CHROs in the Boardroom: What’s Trending, What’s Next?

Episode Transcript
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Steve Odland (00:00):
Welcome to C-Suite Perspectives, a signature
series by The Conference Board.
I'm Steve Odland from The ConferenceBoard and the host of this podcast series.
And in today's discussion.
We're going to talk about the evolvingrole of the chief human resources officer,
the CHRO, and how they're going beyondtraditional, transactional HR stuff

(00:22):
to become really critical players incorporate governance and in the boardroom.
Joining me today is Dr. Rita Meyerson,principal researcher in our Human Capital
Center at The Conference Board, and Dr.Andrew Jones, a principal researcher in
the ESG Center of The Conference Board.
Welcome to both of you.

Andrew Jones (00:41):
Thanks so much for having us, Steve.
Great to be here.

Rita Meyerson (00:43):
Thank you.

All right, so Dr. Meyerson, we need to start with you.
The expert in human capital, all things.
Let's start with the CHRO.
What the heck is a CHRO?

The CHRO is probably the most dynamic role within the C-Suite
and has changed dramatically in thelast, let's say, several decades.
We can talk about how they havebeen traditionally responsible for
attraction and retention of talent.
And in the last several decades, we'veseen the CHRO, or the HR function, move

(01:19):
from execution of HR operations to amore strategic partner and what we call
in our research to an enterprise leader.
But let me break that down for a minute.
So transactions includes talentacquisition, compensation, performance
management, learning and development.

Oh, so HR stuff.

Yes, HR stuff, but we've seen in the last 20 years a movement
towards strategic talent partner.
So we've seen data and insightsleveraged to enhance talent-related
policies and programs, so supportingculture and employee engagement,

(02:01):
including DEI and wellbeing.
And as we conclude today, we'regoing to continue talking about
this aspirational enterprise leader.
And what that means is an equalpeer within the C-Suite, where they
have commercial and decision-makingresponsibility within the

(02:22):
management team and the board,and how we're going to get there.

Yeah, and the term you used was "partnership," I think.
And so whereas before there were moreof a transactional function leader.
That you go off to the hiring,firing, all of that stuff.
And now because we live in amore knowledge-based economy,
it's really important to takecare of your human resources,
think of them as human capital.

(02:45):
And that's how the term has evolved.
And so CHROs really become instrumentalin shepherding the resources of
an organization and furtheringits strategic goals and talent.
And so you two have partnered on thisbig study that we've just completed
on the role of CHROs in the boardroom.
Andrew, you're a specialist in corporategovernance and all things related to

(03:08):
the board and how corporations work.
And it's really remarkable when youlook at the trends over time, as Rita
was saying, that the CHROs reallyare critical as part of the C-Suite,
but also to the board of directors.
Talk about that.

Yeah, it's a really good question, and I think it's obviously
the fundamental point we explored inour work that, as the CHRO role has
evolved in the ways that Rita outlined,we've also seen CHRO is becoming
a lot more engaged with the board.
And obviously, that looks differentat different companies and also
in different regions, whetherwe look at the US or Europe.
But I think taking that big-picture view,and we have some quantitative survey

(03:43):
data to underscore this, as well, thatjust in the last few years, CHROs have
become a lot more engaged with the board.
They're attending a lot more ofthe full board meetings there,
and also increasingly attendingmeetings of specific board committees
beyond compensation, which I thinkhas historically been the place
where the CHRO has showed up.
So I guess, as the CHRO role hasevolved for all the kind of reasons

(04:05):
we laid down, including some of thesedeeper structural shifts, also showing
up a lot more on the board and playinga lot more influential role in the
running and management of the company.

And CHROs always engaged with the compensation committee of the
board of directors because you were alwaystrying to get all of the, certainly the
senior, compensation worked out becausethat's the purview of the board of
directors and needed to be that advisor.
But when we're talking abouthuman capital, Rita, it's a
whole different dimension here.

(04:34):
Because now you're talking about thestrategic resources that are driving
the business model of an organization.

