Can HR executives make good CEOs?

When Anne Mulcahy became chief executive of Xerox in 2001, it wasn’t just her gender that made her stand out. She also had a background in human resources.

Two decades later, the number of female CEOs in the Fortune 500 is nearly 15 times higher — there are now around 74 compared with five when Mulcahy started — but the number of HR executives who have moved into the top job has barely budged.

This apparent glass ceiling hovering over HR departments seems even more surprising in a tight labour market in which people-centric talents, such as attracting and retaining the best staff and building an inclusive corporate culture are regarded as increasingly important. A survey by PwC of US executives, for instance, identified hiring and retaining talent as the “most critical growth driver” in 2022.

For leaders, the “extreme importance” of being able to make the most of your existing skills and then galvanise them behind your business strategy can’t be underestimated, says Mulcahy, who stepped down as Xerox CEO in 2009.

“Your strategy can be roughly right but if you can’t motivate and engage people around your agenda, you get nothing done,” she says.

As experts in people management, HR leaders have — in theory, at least — valuable insights that executives in other functions often miss or underappreciate. Does that make them CEO material? Not in itself. As the executive-without-portfolio in the boardroom, the modern CEO needs to be across all areas of a business.

There’s a strong case for existing CEOs supplementing their people-focused skills by working more “hand in hand” with HR chiefs, says Victoria McLean, founder of the career consultancy City CV. But the opposite applies as well, she points out, with chief people officers drawing on the expertise of other executive-level colleagues to fill gaps in their own CVs.

How many HR executives actually set their sights on the top job? After 25 years in coaching and career development, McLean is unsure if much appetite exists. For all the chief people officers she has met with “super high IQs and superb emotional intelligence”, she says that few, if any, have aspired to running a business.

That could be changing. While it’s true that many HR leaders get job satisfaction from supporting the career progression of others, the higher value now placed on people skills is raising their profile, and with it their ambition levels.

Anne Mulcahy, former Xerox CEO, says if you can’t motivate and engage people around your agenda, you get nothing done

A handful of headline-grabbing HR-to-CEO appointments has helped this shift. High-profile examples include Roisin Currie at UK bakery chain Greggs, Natasha Adams at supermarket chain Tesco Ireland, and Leena Nair at French luxury fashion house Chanel.

Nair’s departure in January from consumer goods group Unilever caused an “outpouring of excitement” in the HR community, observes Laszlo Bock, chief executive of Humu, a California-based HR software company. “The more that companies decide to put talent as one of their differentiating factors, the easier it’s going to become for other HR folks to make that same move,” says Bock, who used to be the top HR executive at Google.

Not that the transition will be seamless. HR leaders will need to get comfortable with a more assertive and potentially combative style of management, Bock says. Chief people officers fall into one of two buckets, he explains: either they strive to “make things easy for everyone”, or they focus on pushing back against the excessive demands of executive peers — for more personnel, say, or higher pay for rising talent.

The pushback mode helps HR directors demonstrate their strategic mettle, but can also lead to conflict with other senior leaders. As Bock points out: “CFOs [chief financial officers] have to say ‘no’ to everyone but that’s expected of them . . . while everyone thinks the job of HR is to prioritise their particular team, not the company overall.”

For all its growing importance, the HR role is still widely seen as an administrative rather than a strategic function — with a budget to match.

Again, there are signs of change. At a governance level, HR is now a standard board function in a way it wasn’t even a decade ago, and HR directors are increasingly responsible for sustainability. “The internal importance now put on values and ESG, plus the shifts in global workforce patterns because of Covid, means the breadth and visibility of HR directors is changing rapidly,” says Áine Hurley, who leads the HR practice at executive search company Odgers Berndtson. But she adds that HR professionals need management experience in non-HR functions if they want to become serious CEO contenders.

That was Anne Mulcahy’s route at Xerox. Having started in HR, she took on senior operational positions in the company before her eight-year stint as CEO. Likewise, Tracy Myhill, a former CEO in Welsh NHS Trusts, used her “people lens” as an experienced HR professional to lead cost-reduction and service improvement programmes. “I didn’t need to become an expert in finance,” she says about her first big turnround project. “I just led as a leader, and made sure I got the expertise around me where I needed it.”

These experiences outside HR gave her a taste of “frontline” management, she adds. Even then, the pull to stay in HR remained strong. “I became an HR director aged 32 and it took me until I was 50 to have the courage to go for the top job,” says Myhill. “And I’m courageous.”

Source: Financial Times

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