The CEO is clearly the most important executive when it comes to creating and implementing organizational strategy. Who’s the second most important executive for strategy?
The standard answer is probably the Chief Operation Officer — especially in terms of carrying out the strategy. But I’m starting to think that the COO is only the third or fourth most important strategic officer. So, who’s number 2? I’m leaning towards the head of Human Resources. Let’s call him or her the Chief Human Resources Officer or CHRO.
I’m leaning toward the CHRO because I’ve always believed that the soft stuff is hard. It’s not easy to get your culture right or to motivate employees for the long haul. It is all too easy to get your strategy crosswise with your culture. As I’ve noted before , when it’s culture versus strategy, culture always wins.
Similarly, I’ve never seen a company falter because they couldn’t find enough “numbers guys”. Our B-schools just keep churning them out. On the other hand, I have seen companies falter because they couldn’t find good communicators and motivators. Understanding human behavior is much more difficult than understanding the numbers. While we can teach people the “soft arts,” it doesn’t seem to be a popular specialty at university.
What’s really pushing me toward the CHRO as strategy leader is Scott Keller and Colin Price’s book, Beyond Performance: How Great Organizations Build Ultimate Competitive Advantage. (Click here for the book or here for a white paper). Keller and Price argue that too many companies pay close attention to performance (“the numbers”) but not nearly enough attention to organizational health. Their “…central message is that focusing on organizational health — the ability of your organization to align, execute, and renew itself faster than the competition — is just as important as focusing on the traditional drivers of business performance.” This has everything to do with the “people-oriented aspects of leading an organization.” In my mind, that means the CHRO better be intimately involved.
Keller and Price present a lot of statistical evidence to buttress their case. (They are McKinsey guys, after all). There is a distinct correlation between organizational health and organizational performance. They also present five “frames” for viewing both health and performance during transformation change: 1) Aspire; 2) Assess; 3) Architect; 4) Act; 5) Advance. I’ll write more about these in the future but the bottom line is that you need to use these frames to view both performance and health to develop a sustainable, high performance organization.
While I think the CRHO could and should be a strategy leader, in my experience, it doesn’t happen very often. I’ve seen HR organizations launch very interesting programs but, too often, the programs exist in their own right rather than as strategic enablers. They don’t impede the strategy but they don’t help it either. I also see the numbers guys set the strategy and then turn to the CHRO and say, in effect, “OK, here’s the strategy, now get us the people we need.” (In technology, this happens to CIOs all the time). To be effective, the CHRO really needs to be at the strategy table.
Why wouldn’t the CHRO be invited to the strategy table? Perhaps because they understand the soft stuff but not the business. I’ve seen CHROs (and CIOs) make naive comments in strategy meetings, showing that they clearly don’t understand the business. The result is a bunch of numbers guys rolling their eyeballs and looking vaguely embarrassed. Numbers guys need to learn more about the soft stuff. By the same token, CHROs (and their staffs) need to learn more about the performance side of the business. Perhaps then, they can truly become strategy leaders.