by Jessica Yuen
Three years ago, Harvard Business Review’s Summer 2015 issue’s cover title was “It’s time to blow up HR” with a main article on “Rethinking Human Resources.” In the same year, former Google People Ops leader Laszlo Bock published his book Work Rules. These ignited a discussion about transforming the HR function. Indeed, there has been rethinking, especially at the top — even the job title of Chief HR Officer (CHRO) has been rethought, with “Chief People Officer” (CPO) a popular choice to emphasize the focus on people instead of resources, and some companies selecting alternatives like AirBnB’s title “Chief Employee Experience Officer” that further emphasizes an employee-centric focus.
To better understand what’s changed about the role in the last three years (in addition to the title), I spoke with those at the heart of the action: top talent search firms who place People leaders at fast-growth private companies. At the crux of their jobs, Scott Kehoe at Launch Search Partners, Emily Lewis-LaMonica at True Search, and John Anderson at Allegis Partners, work with CEOs and executives to define their ideal People leaders.
A new strategic leader
Whether it’s new employment models (remote work, gig economy), HR tech and analytics, diversity and inclusion, career development, or something else, evolving trends in the HR landscape are demanding a new, more strategic (and less back office) approach to HR.
While previous requirements still exist, this role is now primarily described as a strategic one, reporting directly to the CEO with a seat at the executive table. In fact, Kehoe notes that when seeking the best candidates, the role has to report directly to the CEO. No longer is it a tactical back office function but more and more, search firms are being asked to find People leaders who can be business partners and key decision makers in company wide strategy and operations. Anderson reflected, “CEOs are looking for business generalists (vs previously HR generalists) — someone who is a varsity player on the team and can lead the team in a strategic way, someone who will lend their voice and expertise to other functions. It’s a “Don’t stay in your lane” role now.”
People leaders are expected to understand the company strategy and connect it to talent strategy. “If your next frontier is say, Natural Language Processing,” explains Lewis-LaMonica, “then your CPO is helping the leadership think through how that impacts the company’s approach to recruiting, onboarding, developing, incentivizing, and retaining NLP talent, and then start to prepare them to do so.”
Business acumen is the key differentiator.
Companies are now targeting candidates with business expertise from outside HR. Ten years ago, Sheryl Sandberg hired marketing leader Lori Goler at Facebook to lead their People function. Lori’s successful journey led other companies to select People leaders from outside the traditional pipeline including Jacqueline Reses at Square whose background is in Corporate Development + Investing, Robby Kwok at Slack from Corporate & Business Development, and Eileen Naughton at Google from Sales. In Anderson’s article, “The Chief People Officer as the New Business Executive”, he outlines 7 key qualities of CPOs — business acumen tops his list. In fact, Anderson, Kehoe, and Lewis-LaMonica all cited business acumen as the key differentiator for a CPO candidate today.
Supply and demand under pressure
In the last year, the market for CPOs has shifted immensely, with demand vastly outpacing the supply of available, qualified leaders. Search firms are oversubscribed, and are responding to this market in different ways. Kehoe has had to turn away more business in the last 6 months than in the past 3.5 years, while executive search firm Daversa Partners, recently increased headcount by 25%, expanding their team to over 100. What’s causing this jump?
On the demand side:
- Funding has skyrocketed. Investors are raising larger funds than ever, with new investors coming onto the scene every day. More companies are getting funded and in general, companies are getting more funding than in the past. With rapid growth and funding, there are more companies that need to hire a leader in the people space. Lewis-LaMonica summarizes, “It’s insane, the growth. There’s more capital at play in the market and there are many growing trends — verticalization of SaaS, fintech, blockchain, AR/VR, AI, just to name a few. As a result, the talent market is incredibly busy across the board, as well as the People function, specifically.”
