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CHRO

Quarterly

Enterprise Leadership

In This Issue
Encourage Your Leaders
to Take (Better) Risks
Enterprise Leadership:
The Key to One
Company Strategies
Four Resolutions
to Bolster Your
Influence in 2015
Hear from Your Peers:
Why I Took the HR
Maturity Diagnostic
Voice of the CHRO

Richard Floersch
Executive Vice President and
Chief Human Resources Officer
McDonalds

Part of the CHRO Insight Series

CEB Corporate Leadership Council

First Quarter 2015

CHRO
Quarterly

CEB Corporate Leadership Council


Executive Directors
Brian Kropp
Michael Griffin
Senior Director
Adam Brinegar
Director
Matt Dudek
Analyst
John Roman

Contents
Encourage Your
Leaders to Take
(Better) Risks

Content Publishing Solutions

Enterprise Leadership:
The Key to One
Company Strategies

Editor
Mary McMenamin

Four Resolutions
to Bolster Your
Influence in 2015

11

Hear from Your Peers:


Why I Took the HR
Maturity Diagnostic

13

Voice of the CHRO:


Interview with
Richard Floersch,
Executive Vice
President and Chief
Human Resources
Officer at McDonalds

16

Improve HR Analytics

20

Graphic Designers
Mike Jurka
Cameron Pizarro

2015 CEB. All rights reserved.CLC1099714SY N


The pages herein are the property of The Corporate
Executive Board Company. No copyrighted materials
of The Corporate Executive Board Company may
be reproduced or resold without prior approval. For
additional copies of this publication, please contact
The Corporate Executive Board Company at
+1-866-913-2632, or visit www.executiveboard.com.

Infographic
of the Quarter

Design
Compelling
STEM Careers

Expecting total STEM (science, technology, engineering, and


math) roles to grow 19% by 2018, organizations are prioritizing
their STEM talent strategies. On average, organizations spend
US$11,225 per individual to recruit top STEM talent.

Despite these investments, organizations still face major challenges because STEM talent is:

harder to attract.
Organizations median
time to fill STEM roles has
jumped 77% since 2010.

more difficult to engage.


STEM employees exert
less discretionary effort
(especially during their
first two years of tenure).

less effective at enterprise


contribution.
Only 21% of STEM employees
deliver high-quality
enterprise contribution.

To meet growth goals, companies must better manage and empower STEM employees:

Differentiate STEM Talent


Opportunities

Improve STEM Enterprise


Contribution

STEM employees prioritize


compensation as much as other
talent prospects do. But they
care more than others about
development opportunities.

Non-STEM employees are almost 2x more


successful at leading working relationships
with internal/external customers. But more
STEM staff (33% vs. 22%) work with employees
from different organizational functions.

The best companies


attract STEM talent by
emphasizing career
development.

The best companies support


STEM enterprise contribution by
embedding network management
into STEM roles.

Drive STEM Effort and Commitment

28%

33%

33% of STEM staff list advancing to a senior management role in their top two career goals,
compared to 28% of non-STEM employees. STEM managers, however, are less open to seeing
their talent move to different parts of the organization, so only 17% of STEM employees even
discuss possible career alternatives.

The best companies rethink the career life cycle and improve performance
management to keep STEM employees engaged throughout their tenure.

Organizations that reduce STEM turnover will save, on average,


US$15,560 in related costs for each employee.
For more information, read Attracting and Retaining Top STEM Talent.

Encourage
Your Leaders
to Take
(Better) Risks
Strategies CHROs and
Executives Can Employ to
Manage Risk and Increase
Organizational Speed
2

CHRO Quarterly | First Quarter 2015

The Increasingly Interconnected Risk Landscape


1. Regulatory Fragmentation

2. Information Intensity

Greater focus on transparency and


uneven enforcement across the globe

Big Data results in greater analytical capabilities


and need for greater information protection
both corporate and customer.

C
C

C
C
C

C
C
C
C

3. Hyper-Transparency
Business conduct is increasingly visible and
scrutinized, magnified by instantaneous
communication technologies.

