Results from the 2010 Chief Human Resource Officer Survey by the Cornell Center for Advanced Human Resource Studies (CAHRS) Research and Report By: Patrick M. Wright, Ph.D. William J. Conaty GE Professor of Strategic Human Resources ILR School Cornell University Mark Stewart, Ph.D. Senior Consultant Management and Personnel Systems This research was funded by the Cornell University Center for Advanced Human Resource Studies (CAHRS). All of the ideas and interpretations presented are solely those of the author; neither CAHRS nor CAHRS Advisory Board members should be held respon- sible for them. Special thanks to Robert Arbogast and Chelsea Vandlen for their invaluable help with data collection for this research project. Also, thanks go to the executives of the CAHRS Advisory Board for their advice and guidance regarding the survey construction: Marcia Avedon of Ingersoll Rand, Ken Carrig of Comcast Communications, L. Kevin Cox of American Express, Michael D’Ambrose of Archer Daniels Midland, Pamela Kimmet of Coca-Cola Enterprises, Mirian Graddick-Wier of Merck, J. Randall MacDonald of IBM, Lynn Minella of Air Products and Chemicals, Hugh Mitchell of Royal Dutch Shell, John Murabito of CIGNA, Joe Ruocco of Goodyear, Eva Sage-Gavin of Gap, Inc., Laurie Siegel of Tyco International, Elease Wright of Aetna, and Ian Ziskin of Nothrup Grumman Corpora- tion. Finally, thanks to Sarah Thompson for her technical assistance in the preparation of this report. Table of Contents 6 Executive Summary 7 Survey Background & Research Methods 8 CHRO Roles and Impact 13 Most Challenging Aspect of the CHRO Role 15 CHROs and Boards of Directors 17 The HR Function: The CEO’s Agenda and HR’s Obstacles to Achieving It 18 Innovations in HR 21 CHRO Demographics & Career Trajectories 25 Summary and Conclusions Executive Summary Executive Summary The financial crisis that began in 2008 sent chief human resource officers (CHRO) to the bunkers with their C-suite colleagues as executive leadership teams tried to strategically navigate the treacherous competi- tive terrain. The 2010 Chief HR Officer Survey, from the Cornell Center for Advanced Human Resource Studies (CAHRS), reveals that as the economy begins a slow recovery, CHROs are gradually moving from “bunker” to “building,” reaching back out to those lower in the organization—both the business and HR talent—in an effort to reestablish the connections necessary to retain talent and build HR capability. They are spending more time with their HR reports and high potential talent, and are allocating more time to the roles of HR Leader and Talent Strategist/Architect. This building perspective places talent as the key theme running throughout the results. Talent tops the CEO’s agenda, talent processes top the innovations in HR, and lack of HR talent is one of the key obstacles to achieving the CEO’s agenda for HR. Executive pay also still tops the list of topics on which CHROs spend time with the board of directors (BOD). CHROs are not usually members of their company’s board, and seldom of other companies’ BODs. But they are increasingly finding service on other types of boards (professional societies, non-profits, university trustees, etc.). For many CHROs, this service helps them better deal with their role as lead resources to committees of the company’s BOD. Finally, in terms of career paths to the top HR job, 68 percent of CHROs spent some time outside of HR in their careers (up from 54 percent in 2009), usually between three and five years. However, internal develop- ment still seems to be a problem for HR, as only 38 percent of CHROs were promoted to their position as a result of formal succession within the HR function, while almost half were hired from outside the company. 6 Cornell Center for Advanced Human Resource Studies (CAHRS) Survey Background & Research Methods Survey Background & Research Methods In 2009, researchers Patrick Wright and Mark Stewart, with funding from the Center for Advanced Human Resource Studies (CAHRS), began conducting the annual Chief Human Resource Officers Survey. The 2009 survey was sent to CHROs at the U.S. Fortune 150 companies, as well as to ten other CHROs at CAHRS partner companies. That survey focused on understanding how CHROs were allocating their time to different stakeholders and roles, as well as identifying their chief executive officer’s (CEO) agenda for HR and strengths and weaknesses with regard to HR. This year, the survey asked the same questions about time allocation, but focused on the CHRO’s role with the board of directors (BOD) and innovations that had been developed within their functions. In addition, the survey sample was expanded to the U.S. Fortune 200 list. ReseaRch Methods The researchers first identified the names and contact information for the CHROs at the 2009 U.S. Fortune 200 companies. The list also included eight CHROs at CAHRS partner companies, for a total sample of 207 (Berkshire Hathaway did not have a traditional CHRO, and so was omitted). In March 2010, L. Kevin Cox, EVP of Human Resources at American Express Company, sent an email to this list encouraging them to participate in the survey. The following day, the Cornell University Survey Research Institute (SRI) sent an email invitation from Patrick M. Wright, William J. Conaty GE Professor of Strategic HR, to these CHROs asking them to participate in an online survey about their role. Of the 207 invitations, 16 were returned with invalid email addresses. The survey site remained open for four weeks, with three reminder email messages going out to CHROs who had not yet responded. Of