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/ Summer 2022 / Issue 107

Why human resources chiefs are reaching the corner office

The ability to manage people at scale is more relevant than ever to the CEO role.

A version of this article appeared in the Summer 2022 issue of strategy+business.

The sharp focus placed on the people agenda over the last two years has also put a spotlight on those who lead the human resources function within major companies. During the pandemic, many chief human resources officers (CHROs) were lauded for taking broader management responsibility when staff safety and remote working quickly forced changes to strategy and outlook.

So it should come as no surprise that those leaders are now being propelled to new heights. In December 2021, Leena Nair, Unilever’s CHRO, was named as the next leader of Chanel, swapping Dove soap and Magnum ice cream for suits, luxury handbags, and perfumes. A month later, the 2,000 employee–strong UK sandwich chain Greggs announced that Roisin Currie, for many years its group people director, would become CEO in May 2022. And before both, Anne Jessopp led the way in 2018, when she was named CEO at the UK’s Royal Mint after having joined as human resources director in 2008 and then adding business services responsibilities to her CV.

These are examples of a leadership trend that has been a long time coming. Predictions that CHROs—once mere human resources directors—could be the CEOs of the future began to appear as HR executives took on more roles within organizations, and have been around for most of the last decade. A 2014 study by University of Michigan professor Dave Ulrich and Ellie Filler, a Korn Ferry headhunter, found that CEO traits were more similar to those of CHROs than to the traits of other lieutenants (with the exception of the COO, whose responsibilities are often shared with those of the CEO).

But back then, the authors did not foresee a path to the CEO role for HR lifers. They thought success was far more likely for those who had broad managerial experience that also happened to include some time running the people function. That was the way it used to be. The best example was Mary Barra, who became CEO of General Motors in 2014. An engineer by training, she worked her way up GM’s operations side before serving for two years as vice president for global human resources and then holding senior posts in product development. HR for her was more like a tour of duty on the way to leadership of the Chevrolet-to-Cadillac automaker.

Today, in light of the high turnover rates facing so many organizations, CEOs need HR experience more than ever. Before the pandemic, CEOs could look to the workplace review site Glassdoor, where outspoken staff commented on the boss’s actions, for assessments of their performance. More often than not, these report cards did not make a difference. But given the demand for ongoing flexible working, the “great resignation,” and the scramble for talent, staff are speaking up within their organizations and expecting to be treated as customers.

CEOs need to listen. The responsibilities placed on leaders are evolving. The soft skills associated with the human resources department now must flow right to the top, not just as a sign of the times, but because they can drive transformation, too. HR has long attracted women to its ranks, and now, with diversity and inclusion initiatives high on corporate agendas, this has resulted in more women being considered for leadership roles. The exigencies of the pandemic have also elevated the importance of the HR role.

The soft skills associated with the human resources department must flow right to the top, not just as a sign of the times, but because they can drive transformation, too.

This increased focus on people has taken place in tandem with changes to the human resources function. No longer is it simply a cost center or supporting function, a poor cousin to a company’s income-generating units.

During the pandemic lockdowns, it was HR that provided a vital line of sight horizontally across the organization. Helped by increased digitization, the function has a mission of its own to create value for the wider enterprise by boosting skills and culture, and engaging in long-term planning. As noted in a recent report by Strategy&, PwC’s strategy consulting business, human resources managers today “must be able to translate business strategy into human capital strategy and talent requirements, leverage data-driven insights to advise business leaders on how to boost workforce and business performance, and tailor change management approaches and transformation strategies to the needs of specific business units.” That sounds very much like a CEO’s job description.

Minting success

In 2018, Anne Jessopp, who studied economics at Leicester Polytechnic in England (now De Montfort University), broke new ground at the Royal Mint, which manufactures coins for the UK and 22 other countries. She became the first female CEO at the 1,100-year-old organization. (Yes, it was back in the second half of the ninth century that coin making was centralized.) At the time she took the job, she was also a rare leader from a human resources background. Her previous jobs included personnel roles for consumer products giant Procter & Gamble and the industrial arm of UK-based vehicle leasing firm Lex Autolease.

Jessopp thinks that in the past, CHROs had made little progress getting to the top spot in organizations because chairmen were used to replacing like with like. More diverse boards—around 30% of board positions in both the EU and the US are now held by women—have led to greater open-mindedness in looking beyond finance and operational functions for the next boss. She also believes that the agility required of today’s leaders has forced boards to consider more options.

“I’m exaggerating to make the point, but organizations did the same thing for quite a long time: same customers, same marketplace, same way,” Jessopp told me. “The CEO could more easily be expert [in one area]. Now change is so fast, and organizations have got to be looking at new opportunities and threats constantly. The CEO has got to be expert at enabling others.”