Yes, and that is a very forward-looking way to view
human capital as an asset andthe role that it plays within the
management team and within the board.
There's been a significant shift,let's say in the last 20 years,
with digital transformation andhaving a lot more access to data,

(05:02):
to understanding how to optimizeand be efficient with human capital.
And culture has taken much more of a frontseat in organizations and with the board.
But COVID-19, the pandemic, was reallya pivotal moment for human capital to be
seen as a driver in business strategy.

Yeah.
And this whole notion of culture isimportant for a lot of reasons, right?
But retention is a big one, which iswhat you're talking about with COVID,
where people then started changingjobs because you could do everything
virtually for that period of time.
And people lost really importantskill sets in their company.
So this point about culture andunderstanding what kind of flexibility

(05:47):
is needed, what kind of work-lifebalance, what are the values of the
company—all of this is important.
And so governing all of that, shepherdingall of that, having the accountability for
all of that, is primarily led by the CHRO.
And so that then determines howyour recruiting is going to go and
whether you're going to bring inthe right skill sets and whether
you're going to retain them.

Exactly.
And I know you and I have talked aboutthis, but as you, as a transformational
leader, the culture is so important,and it's very hard to change it.
So really being mindful abouthow important that is within
their role and the board's role.
. And the partnership betweenthose two entities are important

(06:29):
when you talk about culture.

Yeah.
Now, Andrew, boards are notthe same all over the world.
And the US form of corporategovernance is different to the, say
the European form, where there's amanagement board and supervisory board.
What we've been talking about with theCHRO is primarily US governance focus.
How does that change when you'vegot a two-tier board structure?

It's a really good question.
And yeah, to clarify, there are reallybig differences, as you said, Steve.
Very common in Europe is thetwo-tier system, where you have the
management board, which is comprisedof executives, and the supervisory
board, which has oversight ofthat board, but it's very separate.
And obviously in the US and othermarkets, it's much more of a unitary
board, where you combine executiveand non-executive directors.

(07:13):
I think it's interesting, so obviouslythat adds different dimensions
to how CHROs interact, right?
Obviously, with the board in the US, youhave the CEO or president on that board.
The CEO may even be the board chair.
I think that does potentially add adifferent dynamic than in engaging
with a supervisory board in Europethat is very separate or may even
include employee representation orbroader stakeholder representation.

(07:33):
I think one important point toadd that really came out of our
research, though, is despite the quitesignificant differences in between
governance models, many of thesetrends are actually cross-region.
That we're seeing CHROs show up more,whether it's with the unitary board
in the US or the supervisory boardin Europe, for the same drivers that

Rita and you outlined (07:51):
this increased recognition of human capital risks and
opportunities, increased focus on culture,increased focus on workforce strategy.
I think that's bringing the CHROmore into the orbit of the board
across jurisdictions, really.
So it's an interesting big picturedespite the geographic variations.

Talk about how you did this study.
Together, collectively, you satwith many CHROs and board members.
Talk about how that process went.

Yeah, it was a really extensive and very
timely research project.
I think it was obviously inspired by manyof the issues we've already discussed.
And what we did in practice was, yeahwe spoke to a lot of people, right?
We actually had about 30 or 40-plusrigorous research interviews with
CHROs in the US and Europe, but alsoCEOs, board directors, including
some former and current board chairs.

(08:39):
We actually also had a quantitativesurvey of corporate secretaries
of public companies in the US andEurope, recognizing that the corporate
secretary has a very interestingperception of the board and how
executive roles are showing up there.
That survey was primarily more US thanEurope, but it was trans-regional.
We also actually collated a lot ofpublic disclosure data as well on board
composition board committees and so on.

(09:01):
So we had an extensive researchbase that informed this piece.

And lots of meetings and interviews.
So, Rita.
What did you hear differentlyfrom CHROs versus board members
on the role of the CHRO?

