Founder's Mentality Blog
CHRO 3.0 may sound a bit like a Star Wars character, but it’s actually the latest evolution of the chief human resources officer (CHRO)—and a way of describing an essential part of restoring the Founder’s MentalitySM to a company.
As we described in “Resolving the CEO’s Dilemma,” the most successful chief executives form a “troika”: themselves, the chief financial officer (CFO) and the CHRO. A CEO working with a strong CHRO can make changes quickly, systematically and effectively, while the finance director manages the money; working together, they control the business. “With a good CFO and CHRO, you can control the whole organization,” explained one utility company CEO. “The three of you can see everything.”
During my time in New York City, I had an opportunity to speak with Sandy Ogg, a senior operating partner at Blackstone, about the critical role of the CHRO. He observes that the role of CHRO has changed dramatically over the last three decades, and describes the change here:
Regarding CHRO 1.0: “We were generalists in our companies, acting as the general manager of the HR function. We worked on organizational design issues, reward systems and talent (which was mostly recruiting). We were called administrators or personnel coordinators, and often we were called bureaucrats,” Sandy says.
On to CHRO 2.0: “We became ‘business partners.’ Our jobs were linked directly with the operations of the business; we were invited to every important conversation. We began to separate the transactional activities we led (and often tried to outsource) from our role supporting key decisions around the big leaders in the big jobs,” he says. “The notion of ‘partner’ was positive, in that it moved us from administering personnel tasks to supporting key decisions. But the notion of ‘partner’ was also negative, because it meant we were there in the shadows, supporting others. It doesn’t put us into leadership roles.”
Finally, CHRO 3.0: As Sandy puts it, “CHRO 3.0 is about the role of the CHRO professional as a leader in the business, especially during big business transformations when time frames are compressed. Yes, we still need to ‘run the shop,’ and yes, there are some support roles that are holdovers from version 2.0 of the CHRO. But we also need to lead. We control some of the most important lists in the company—the list of the biggest jobs to be done (ordered by value creation or avoidance of value destruction) and the list of the best talent in the firm. We also need to assess the company’s organizational readiness for change and help tackle the big issues that will hamper business transformation.”
Given this context of CHRO 3.0, Sandy and I went through my list of Monday morning actions CEOs can take to change the behaviors of the leadership team and looked at how the CHRO could help. Here is Sandy’s take on our evolving list:
- Fall back in love with your product and the people who sell it. “The key here is for the CHRO to fall back in love with the operators,” says Sandy. “In recruiting talent, it is very easy to fall in love with the boardroom manager, the really smart guy who can handle himself well in executive and board meetings,” notes Sandy. He elaborates: “It is often harder to fall in love with the frontline operator. Though they can be fantastic leaders, they are impatient with the head-office stuff, including interviews with HR guys. When searching for talent, I tell my guys to be very clear about the unit of experience you need. I think you shouldn’t even see someone unless they have clear evidence that they’ve done what you need at least twice.” In fact, Sandy attributes his reputation for picking talent to this approach. “I’m actually risk averse,” he says. “I want to know someone has developed a repeatable model for doing what I need. I avoid getting seduced because I simply say, ‘Show me your track record.’”
- Be ruthless about distinguishing between “doers” and “thinkers,” and make it clear that the heroes of the business are doers. “This is a tough one for all of us,” Sandy observes. “I think CHROs systematically devalue people who are happy executing day in and day out. We inadvertently signal that execution is the lowest rung of activity in the organization. One of my particular pet peeves is management-development programs that require people to work in sales for six weeks before ‘moving up.’ What does that say? First, it says sales is easy and any management trainee can do it. Second, it says sales is something to ‘move through’ before heading up the corporate ladder. “This action is a great challenge for CHROs—and my guess is they’ll uncover a lot of organizational bias toward the thinker and away from the doer.”
- Create lines in the sand: Anyone who crosses a line attends the next Monday meeting and stays in it until they’ve crossed back. “This is about being very clear on the few things that really matter,” Sandy says. “I’m a big fan of what I call ‘3+1’ for each person’s performance plan. They should know the three numbers they have to deliver and the one development goal we will jointly commit to. For CHROs, it means being as focused on delivering the numbers as they are on softer issues like creating a high-performance culture. “Too often I see CHROs become the ‘explainers’ of underperformance, thinking that sitting on the side of an underperformer trying to explain the number does anybody any good. It doesn’t. If we believe in ‘lines in the sand,’ then there have to be positive and negative consequences at the end of the year, depending on which side of the line you end up on.”
- Embrace the Monday Meeting: All issues brought to it must be resolved during that meeting. Sandy explains: “I love the Monday meeting because they are a ‘surgical intervention.’ I tell CHROs to focus on a small number of interventions that address key organizational issues without pulling the big re-org lever. One of my mottos for business transformation is ‘Think big, start small, but act fast.’ Interventions like the Monday meeting can get to 80% of the major issues you’re trying to impact and you can do it tomorrow.”
- Fall in love with conflict, since the whole purpose of good organizational design is to create conflict. “When I see HR folks running around after executive meetings where there was a real blowup and trying to smooth things over, I sit them down and tell them they have completely misunderstood their role,” Sandy says. “I tell them that conflict is a good thing because it means we’re actually talking about big issues. Business is a contact sport. The role of the CHRO is to make sure this conflict happens and leads to a resolution; the CHRO should be the enemy of ‘smooth’ meetings.”
- Find and develop the right people with the right capabilities to solve issues, rather than trying to resolve everything yourself. “This is really the most important role of a good CHRO,” Sandy concludes. “On one hand, they are a leader on the executive team, making the right decisions, raising the right conflicts. On the other hand, they need to make sure they are developing the decision-making abilities of the next generation of leaders. Unless we’re pushing some of the decisions back down, we’re in danger of signaling to the team that all decisions should flow up.”
As we continue to work with companies on the dual job of gaining the benefits of scale and scope and restoring the sense of Founder’s Mentality, we find that the CHRO is often the key champion of this change.