When I was young and innocent I held, what I now know to be, a very naïve belief that anyone who was given the title of CEO must -
- a. know what they are doing and
- b. be significantly more intelligent and effective than the people they employ
With a few, very rare and notable exceptions this is no longer a belief that I hold to be true. No, I am now absolutely clear in my own mind that whatever it was that got the CEO to the top it wasn’t necessarily anything to do with indicators a. or b. above. This is particularly true of CEOs in the public sector (for obvious reasons) but, alarmingly, it is also true of the private sector.
Obviously, if I aimed this accusation at any particular CEO they would probably regard it as a ludicrous statement, until I add that my definition of an effective CEO is one that gets the best possible return from all of the resources and assets at their disposal; and that has to include their human capital. This was always the only standard worth having for assessing CEOs but it is even more appropriate now having learned that profits and ‘performance’, especially during the bubble years, are neither valid nor accurate long-term indicators of a CEO’s capabilities.
If you ask the average CEO what their view is on strategic, HR management (and you manage to get past their indifference and ignorance) what range of perceptions and perspectives would you expect to hear? Here are some of the responses I have personally witnessed over the years and not one of them is encouraging -
- They vigorously support their HR Director, and everything they are doing, not because they see any value in it but because they realise it would be pretty stupid to admit they have no interest in HR strategy and don’t have a clue what it is really all about
- They tolerate HR because they are under the misapprehension that it helps them to keep the troops happy and the company out of the employment courts
- They don’t see people as capital. In fact they are affronted and go all touch-feely on you, all of a sudden and totally out of character, for even suggesting such a thing
- Duh – what was the question again?
Yet surveys, too numerous to mention*, from the last 20 years or so have indicated very clearly that HR is not respected in the boardroom and CEOs have generally been dissatisfied with what the function offers in terms of added value. This view was probably best exemplified by entrepreneur and venture capitalist Luke Johnson in a diatribe he launched in the Financial Times (29 January 2008) saying that -
“HR is like many parts of modern businesses: a simple expense, and a burden on the backs of the productive workers …. Managers too often think their company isn’t grown up unless it has all these important-sounding departments.”
Some of you will be old enough to remember that this is the same Luke Johnson who, infamously, couldn’t take the heat in his own Belgo kitchen and left in a decidedly, un-grown-up, hissy fit on the BBC’s “Back to the floor” series in 2000. So don’t expect CEO’s to be mature adults either, they can be emotional too you know.
So why don’t we set an example and take emotions out of the equation. No one can deny that Luke Johnson is a highly intelligent and very talented ex-investment-banker turned-entrepreneur but that does not mean that all of his ventures are a success, nor that he has any more of a clue about human capital management than I have about astrophysics. Each to his own, horses for courses and all that, but HR directors do have to know about the strategic management of human capital if they are going to help to get the very best performance from their CEOs. They cannot do that unless they have evidence of how well they are managing this particular type of capital.
Who knows, by helping the CEO and the company to perform at their best they might even stop acquisitions by unscrupulous and immoral private equity partners who have often placed their own huge “burden on the backs of the productive workers” by loading the company with debt in order to acquire it?
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*One survey of senior business executives in particular was Deloitte’s “Aligned at the top” in 2007 that found that “63% never consulted HR leaders on mergers and acquisitions”, only “19% saw people management as valuable to the ambitions of the business” and a mere “5% described the HR function as ‘highly effective’ in addressing business needs (Personnel Today, 19 June 2007).