Chief executives are far more confident in their decision-making when they have the input and support of a good Human Resources Director. Both parties must present a united front on the ‘people strategy’ of the business, but the HRD must also have the strength of character to challenge the CEO when necessary. 

Andy Clarke, who was CEO of the supermarket chain Asda between 2010 and 2016, says he appreciated candid feedback. “Every HRD has to be able to tell you what they think and you must be prepared to listen. I had to have a team of people who could share what they felt was right or wrong – and my HRD was an integral part of that,” he explains.

During Andy’s time at Asda, he focused heavily on developing people internally. “At the start of my tenure, it hit me that around 80 per cent of our talent below the executive team came from outside the organisation. Of course, we needed new thinking and diversity, yet still had to develop a strong core of talent from within. 

“As a result, I spent 20 per cent of my time identifying and developing individuals, both internally and externally. I did that in conjunction with the HR Director and it had a major impact. When I left the organisation we had developed enough internal talent to fill a greater proportion of the opportunities available. External talent was still important, but the split had improved.” 

Benny Higgins, CEO of Tesco Bank, agrees with Andy that the HRD should be seen as a vital member of the top team. “Talent and development are essential, not just for the here and now, but in order to be a sustainable, long-term business. To get this right, you need to work with the HRD,” he comments. 

Since buying out RBS’ shareholding in 2008, Tesco Bank has grown rapidly and currently has around 8.1 million customer accounts, with 86 per cent of products bought online. Benny says it recently became apparent that the structure of the organisation needed to change in light of how the business has grown and its ongoing investment in digital services. 

“We had been organised into separate functions, but recently we decided to re-organise from the traditional siloed banking structure to be more like a digital firm, and introduced a matrix way of working,” he says. 
The HRD was pivotal in supporting Benny as he established this new structure, which was designed to maximise cross-team collaboration. “When there are siloes, people can hide. In matrix organisations, it’s more evident how people can and should work together,” he states. 

A Board Perspective

Chairmen and non-executive directors are increasingly looking to HRDs to provide insights into the people agenda and how this relates to the overall performance of the business. 
Caroline Silver, Non-executive Chair of consumer products group PZ Cussons, explains how the company’s HRD was an indispensible figure in implementing a change management programme designed to make the organisation more customer focused. She explains: “It was an enormous initiative and it required the business to adjust across the globe, with significant headcount implications.

“The HRD was closely involved and played a leadership role at the ExCo level on how to execute that, laying out a roadmap and guiding the business.”

Caroline adds that the HRD is at every board meeting to discuss agenda items such as succession, talent management or a change initiative, and works closely with the remuneration committee. “As opposed to just being in that ‘people box’, our HRD is a real business architect. She is completely trusted by the broader executive team and the board.

“I don’t believe our CEO could have achieved what he has – certainly over the last five years – without an incredible partnership with our HRD,” she states.  

For Caroline, this is the ideal and aspirational relationship. She continues: “That partnership between the HRD and the CEO lies very much at the heart of what can be a lonely job for a CEO. It takes real balance for a person to look across the organisation and distil information back to the CEO, while also working with the Chairman on the CEO’s performance and objectives.” 

It’s not all plain sailing. Indeed, there are doubts about how many HRDs are able to step up from the more functional aspects of the role to act as a true ‘business architect’. Matthew Blagg, CEO of Criticaleye, has seen the good, the bad and the ugly of the CEO-HRD relationship, primarily when supporting strategic alignment in the ExCo, both in listed and PE-backed companies.  

He says: “When we go into a business where the CEO and HRD are aligned on a clear strategy, it’s really easy to add value as the focus is often on increasing the pace of execution. The more interesting and harder work is when one of those two are not on the same page. 

“When the CEO and HRD don’t have the requisite level of trust, inefficiency is quite outstanding as it’s not simply between those two parties – it extends to the executive team and across the whole organisation.”

If a CEO is to put faith in their HRD, the latter must be able to take a wider view of the company and its various stakeholders. Quintin Heath, HR Director of AB Sugar, which employs approximately 32,000 peoples and operates in 10 countries, tells Criticaleye: “As a HRD, you have to engage with the chief executive and listen carefully to the business challenges that interest and concern them. 

“You do this on a constant basis, from the moment you start working with them, not just in formal meetings. You build trust both in your one-to-one connections and through the leadership of the HR function… Sometimes you will have to call the CEO to let them know when things have gone wrong before they hear it elsewhere. You must be open and honest to build that trust.”

The best HRDs will understand what information the CEO and board will find useful. Quintin explains: “To make an impact, you focus on moving the business forward by solving problems. You apply evidence-based solutions, founded on a sound understanding of the numbers…  You must immerse yourself in the business – go out and talk to people, rather than relying on conversations with the CEO and fellow directors.” 

When the dynamic between the CEO and HRD is right, there’s no questioning that a business executes faster on strategic objectives. However, as Benny of Tesco Bank points out, it's not only the HRD who has a duty to examine the talent agenda. “People are the responsibility of everyone in the organisation. It’s such an important part of achieving success,” he says. 

These views were shared at Criticaleye's fourth Human Resources Director Retreat, in association with Legal & General Investment Management (LGIM). Find out more here 

Marc Barber, Managing Editor, Criticaleye