- If unchecked, organizational growth comes with liability. More investors, boards, and CEOs are realizing the importance of proactively investing in the HR function. Companies are no longer waiting until they are several hundred employees to hire for a CPO; instead the request is coming much earlier (around 100 or fewer). From the continued turmoil at Uber to the lessons of hyper-growth’s organizational debt, the hope is that this critical hire will minimize the risks that come with rapid growth.
- Employees want more. With more millennials entering the workforce, the demand for career development has intensified. Company growth alone is not enough; 87% of millennials expect individual growth and learning on the job. Organizations are being asked to articulate the value of a career with their team, and how it relates to employees’ future goals. Kehoe observes, “A few years ago, hiring a Head of Talent was the crucial senior People hire for a company anticipating hypergrowth. Now, the request is increasingly for Chief People Officers, to ensure that the organization can hire AND develop their employees.”
On the supply side:
- Not many have done it before, and not many want to do it again. When CEOs outline their ideal candidate, the first criteria is often someone who has already led an organization through an expected phase of growth (in revenue and/or headcount). Kehoe acknowledges, “This results in a small pool of potential candidates because 1) This list of companies that have gone through hypergrowth isn’t as long as you’d think, and 2) More often than not, those who have led organizations through hypergrowth phases have been the beneficiaries of financial upside associated with IPO or acquisition exits and transition into advisory or consulting roles, or seek out different opportunities for personal growth and development — for example, shifting their focus toward larger, public company environments versus playing in the growth space again.”
- HR experience is usually broad or deep, and companies want both. Lewis-LaMonica points out, “Companies like Google, Salesforce, EA, GE, and Intuit have incredible People functions that understand what strategic HR looks and feels like.” Kehoe hones in on this point further, “When clients ask me which companies produce great HR leaders, I tell them the question they should focus on is which leaders produce other great HR leaders. Gaby Toledano (Electronic Arts) and Laszlo Bock (Google / Humu) are examples of great leaders who have developed dozens of CPOs during their careers.” Outside of these talent magnets and handful of formal programs, it’s harder to find HR leadership talent with well-rounded experiences via rotations across different HR disciplines or across business roles. Kehoe observed, “In other functions like Finance or Marketing, it is much more common to see resumes where leaders have rotated across different areas of their functions, and even outside of their functions. The majority of HR leaders in Silicon Valley have experience that indexes toward one area — either more general HR Business Partnership or experience in a narrower discipline like Compensation, Talent Acquisition or L&D — rather than experience that spans many of these areas. Clients expect People leaders with good strategic and business acumen (which is perceived as coming from working directly with the business in so-called “client-facing” Business Partnership roles), as well as the ability to dive deeper in the Compensation, Talent and Learning & Development areas, and guide building-oriented work around these areas in a more hands-on way.”
- Diversity is top of mind. The composition of leadership teams is often viewed as a reflection of a company’s commitment to diversity. Filling any executive spot, particularly the CPO, is therefore an opportunity to add a female and/or minority to the team. Statistically, the CPO talent pool is more gender-diverse — according to the Bureau of Labor Statistics, 73% of the HR profession is female, so it is not a surprise that it is the only executive role with a majority filled by women (55% according to a 2016 Korn Ferry study). This sometimes comes at a cost to male candidates and limits the supply side even further. The irony of this discrimination highlights how much these companies need a CPO to guide them. Executive search firms are educating executives before they start searches, but a handful of white, male CPO candidates confidentially shared that they have been disqualified or turned down from roles because they are white and male.
What is the effect?
Besides making it harder to fill these top spots, this supply and demand pressure on the market is having a few effects:
It’s a candidate’s market. Given the small pool of talent, it’s a candidate’s market and those with the ideal profile are getting flooded. One HR executive who recently left his last role counted 17 active conversations with interested companies, and hasn’t even started to search for a job. In his words, “I thought I’d have to put in at least a little effort!” Kehoe estimates that there are at least 35 active searches for People function leaders for growth companies in San Francisco alone.