That's such a good question.
I think that if I was to sum that up,
we heard about the remit of what they areresponsible for and what they're doing,
but there's certainly room to grow.
So this aspirational view, where you havea trusted relationship with the CEO, which

(09:40):
many of them had, but being fully embeddedwith the board on issues around human
capital and the workforce, potentiallyAI, the multi-generational workforce,
things future-focused, there's stillimprovement for that and room to come.
And what's surprising was wedidn't hear so much from the CHROs

(10:01):
around the collaboration withother C-Suite functional members.
So the COO, the CFO, and the CLO.
However, we heard that loud and clearfrom the CEO and the board members.
That partnership is so important.

Was so important, but you didn't hear it from the CHRO.
So this seems to be a gap, doesn't it?
You've got board members and CEOssaying, this is really important stuff.
It's really important that the CHROstake a strategic view of human capital
and engage with the board and managementteam to do that, but you didn't hear
it quite the same way from the CHROs.
What did you make of that?

There's room for improvement.
And the idea that you're on amanagement team leading the company and
managing the operating of the company.
That is new, taking an enterpriseleadership perspective is a new
way of thinking, I think, for CHROsand CEOs, and you need to encourage

(10:56):
the partnership across thosefunctional leads of C-Suite leaders.

Yeah.

And if I could just add, I mean, I think
Rita outlined it so perfectly.
I think we really heard land and clearfrom, I think both CEOs and board
directors, perhaps particularly boarddirectors, a hope and expectation that
the CHROs would really broaden outtheir business acumen and commercial
fluency and fluency with some ofthe core financial and operational
decision-making aspects of the business.

(11:22):
And I think many CHROs are doing that.
But it's still a work in progress,and perhaps the CHRO has a particular
nuanced barrier to overcome inthat there might still be some
perceptions of HR as fundamentallyoperational and people management.

But this is interesting, because a few years ago, if you would ask
CHROs, they would say, "Oh, I'm not takingseriously enough in the boardroom. I could
be giving so much more," and, yada, yada.
Now it seems to be the other way around ina very short period of time, where there's
been a pivot here with CEOs and boardsreally seeing a bigger vision for this.

(11:56):
So the fact that you didn't quite hearthat the CHROs had kept up is interesting.
Does it suggest that thereare skill set gaps with CHROs?

Yeah.
So the commercial andfinancial acumen, for sure.
Having run a P&L, being part ofa business unit, doing a rotation
within the organization whereyou have that P&L responsibility.
Also, partnering with one of thosefunctional C-Suite members to lead a

(12:28):
strategic project across the organization,some type of transformation, would
give exposure to and elevate theskills of the CHRO that maybe did not
have a business role prior or wasn'tmaybe a general counsel, which we saw.

So if our listeners are aspiring CHROs or developing in the
system, your advice to them would beget some cross-functional experience.
Go run a business, get some P&Lexperience, because it'll make
you a better CHRO in the long run.

You'll be able, exactly, you'll be able to make better human
capital-informed decisions havingunderstood what it is to run a business.

OK.
But if you're in the role and youhaven't run a business, you're not
going to say, "Oh, pardon me, I'mgoing to go do this for a while
and not come back." So therefore,you're recommending more project—

Strategic projects, right.

So jump in and be a co-lead on some business project
where you can really engulf yourself.
Yeah, we know that you have a full-timejob, and you have to do that, too.
But this is going tomake you so much better.

Yes.
It will legitimize yourrole in the boardroom.
And what we heard, surprisingly,from one of our board members that's
been very engaged in this project,and she's been the chair of several
public companies boards, is that shesees in the future, the near future,
that the CHRO and the general counsel,or the chief legal officer, have a

(13:54):
huge opportunity to partner on AI andthe governance of that and how it's
introduced into the organization.

We're talking about the role of the CHRO in the boardroom.
We're going to take a shortbreak and be right back.
Welcome back to C-Suite Perspectives.
I'm your host, Steve Odland, fromThe Conference Board, and I'm joined
today by Dr. Rita Meyerson, Dr. AndrewJones, both from The Conference Board.
So we're talking about your study thatyou did, and collectively you interviewed

(14:24):
and researched this whole area with manyC-Suite members, board members, and CEOs.
Talk about what theCEOs said specifically.

