and their organization.
Why top HR professionals struggle with the skill sets
Why do top HR people struggle with these skill sets? They are not any less smart than say top finance or top marketing people. Yet they struggle. The reasons for this poor skill development in many HR people lies in the following:
a) HR function recruitment standards – HR function recruiting standards are weaker than other functions – they don’t typically test analytical skills – one reason why a number of HR professionals entering the profession come in with weak numerical skills.
b) The HR career development process is focused on deep functional specialization – if you are a compensation person, you remain in compensation and become an expert in compensation without developing a wider perspective on business and human resources issues
c) Getting involved actively in understanding the business – Most HR folks don’t spend enough time understanding the key business drivers themselves – they either learn it from what others tell them –but never actually fully understand them – or just don’t bother to learn about the business drivers, period. I once met the head of HR for a telecoms company who knew ARPU was an important measure of business performance for the company at that time – but never really understood why – or what the changing trend in ARPU meant for the business. He wasn’t able to see that as call costs and data costs went down, ARPU would inevitably go down – and that the company would need to think about additional sources of revenue or growth opportunities. And even more seriously, he was unable to link changes in market trends to the organization’s human capital needs.
d) The “can’t do it mindset” – A number of top HR professionals never really believe or even think for a moment that they can become CEOs. They rule themselves out of the running for the top job right from the beginning. This is compounded by an unwillingness or reluctance to take on risky and challenging assignments