Salaries are going up, but not as much as you’d expect. For top People leaders, companies are putting the dollars behind offers, matching what other executives are making — signaling that this top job is being valued on par with other leaders. However, salary survey data does not yet reflect these packages, and current salary data shows CPO increases have not kept pace with other executive increases; as it stands, the CPO continues to be the lowest paid executive.
Great expectations are leading to misalignment.
The expectation is that a CPO will solve all people challenges (spoiler: all company issues are people issues), so the bar is often not only lofty, but unrealistically lofty, for one person. Any company that has scaled their culture well knows that it is not the responsibility of one person, but a collective effort of every single employee. The expectation for a CPO needs to be reframed to focus on what’s realistic for one person to achieve within the context of the team and budget. If not, the People leader ends up busy with tactical issues, and strategy is deprioritized. The consequence? The CEO isn’t getting the value from their senior leader, and the senior leader is dissatisfied because they anticipated a strategic role.
While interviews are the time to put the company’s best foot forward, it’s important to be as open with a CPO candidate as possible because when they start full-time, the truth quickly reveals itself. One CPO confided, “The same executive who said in interviews that they desperately wanted change, on Day 1 was demanding ‘don’t change anything’. I felt like I joined a different company that the one I interviewed with.”
Advice for CEOs
The goal should be to set up your future CPO for success. To the CEOs who are thinking about hiring a CPO, start to prepare. It will take time to find your perfect People leader — CPO searches typically take 90 days, though with the current market, it is trending toward 120–150 days. These time estimates are assuming you can clearly articulate what you need, align your executive team on those needs, and are open to considering different profiles. Kehoe shares 10 questions that can help CEOs articulate their needs:
- What are the driving forces/factors to trigger the search?
- Have you met prior candidates to help you baseline what you’re looking for? (could be actual and/or exploratory candidates)
- What are the most important impacts of the role over the next 12 months? Of those, what are the top 3 priorities?
- What is the ideal profile (specific experiences, leadership behaviors, culture fit)?
- What tradeoffs are you willing to make if your ideal profile is not available?
- Does your desired profile align with what needs to be solved?
- Does the full interview team value the role similarly? Misaligned interview panels can cause attrition of great candidates, and great candidates are tough to find in today’s market.
- Are you and your team committed to investing the time to interview and run this process? Scheduling executive interviews is the main culprit in slowing down a search.
- What are you willing to pay? Think carefully about it.
- How will you weigh backdoor references? Many millennial CEOs value backdoor references early in the process and want to use their own networks to vet candidates. However, the best People leaders likely have some enemies, even when they are hypersensitive to treating every employee well. Their jobs involve performance managing and firing employees, directing layoffs, helping to communicate promotions (and non-promotions), and managing sensitive employee relations issues….all of which it’s rare for even an executive-level peer to have full context on.
While prepping, don’t wait to take action. Anderson noted, “I recently worked with a startup that needed to quickly grow its team. Rather than hire employees who would report to managers who had no previous management experience, or training, the leadership team paused hiring until they were able to put their prospective managers through leadership training. It seemed crazy in the midst of massive growth, but strategically this investment in their leaders was critical to their success and culture, and they didn’t wait for a CPO to invest in leadership development.”
Set up your future CPO for success.
When set up for success, CPO’s can have enormous impact. When Anna Binder joined Asana in 2016, it was already a coveted culture (recognized by Glassdoor, Top Places to Work, and Entrepreneur magazine). Binder not only continued Asana’s awards streak, but also scaled Asana’s incredible culture through initiatives like expanding their leadership program for all staff and identifying metrics to track early on so they’d have the data when they needed it. Before hiring a CPO, Asana’s co-founders had articulated company values, invested in scaling recruiting, set-up amazing company benefits, and hired a top Head of Diversity and Inclusion. By investing early and often, Asana was able to attract and hire their ideal People leader.
At the end of the day, the real secret is to always prioritize investing time, effort, and resources into attracting great talent, developing your employees and defining your culture — CPO or not. While rethinking HR has moved the needle, the next focus should be to reinvest in HR.