So the CEOs were interesting, right?
Because obviously, the CHRO isoften seen as really almost like
the right hand of the CEO, right?
Such a trusted advisor, strategic advisor.
And we definitely heard a continuedappetite for CHROs to play that role.
But at the same time, I think buildingon the previous point, we heard before
the break, gaining that sort of morecommercial and financial fluency.

(14:57):
Something we actually heard fromquite a few CEOs was that there
might be a real opportunity forCHROs to gain that through exposure
by working with the CFO, for example.
We generally heard a big appetite forincreased integration across the C-Suite
for the CHRO and to really embrace thatrole of being a business leader that,
"Yeah, you bring the people skills, youbring the HR expertise, you bring that

(15:17):
capacity, but you can then bring that lenson the broader enterprise priorities."

So OK, Rita, you're advising that they get some business
experience, some P&L experiencesomewhere along the way or in seat.
Assuming they do, what then can theydo to better meet the expectations
of the boards and their CEOs?

It's really important, and I would think if you're in that role
and you're able to do a rotation andyou have that experience or you're on a
strategic project, you need to bring thoselearnings into the conversations, both in
the management team and in the boardroom.
As you make decisions, you needto go through that lens, that
you've run a business, with thatcommercial and financial acumen.

Meaning don't just talk about the HR issues.
Talk about the strategic goals.
How do we make the strategic goals,and what role does the human capital
play in that, and what can theydo to help make that happen, yeah?

Exactly.
Exactly.
But look at it as any otherasset in your organization.

So maybe then, the CHRO should look to their other colleagues,
the COO or the CFO, and say, "OK, whatrole do they play in engaging?" Because
they're also kind of staff positions,they're not running the business, per se.
They're part of the executive team.
But their engagement comes from what dowe do financially to drive the business?

(16:40):
What kind of investments do we make?
What kind of returns do we expect?
What did the data say?
So maybe, you didn't say this, butmaybe if CHROs thought and acted
more like CFOs in the sense of howthey make their recommendations and
engage, maybe that would make themmore powerful and influential?

A hundred percent.
You can apply that to also what thegeneral counsel brings and managing risk.
Because we saw that, while CHROsare involved with compensation and
potentially, if it's a compensationand talent committee, they're
not as engaged in, and Andrew candefinitely talk about this, audit
and risk committees and non-gov,where they have some opportunities.

Yeah, and they should be in those committee meetings because,
I'm just thinking about risks, whenyou're in a knowledge-based economy,
the risks come from people, mostly.

Yes.

And so therefore, who's in charge of that?
So it does bring a whole different—OK,so Andrew, we were talking about
what the CHRO should do differently.
What should the boards and theirCEOs be doing differently to help
develop and guide their CHROs?

I think this is a really important question, because we've
been talking about the evolving roleof the CHRO, and all the things the
CHRO can do to build their visibilityand credibility and legitimacy.
But obviously, the board in particular,has a critical role to play in
providing the space for the CHRO tothrive and to demonstrate that, right?
We definitely heard loud and clearin a lot of our research that the
board can really be clearer in settingexpectations and pursuing a more

(18:13):
direct relationship with the CHRO.
And that relationship shouldn't circumventthe CEO or be behind the CEO's back,
but I think we recognize that boardaccess is often mediated for the CEO.
And I think boards can just beclearer, being clear on the kind
of discussions they want to have,particularly when it relates to workforce
and culture, the kind of data andmetrics that they would like to see.
Perhaps that even could extend as faras scheduling direct executive sessions

(18:36):
with the CHRO or inviting the CHRO topresent directly on some of these topics.
We really heard that the board cancreate more space for the CHRO.
And then, obviously, it falls onthe CHRO to capitalize on that and,
in doing so, elevate the entirediscussion around human capital.