Such skill demands a closeness to the workforce and speaks to the new corporate agenda, in which people trump the previous priorities of brand management or revenue on the path to success. Human capital has become disproportionately important to modern companies that make nothing tangible, within which intellectual property (IP) is created from the best ideas. Success is contingent on how well IP is promoted and distributed by the workforce, and transformation, be it digital or to a hybrid world of work, is top of mind.

Roisin Currie explained the importance of the people agenda in driving change in an interview. At the time, Greggs was overhauling legacy IT systems inherited through a series of acquisitions while also pushing into new markets. The Main Street bakery, famous for its sausage rolls, was transforming into a food-on-the-go provider. Currie was instrumental in managing expansion into new lines, such as serving coffee in competition with Starbucks and McDonald’s, which required training staff and altering working practices.

“Technology is part of it, but people are much more important,” Currie said. “Getting people behind one way of working will be absolutely critical.” She added: “We have to make sure we engage with everyone around what this change program means. People resist change because they are frightened and don’t know the impact it will have. From Day One, we’ve tried to be as transparent as possible.” Since 2019, Greggs has sold more coffee in the UK than Starbucks, and in 2020, it shared bonuses worth £20 million (US$26.8 million) with staff. The public share price nearly doubled in calendar year 2021.

Additional responsibility

During her 24 years at Unilever, Chanel’s Leena Nair promoted the HR function as a forward-looking part of the business, rather than simply being reactive to the needs of its other parts. “I passionately believe that HR needs to lay the road for the business, not merely fill the cracks after the business has gone ahead,” she said in an interview while still at Unilever. “We can’t lay the road if we’re not out there, finding out what’s happening in technology, what’s happening to people, what is happening to jobs and employment.”

Nair also strove to connect HR with the financial outcomes and efficacy of the business, an approach that included using a predictive attrition tool to forecast who was most likely to quit their job.

“If we forecast that X number of people are going to leave the business, that translates to a waste of, say, €200 million [$253 million],” she said. “If we can retain a certain number of people with active conversations, then we’ll have saved €50 million [$58 million] for the business. We aim to encourage HR people to think in that way and quantify what they do.”

Nair joined Unilever as a management trainee in India in 1992 and progressed through a series of personnel roles, first within the country and then across South Asia. She became CHRO and a member of the group’s leadership executive team in 2016, which exposed her to broader decision-making. Nair also gained wider experience in another way, by joining BT Group, a multinational telecom company based in the UK, as a nonexecutive director in 2019.

Currie spent most of her working life in HR roles, but she also took on added responsibilities as Greggs’s retail and property director in 2017. Those responsibilities included the development of the physical real estate—the shops—plus a delivery business in partnership with the takeaway app Just Eat. Before joining Greggs in 2010, she worked at Asda, where she held HR roles in the retail and distribution sides of the supermarket chain.

Throughout her career, Jessopp was accustomed to extending her responsibilities and seeking to master new skills. Prior to joining the Royal Mint, she had worked with a team of external consultants brought in to develop a new strategy for her employer. So when Jessopp arrived as the Mint’s HR director in 2008, she quickly expanded her portfolio to include other responsibilities such as health and safety, IT, and a change program.

The Mint was essentially a manufacturing business that is destined to shrink as cash in circulation declines. Most staff are based at its site at Llantrisant, in South Wales, where already poor labor relations were made more fraught when the government raised the prospect of privatizing the business. Jessopp’s goal was to help establish a new relationship with the Mint’s trade union and find ways to preserve long-term employment in the region—she used a combination of soft and hard skills requisite of a CEO in waiting.

In 2015, she was appointed consumer managing director, overseeing the creation and marketing of coins commemorating everything from major historical events to the rock band Queen. Today, the Mint employs more than 1,000 staff and is still in state hands. Its currency arm, which issued more than 2 billion coins and coin blanks in 2021, loses money, but other, profitable activities, such as the commemorative coins unit, have kept the organization viable. Its latest venture is a service to extract and recycle gold and other precious metals from electronic waste contained in the circuit boards of discarded laptops and mobile phones that would otherwise be sent abroad.

Moving beyond HR “helped me practice managing and leading something when I didn’t know how to do it,” said Jessopp. “It really taught me that the core skill is managing and leading people.”

She hopes that a renewed focus on the people agenda serves as a reminder that those leaders with soft skills have no qualms about making hard decisions. As she told me, “True diversity and inclusion says: who is the best person to do this job? It doesn’t really matter where they come from.”

Author Profile:

  • James Ashton is a UK-based business writer and speaker with more than 20 years’ experience, including working as city editor for the Sunday Times of London. His book The Nine Types of Leader was published by KoganPage in 2021.
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