CHROs are the rising stars of the C-suite. Workplace and talent issues have become a major focus for chief executives since the pandemic and the profile of HR leaders within organisations has grown as a result.
The workforce now ranks as the third-highest business priority for CEOs in 2024, according to a survey by Gartner. As such, the CHRO has become a key ally to the CEO as companies seek to address the pressing challenges created by skills shortages, declining employee engagement and a competitive talent market.
“Not many CEOs would have had HR-related issues in their set of top priorities a decade ago,” says Chris Smith, head of the global Human Resources practice at executive search firm Leathwaite. “But now CEOs are much more focused on culture, people, capabilities, skills and ways of working.”
Boards are also turning their attention to talent challenges. In the UK, board members say the workforce has greatly increased its influence on the boardroom agenda since the pandemic. Indeed, its sway has grown even more than that of the CEO and leadership team, according to a global survey of board members by executive search company Heidrick and Struggles. Its CEO Tom Monahan says: “Companies are realising that, in order to compete effectively in the market, they need to compete effectively for talent. CEOs are much more focused on this.”
Are CHROs being overlooked?
Despite their growing power and influence in the executive team, CHROs remain much less likely to be promoted to CEO than their C-suite peers.
Raconteur analysis of the CEOs in the FTSE 100 shows that CFOs and COOs are the most likely C-suiters to progress to the top position, while 43% had been a divisional director or CEO of another company immediately before their current chief executive role.
Although moving from CHRO to CEO is not a well-trodden path, it is happening more than it used to
Motivation is one of the key reasons fewer people leaders have been promoted to the CEO post, according to Smith. “It’s not a primary career objective,” he says. But changing perceptions of the role and its growing importance means HR leaders now have a “huge opportunity to have a bigger impact”, he adds.
And there is a growing list of former HR leaders who are seizing this opportunity. Greggs CEO Roisin Currie was formerly the bakery chain’s group people director. General Motors chief executive Mary Barra previously led the company’s global HR function. And Chanel CEO Leena Nair was Unilever’s CHRO prior to her appointment.
“Although moving from CHRO to CEO is not a well-trodden path, it is happening more than it used to,” says Anna Penfold, who heads up the HR practice at Russell Reynolds Associates.
The evolution of the CHRO
Another reason so few people leaders have ascended to the top job was because the scope of their role was relatively narrow. This is no longer the case. “CHROs are now taking on commercial property, workspace and sometimes sustainability and communications as well,” Penfold adds. “They’re broadening out beyond the traditional HR remit and taking on some elements of the COO role.”
If HR follows the same pattern as finance, we can expect to see more CHROs becoming CEOs
These changes mean HR executives are much more involved in business operations and strategy than they were previously. “If you’re responsible for succession planning, talent and organisation design – and if there’s a large intersection between customer and employee experience – as a CHRO you own a huge chunk of the pie,” Penfold explains.
This broader experience is placing CHROs in a good position to take on business leadership roles in the future, according to Smith. While he notes that transitioning from chief people officer (CPO) to CEO is still unusual, it’s a much more feasible route than it has been in the past.
“The CPO role has never been as broad or as complex as it is now,” he says. “We’re seeing CPOs take on expanded enterprise remits that break down some of the silos of the function and so, by design, their likelihood of stepping up to CEO is higher.”
Monahan believes this current trend closely mirrors the growth in influence CFOs experienced in the 2000s, which created a more established route for finance leaders to progress to CEO. “If HR follows the same pattern, we can expect to see more CHROs becoming CEOs in the future,” he says.
The transition from CPO to CEO
One person who has made the transition from CPO to CEO is Ash Ramrachia. In 2019, he left his position as CPO of the British ecommerce company THG to head up employee-training agency Academy.
He believes one of the reasons HR leaders have previously been overlooked for the CEO role is a lack of leadership talent in the function. “Historically, HR hasn’t attracted the best and brightest talent,” he says. “It’s previously been viewed as an administrative and compliance role within a company.”
However, Ramrachia believes perceptions are changing. “CPOs arguably have the most holistic view of an organisation,” he says. “You sit across every function and you can influence all parts of the business.”
There’s probably an 80% overlap between the CEO and CPO job description
The role of HR in mergers and acquisitions, talent attraction and change management also position CHROs to be successful chief executives, Ramrachia adds. “There’s probably an 80% overlap between the CEO and CPO job description,” he says.
One of the areas where HR leaders typically lack experience is commercial, with few CHROs being called to manage profits and losses or help set an organisational budget. Being involved in strategy meetings while at THG aided Ramrachia’s development in this area. “It really accelerated my commerciality and made me realise that the quality of a business’s people can have an outsized impact on the success of the strategy,” he says. “CPOs who embrace that can do really well.”
This puts CPOs at an advantage when it comes to differentiating themselves from other potential candidates for the CEO role, says Ramrachia: “HR hasn’t necessarily been a breeding ground for future leaders, but if you’re smart, driven and commercial, you can get to the top of that field very quickly.”
While the transition from CHRO to CEO remains uncommon, the growing complexity and importance of the HR function is forcing boards to change their perception of the role. As the competition for top talent continues, having a leader who truly understands its value could be a strategic differentiator few boards can afford to ignore.