And then, of course, the relationship between the CEO
and the CHRO is just so important.
Rita touched on this a minute ago,but they are the advisor on all
these things and the CEO can empowerthe CHRO or completely disempower
the CHRO, depending on how the CEOacts with the rest of the team.

(19:14):
So if the CEO allows the rest of theexecutive team to go around the CHRO
and come to the CEO for human capitaldecisions, you'd completely chop the
legs out from underneath the CHRO.
So there has to be specificpartnership behaviors.
Yet they, the CEO and the CHRO,need to agree collectively on

(19:35):
how are we going to team this?
And what are we going to do,and what are we not going to do?

And I think this is such an important point, I think,
and we do make this recommendationin the report based on what we heard,
that the CEO has such an importantrole to play in championing the CHRO.
And, as you say, setting the tone ofthem as a genuine peer in the C-Suite
that has an equal voice and a right toinfluence core business decision making.

Yeah.
And so are the CEOs who arelistening you've got to really
be deliberate about this.
And it's very hard as a CEO not tohave your head of operations come
in and say, I talked to the CHRO,but she doesn't want me to do this.
I really need to do this.
Can I have your support?
And of course, the CEO wants to say, sure.
But it takes a lot of discipline togo, "No, you guys need to go work this

(20:19):
out because I can't just overridethe CHRO on all these decisions."
So it's not only support, but it'salso an agreement on accountabilities.
RACI, essentially.
And who's going to do what.
So, Rita, then what arethe derailers of CHROs?
One of them is for the people togo around to the CEO, but what are
some of the other common derailers?

I'm just really glad that we covered that point about the role of
the CEO being an excellent leader andreally empowering the team, the management
team, to take human capital seriously.
And putting the CHRO atthe forefront of that.
Other derailers that we saw werethe boards undervaluing the CHRO

(21:01):
and human capital in general.

But isn't that, I'm sorry, but doesn't that
really depend on the person?

Yes.
Yes, it's certainly unique.
So in the more mature, sophisticatedorganizations, that wasn't
as prevalent, but in someorganizations that still exists.
So depending upon where you arein your life cycle, not every
board, and not every managementteam is as sophisticated on that.

OK.
But if they're dismissing the CHROor not listening to the CHRO, doesn't
that fall back on the CEO and theboard then to say, "OK, here are the
skill sets we need in this role,"and really to upgrade the role?

Exactly.
That is why we accentuate the point,that this is a partnership between all

three (21:45):
the CHRO, the CEO, and the board.
And they all need to worktogether to ensure that this is
that human capital is elevated.

So, Andrew, that brings a different point in on governance because
the boards have been told, and they thinkthat their role is, to select the CEO.
And then the CEO's role is to selecthis or her direct reports, including
the CHRO, and it's not the board'srole, but what Rita's saying is, yeah,
maybe they need to have some input inthis cause it's a very strategic role.

It's such a good point.
And it's something we haven'tperhaps touched on yet, but
runs through the report a lot,which is succession planning.
And the whole process of talentdevelopment, we heard loud and clear
that first of all, the CHRO hasa critical role to play in that.
And it extends well beyond justmaking nominations late in the day,
they should be involved early on.
But also the board itself has to take amuch more proactive role in that, yeah.
And the board should be taking thatholistic view, looking to the longer

(22:40):
term, looking well beyond, as you said,Steve, the kind of the narrow niche
singular focus that you just outlined.

So it says, then, the role of CHRO is going to change.
You have some, and we just said this,you've got the top tier companies
for whom this is already done.
So, it's hard for us to peanut butterthis situation and be right in every
case, but it's going to change.
And that means that the role of theCHRO in the boardroom needs to evolve.

(23:10):
So as you dial forward, I don'tknow, just pick a decade out, it's
longer than the next couple of years,but it's still within our careers.
But go a decade out.
How do you see the role of theCHRO different then than now?

