5 Reasons HR Needs a Seat in the C-Suite

As Richard Branson, CEO of the Virgin Group, said, "a company's employees are its greatest asset."

Branson is one of a growing cohort of leaders who understand that a company is no greater than the talent it employs. And who owns responsibility for managing the needs of corporate talent?

Human resources, of course — a department that rarely has influence in the C-Suite. Corporate culture is transmitted from the top down, so a culture that values its people first needs HR in the C-Suite. Here, five reasons a CHRO is invaluable when it comes managing a company's greatest asset — its people — and their contribution to its success.

Succession planning — a strategic move that's often overlooked by senior management until a crisis arises — is one of the most important reasons to hire a CHRO.

In order to attract and retain top talent, companies should foster a culture of growth, demonstrating through its actions that open positions are first sourced internally. In order to do that, a company needs a CHRO to not only develop a succession plan, but also monitor its progress by identifying promotable talent and cross-training opportunities.

Performance assessment is another contentious issue, particularly because of its close tie to compensation. A CHRO who understands the unique culture and requirements of the company can develop a balanced performance and compensation dynamic.

Of course, this may involve shaking things up and ruffling a few feathers. When I worked at a SaaS company, its HR policies were as outdated as its technology product was innovative. I designed an interactive performance assessment to replace the "old economy" prescriptive one. In the new version, employees provided feedback on how well their managers helped them achieve goals just as their managers provided feedback on employee performance. Senior management initially derided the idea, but when I convinced them to try it for one year, the level of employee engagement rose and satisfaction increased.

Employee engagement is critical to your employer brand, and your employer brand is critical for hiring the best talent. Employee engagement, in fact, may be the most important talent strategy for companies to adopt — nearly every HR initiative can trace back to increasing engagement.

CHROs are instrumental in promoting engagement, which provides the added benefit of profiling your company's talent pool and creating a more sustainable enterprise. When employees are fully engaged, two great things happen: their contributions are more readily recognized by senior management, and they become invested in the company's success as well as their own personal achievements. According to a 2011 study, raising low engagement by 10 percent in a company of just 10,000 employees can create a $24 million impact on the bottom line.

HR is rarely valued for its thought leadership — instead, most companies hire a senior HR professional to report to the COO or the CFO, trivializing the profession into a function rather than an overarching discipline integral to incubating corporate success. But big data supports the business case for the importance of having a CHRO.

A 2011 study revealed that when companies include strategic HR within their other operations, they experience nearly 40 percent lower turnover, 38 percent higher employee engagement and more than twice the revenue per employee than companies who view HR as a primarily transactional function.

Throughout my career, I've worked for CEOs who initially viewed HR as a necessary, but non-revenue producing function limited to personnel management — in other words, not particularly valuable. Some soon came to recognize the need for a CHRO to provide strategic direction alongside the CFO, COO and CMO. One CEO, however, memorably invited me to the C-Suite only once — and that was to discuss the annual holiday party.

CHROs belong in the C-Suite not only to manage a company's critical asset, but also to make the C-Suite team more effective. They help focus the team as a cohesive unit and by doing so, support the CEO's mission. I predict the most forward-thinking CEOs will soon start planning to bring a CHRO onboard, if they haven't already.

To learn more about the role that HR should play in the C-Suite, read Cornerstone's ebook, How HR can Help Executives Get the Big Picture: Becoming a Strategic Partner to the C-Suite.

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