Episode Transcript
[00:00:00] Good morning everybody. Today we introduced a new body of research on the CHRO part of our CHRO Insights program.
[00:00:10] And this is more specifics on what's going on in the world of HR senior executives using some new data from 25,000 CHRO profiles analyzed by a company named Findom, which which does detailed data labeling and AI based data inference in the job market. And the report that summarizes the findings discusses five paradoxes. But before I talk about the paradoxes, I want to talk about the high level results. Essentially what you're seeing here, and I think many of you know this, but you may not have understood exactly how big this is, is that the role and, and expectations of the HR executive have skyrocketed in the last year, maybe two years. The average tenure of a CHRO dropped by about 20% from six years to 4.8. 70% of CHROs are in their role for the first time, which is relatively high. And Almost only about 20 to 25% of the CHROs in this sample and it's a big sample had non HR business experience. And that's relevant as I'll explain in a minute. Essentially what is happening, and most of you may know this, but you're probably experiencing it over time, is that the head of HR is dealing with the transformation of hr, of course, and all of the AI implications of that, but is in a much bigger role now, being asked to take responsibility for the hiring and skilling of AI ready workers. The transformation of the skills and behaviors of everybody. Because we all use AI, the job design, job architecture and org structure of the company in the world of AI, at least understanding some direction for that, assisting business units in staffing and hiring and reskilling their individual areas around AI. By the way, each functional area of business is going through a different kind of transformation because AI doesn't affect everybody the same way. AI in sales, AI and marketing, AI and finance, research, engineering, etc. Are different. And dealing with a lot of labor market stress caused by the fears that employees have about AI, their agility and ambition to take advantage of AI for their own careers and their desires to stay employed in a time of relatively high inflation. And on the candidate or workforce side, we are living through one of the most stressful periods since the pandemic. It's not as bad as the pandemic, but it's. It's about as bad if you look at the employee engagement data that people in the workforce all over the place and doesn't matter what job you're in, are Worried that there's going to be some automation tool or some bot or some robot or some machine that's going to eliminate their job or replace it, and they don't know what that is. And their bosses and their CEOs are making all sorts of grandiose statements about productivity, which of course lands on the laps of, you know, the people in the workforce saying what does that mean about me?
[00:03:28] Now CEOs may not worry about that so much, but chros do. Because we need to hire and retain people and reskill people and give them the energy to reinvent themselves around AI and then figure out how to restructure the company and figure out where the big use cases are for AI. Because as I've talked about, this is a target rich environment. I mean, everybody has things that we could automate that could make us more productive. But the big things tend to be cross functional, cross role workflows that require teams to focus on development of new applications.
[00:04:03] So anyway, that's all landed much of it in the C suite, of course, and the Chro feels a tremendous amount of pressure. Now in addition to this, there has been an explosion in the number of people in hr. If you look at the data in the report and some research that I'm going to publish in our 2026 imperatives, the number of in HR has gone up 60% faster than the workforce as a whole. So in other words, the profession has grown in volume. And the reason for that is we've had skill shortages. The pandemic, remote work, hundreds of human capital issues, and of course the economy has become more of a service economy every day. Something like 70% of US GDP is service related businesses that include software. So the HR function has gotten more complex. There are more job titles in HR, there are more functional skills and domains. We have 94 independent capability areas in our capability model and I think we're missing about 8 to 10, so it may be more than a hundred. And so we've hired lots and lots of people into HR and suddenly we feel, or at least many people feel, that it's become very bureaucratic, too slow, too administrative. And many of the practices of hr, the historic practices, how we do performance management, goal setting, pay are falling out of date. Just to give you an example on pay, we're doing a lot of work on TAL talent density. And you're going to read a lot about that from us. And there I just did a podcast on it. Elon Musk is the first human being I know of that is now earning a trillion dollar payout for his performance. And Meta, according to the analysts that I read, has spent almost $20 billion on AI talent in the last year. Some of that went to buying a couple of companies that were mostly just people, but. And many of the new engineers joining Meta get $100 million pay packages, which sounds almost bizarre, but now it's beginning to sound normal. How would you possibly reconcile that with a bell curve forced ranking 5 scale performance rating? Do you give them a 50 out of 5 or 500 out of 5? What is the point of having traditional performance management if that's the level of skills disparity we have in the workforce? That's an issue for the Chro.