I think we see the CHRO role being potentially very different,
I think, in the sense of how integratedinto some of this key decision making
and being a regular, ever present inthe boardroom and in board discussions.
Leading on key issues relatedto workforce, strategy, culture.
And we actually outlined in thereport some of the big coming

(23:45):
disruptions that we think willreally create a space for the CHRO.
And the two that really stood out, Ithink, were one, generational shifts in
the workforce, which will require verydelicate, very long-term management.
And the CHRO is best positionedto really lead that within
the confines of the board.
And also the impact of AI andautomation, which heralds potentially
huge disruptions for talent, forworkforce strategy, for culture.

(24:09):
And again, the CHRO can and should bereally playing a central role in that,
within the board, within the C-Suite.
So we expect this trend to continue.
The evolution of CHRO and the boardis, it's evolved a lot in recent
years, but I think it's going toevolve a lot in the years to come.

So the role of the CHRO, Rita, is going to change.
You also have this generationalthing, which Andrew brought up, and
that's a subject of a whole ‘nother,it's a whole ’nother kettle of fish.
But Gen Z has now overtakenbaby boomers, right?
In the workplace.
So we are sitting right on thepivot point today, and hence the
needs of the populace, the employeepopulace, are shifting as well.

(24:51):
There are some generational thingsthat happen in every generation,
but this generation is different.
It's digital native, AInative, all of that stuff.
What do you see as the primary skillsets of the ideal CHRO a decade from now?

You need to have an equal focus on commercial and financial acumen,
in addition to understanding humannature and motivation and leadership.
So a balance between those hard andsoft skills are really important.

To what end?

What the newer generation, so Gen Z and we know, OK, so 31% of the
workforce by the end of 2025, right?
We've talked about that.
Their focus on wellbeing, on being partof a purpose-driven organization, on
their expectation on work-life balance,on being part of a collaborative team.

(25:46):
All of that needs to be integratedinto work as much as you're
focused on the balance sheet.

And then CHROs also then need to understand the business model.
Because if they're to beeffective in interpreting.
All of that.
But still, it's the balance, isn't it?
It's not just, you have amulti-constituency world, customers,
employees, owners, community, environment,and so you've got to make it all work.
So you can't just do everything for thebenefit, "oh, we'll just make everybody,
flexible, you don't need to work.

(26:13):
Don't come in, we'll just pay you."You go from an extreme like that to,
"OK, we're going to focus only on theshareholder." And so it's got to be a
balance, and the CHRO is the pivot pointin making all of those constituencies
work and putting it all in balance.

They have to be a highly sophisticated operator and executor.

Yeah.

Navigating that multi-stakeholder point
of view you talked about.

Andrew, any last thoughts on the study?

Yeah.
Obviously we've been speakingso much about the CHRO and the
CHRO's evolving role in the board.
I just wanted to add that, at the sametime, the same trends that propelled the
CHRO into a more prominent role havealso had a big impact on the board itself.
And actually the boards, I think, asSteve, have been actively diversifying,
actively refreshing, actively appointingdirectors with brighter sets of skills

(27:00):
or new sets of skills in the last fewyears, whether those are around the
environment or technology or now AI.
And human capital falls into that bucket.
And actually we have disclosure datathat shows that the share of independent
directors at US public companies withdisclosed human capital skills has
gone way up in the last few years.
And I think it just reinforcesthis recognition of human capital

(27:21):
as a top-tier governance issue.
And I think at the same time, it'sobviously shaping a board that is a
little bit more conducive to the CHROshowing up and doing their thing.
So I just wanted to add that, that there'sa whole "next" dimension here, too, which
is the board itself is always changingand always evolving, as you know so well,

Rita, you get the last word.

I'm excited about the future.
I think that, although this ischallenging, that it's a very exciting
time to be part of human capital.

Dr. Rita Meyerson, Dr. Andrew Jones,
thanks for being with us today.

Thank you so much, Steve.
It was a pleasure.

Thank you.

And thanks to all of you for listening to C-Suite Perspectives.
I'm Steve Odland, and this series has beenbrought to you by The Conference Board.

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