the 191 successful invitations to participate, 75 completed the survey for a response rate of 39 percent, which is equal to the 39 percent rate for the 2009 survey. Again, such a high response rate is extremely rare, indicating strong support for this effort. The 2010 survey covered four main areas. First, a section examined how CHROs allocate their time to different stakeholders, members of the executive team, and CHRO roles. Regarding the roles, the survey also asked CHROs to evaluate the relative impact of each role on the business and their relative effectiveness in each role. The second section examined CHROs’ role with the BOD—both within their firm and their participation as board members for other organizations. Third, the CHROs were asked to describe any innovations within their HR functions that they felt were best practices. Finally, the survey examined a number of demographic characteristics of the CHROs and their companies. 7 Cornell Center for Advanced Human Resource Studies (CAHRS) CHRO Roles and Impact CHRO Roles and Impact The 2009 survey was conducted at the height of the economic meltdown triggered by the collapse of the subprime mortgage industry. The results of that survey indicated that CHROs had “hunkered down” in the C-suite to strategize how to deal with the crisis. It was suggested in the 2009 report that CHROs may need to get out of the C-suite and reestablish their relationships throughout the rest of the organization. The 2010 survey results indicate that CHROs have done just that. As can be seen in Figure 1, CHROs have been spending the most time with their HR reports, the CEO, and other C-suite colleagues. But compared to 2009, they are allocating more time to the former group and less time to the latter two. In addition, the results indicated a slight uptick in the time CHROs are spending with individual high potential (HP) employees and the larger workforce, suggesting the need to rebuild relationships that may have been neglected. Fig. 1: How CHROs Allocate Their Time Among the Following Individuals/Groups CEO Individually Individual Executives Executive Team Board Members HR Team HR Individuals Individual HPs 2010 Group HPs 2009 Larger Workforce Customers Outside Consultants Outside Service Orgs Professional Organizations Service Organizations Other Government Agencies 0 2 4 6 8 10 12 14 16 18 Percent of Time Spent Per Fiscal Quarter 8 Cornell Center for Advanced Human Resource Studies (CAHRS) CHRO Roles and Impact In addition to changes in time spent outside the C-suite, CHROs seem to be reallocating their time within the C-suite. As Figure 2 shows, CHROs reported an increase in time spent with the CEO, up from 28 percent in 2009 to 31 percent in 2010. In the 2010 survey, a new C-suite member was included, the Chief Control or Risk Officer. CHROs reported spending approximately 5 percent of their time with this individual. However, it is important to note that the rank orderings of time allocation among C-suite members remained relatively unchanged—with the most time spent with the CEO, Business Unit Presidents (19 percent), CFO (14 percent), and Chief Legal Counsel (11 percent). Fig. 2: How CHROs Allocate Their Time Inside the C-Suite Chief Executive Officer Chief Operating Officer Business Unit Presidents Chief Financial Officer 2010 Chief Marketing Officer 2009 Chief Technology Officer Chief Legal Counsel Other Chief Control Officers 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Percent of Time Spent With C-Suite Colleagues Strategic Advisor to the Executive Team: Leader of the HR Function: Focus on the formulation and implementation of the Working with HR team members on the development, firm’s strategy design, and delivery of HR services Confidante/Coach to the Executive Team: Workforce Sensor: Counseling or coaching team members, or resolving Identifying and addressing workforce morale issues or interpersonal or political conflicts among team members concerns Liaison to the Board of Directors: Representative of the Firm: Preparation for board meetings, phone calls with board Activities with external stakeholders, such as lobbying, members, attendance at board meetings speaking to outside groups, etc. Talent Architect: Focus on building and identifying the human capital critical to the present and future of the firm 9 Cornell Center for Advanced Human Resource Studies (CAHRS) CHRO Roles and Impact We again asked CHROs to indicate the time they spent in each of seven roles (see definitions on page 8). As can be seen in Figure 3, the results regarding the time spent in CHRO roles similarly support the transition from C-suite to the rest of the firm. While the Leader of the HR Function role received the most time in both years, this time has increased to almost 24 percent from 22 percent. The Strategic Advisor role, which accounted for 22 percent of CHROs’ time in 2009, has decreased to 18 percent in 2010, while the Talent Strategist/Architect role has increased to 19 percent from 17 percent in 2009. These results also seem to indicate that the apparent “bunker” mentality that was necessitated by the financial collapse is beginning to transform to a “building” mentality—both building the talent of the firm and the capability of the HR function. Fig. 3: Percent of Time Spent in CHRO roles 18 Strategic Advisor 22 17 Counselor/Confidante/Coach 17 11 Board Liaison 10 19 Talent Architect 2010 17 2009 24 HR Function Leader 22 7 Workforce Sensor 8 5 Firm Representative 5 0 2 4 6 8 10 12 14 16 18 20 22 24 Average % of Time Spent 10 Cornell Center for Advanced Human Resource Studies (CAHRS)