[00:06:28] Now, many high performing companies ignore some of these HR practices and just do whatever they need to do and then HR comes along later and tries to clean things up. Because if you decide you don't like HR getting in the middle of all these management decisions, you can ignore them, but you will end up with people that are unfairly paid relative to their peers, people that are under skilled or overskilled, people politically competing for different jobs when they really shouldn't, lack of collaboration and many other organizational dysfunctional things. And if there's anything, if there's anything that the AI world is teaching us, it's that your ability to transform yourself in an integrated but speedy way is the number one factor in how quickly you catch hold of whatever this AI wave turns into. And that means alignment between people, people listening to each other, working together, collaborating and upskilling themselves as individuals. And those things happen with the culture of trust and support and growth. Not in a world where everybody does whatever they want. So, you know, you could argue that HR is a bunch of bureaucrats, which, you know, I suppose maybe we are bureaucrats, but what we're trying to do is give the company human capital practices that are as scalable and differentiated as financial practices, manufacturing practices, customer practices, sales practices and everything else. And that's what HR is all about, and that's the reason it's so complex, is that if you think about the 194 domains, and I said, as I said, it's more than that. Every single one of them is a human capital practice that doesn't have a right or wrong answer. Just like you can't tell somebody there's a right or wrong way to do sales. There are things that work and things that don't work, and there are typical pitfalls, but everybody who does sales brings a slightly different approach. And in every company, the needs and the nature of the sale is different. So anyway, it's a complicated job. And since 70% of the CHRs are new, a lot of them are in the role for the first time. Maybe not all of the 70%, but maybe half. And so what happens is you become a head of HR operations or a head of multiple functions, or a head of talent, or maybe you're a head of labor, and somebody says, the CEO says, I'd like you to run the whole thing. And all of a sudden you realize it's a lot more complicated than you thought, because not only do you have all these functional areas to worry about, but you also have the technology stack, which is getting in the way all the time, the vendor market, the consultants breathing down your neck, all of which claim to have the right answer to all the problems. And, you know, you're dealing with the expense of labor, which is probably 50%, sometimes 70% of the expense of the whole company. And then you go to, you know, the industries that are in shortages. Airlines, transportation, healthcare, some retailers, some hospitality companies right now, construction. Certainly if you're in the data center business, and the main thing people want you to do is just hire people as fast as you can. And you know, as an HR leader that you can't just hire people quickly. You have to be careful and get the right people or it's going to backfire anyway. The chros are feeling the pressure from all of this, and that's what this research is all about. We also discovered that 70% of the HR professionals in the world in that ballpark are women.
[00:09:53] 70% of the CHROs are also women, a little more than 70%. Yet all of the other C suites roles are dominated by males, men. So the gender disparity continues to exist. And about 12% of the CHROs in the sample are paid at the top level of the top five executives in their companies. But that's a pretty low number when you consider the other C suite officers, too. So I think in my career for the last 25 years doing this, there's been a steady kind of rocket ship upward of the HR profession to the point now where, you know what they say, when you get too close to the sun, you can get burned. We've been given all of this opportunity, and now we need to deliver.
[00:10:38] And, you know, I interviewed Jackie Canney the other day, and I've talked to Kathleen Hogan at Microsoft recently. A lot of you who are HR people are given the opportunity to have a different job. Chief AI Enablement officer, chief AI Transformation officer. Chief Corporate Transformation Officer. Chief Corporate Strategy Officer if you're really a business person. So it's a, it's a really fascinating time. I mean, the chros that I know and I meet a lot of heads of HR are some of the most high powered, high performing, practical, pragmatic business people I've ever met. This is not a job for concepts, for all sorts of new ideas, for constantly asking questions, those are fine. But the reality of HR is the rubber meets the road every day in every manager's and every employee's life. And so in some sense you have these big transformational agendas, which includes transforming HR and the rest of the company and the skills and the jobs and the roles, but also the important needs of day to day life, work life. Are people safe? Are they fairly paid? Are the systems working correctly? Can people get the right information? Are there benefits up to date? Does the HR technology deliver the right candidates or the right training or the right experience?
[00:12:06] So my experience with HR executives is they are extremely pragmatic people. They're extremely good at communicating and connecting multiple executives inside and outside the company. They're very creative, hardworking business people, not just HR people. They know the company, they know the industry, they know the competitors, they know the customers, they know the products. And they have this unique organizational savvy, which some people have and some people don't. I think you can gain it over time. You know, for me as an analyst and a consultant, having spent so much time doing this, you see organizational performance that outperforms peers and it's almost always about culture, management culture, leadership culture and execution culture. And the chro isn't always involved in that. In fact, I think sometimes the chro is left out of that. But ideally you as a chro should be pushing that agenda as well. And speaking truth to power when the organizational culture is dysfunctional or broken in certain places. You know, for those of you that work in big companies, you're talking about multiple business units, multiple geographies, different parts of the company that have very different management teams and very different cultures.
[00:13:19] So all of that lands in the lap of this really fascinating job. You know, the reason we do this research is for two reasons. One is our entire mission here is to advance and support the profession of hr. And the mission of making companies better and making employees lives better of course too. But the second is we want to give chros some amount of support, advice, counsel and education so that new chros or people that get catapulted into this role from the outside, which happens all the time, can quickly figure out what they're dealing with and create clarity from the noise. If you have more than five big things on your agenda as a chro, you're probably doing too much because the big agenda items, you know, you should be worried about should be relatively large. And a lot of the strength of a great chro is attracting and developing great HR people because unlike the rest of the company, most HR departments don't have a lot of talent development. And that's, by the way, the reason we've landed in this space is we see so much need for it and so much demand here. Anyway, it's very interesting research. Take a look at it. We'd be happy to talk to you about it. It certainly doesn't apply to everybody. A lot of you are fine. A lot of you are probably having a flourishing career, doing great things, but the pressure's on. And I think the research shows that this is a really interesting time to be in this profession. I think a lot of new people are going to join HR because of the interesting and urgent nature of what we do.
[00:14:52] And I just want to say how much I admire all of you that do this because I know how difficult this role is. Thanks very much, you guys. Talk to you again soon.