4. The Extended Enterprise


The increased use of offshoring, outsourcing, and shared
service arrangements have reduced direct management
control over risks but increased accountability.

Source: CEB analysis.

Risks threaten organizations in a variety of new ways.


Executives do not need to look far to see, for example, how
social media or data breaches have created a new generation
of risks that threaten a companys reputation, competitiveness,
and workforce. Whether or not they are prepared, all leaders
including HR executivesare now expected to play a major
role in corporate risk management.
Looking broadly at todays risk climate, four changes have
increased the number and scope of risks and have widely
distributed them throughout organizations, making them more
immediate priorities for CHROs:

Regulatory FragmentationGovernments and regulators


have established more rules to deter risky behavior, but
jurisdictions inconsistently implement and enforce them.
Information IntensityCompanies now collect and
manage exponentially more data. Greater access to
information brings tremendous potential, but it also poses
new risks to cybersecurity and customer data privacy.
Hyper-TransparencyInstant communication channels
(e.g., viral social media) amplify and accelerate insight on
how companies conduct their business.

The Extended EnterpriseTraditional definitions of


third parties (e.g., vendors, suppliers, contractors, agents,
resellers) blur as data and processes become highly
interconnected.

Which trends will cause the most dramatic


changes to HR and its role in the next
three years?
Changing Labor
Market Demographics

51%

Rapidly Evolving
Workplace and
Marketplace
HR Analytics
Globalization of
Labor Market
Source: CEB 2014 CLC Agenda Poll.

46%
35%
30%
3

Using shareholder value as a barometer, the most potentially


damaging types of risks that should concern CHROs are
strategic risks. In fact, significant market capitalization
declines in the past decade reveal that 86% of them were caused
by strategic risks. Examples of these risks go beyond changing
labor market demographics and now include new competitors
or declining demand for a core product.
Unlike more traditional financial and catastrophic risks,
auditors and enterprise risk managers cannot easily audit and
mitigate strategic risks through insurance or other hedging
strategies. Perhaps not surprisingly then, the average audit
department spends just 6% of its time assessing strategic
risks. In the end, CHROs and other executives find assurance
functions offer much less guidance here than they expect. As
a result, many CHROs and their peer leaders work on their
own, making well-intentionedthough ultimately flawedrisk
decisions. Too often, they seek only to eliminate strategic risks,
an approach that can often be more dangerous to growth than
can taking on risk.

Possible Versus Current Growth Rates in


Percentage Terms as Cited by Corporate
Strategists
Possible Revenue
Growth Rate (If Inaction
Were Not a Problem)
Current Revenue
Growth Rate

11.1%
5.8%

= 47.7%

Source: CEB 2012 Strategy Growth Survey.

Risk Aversion Can Quickly Lead to


Executive Inaction
Excessively or exclusively focusing on risk prevention and
formalized risk management processes can unintentionally
cause Organizational Drag. Simply put, Organizational Drag
is slow decision making and executive inaction caused by fearrelated biases, second-guessing, and crisis-mode mentality
present within leadership teamsand it reduces team
effectiveness.
Corporate strategists believe that Organizational Drag can cut
growth rates in half, from a possible 11.1% to the current rate of
5.8%. This significant growth reduction can be attributed to the
fact that framing decisions as risk versus reward implies that
risk and reward are mutually exclusive and also encourages
risk avoidance and executive inaction.

When was the last time I deliberately accepted


and managed a strategic risk?
How CHROs Can Overcome
Organizational Drag
Effectively reducing risk aversion can accelerate executive
action by 34%. As organizations senior human capital leaders,
CHROs must address more than just the Organizational Drag
that affects their personal decisions. They must self-assess
their personal aversion to taking risks while also coaching

CHRO Quarterly | First Quarter 2015

risk-averse colleagues to recalibrate their own risk tolerance


and drive for action.
To avoid the extremes of risk elimination and also reckless risk
taking, CHROs should work with their executive peers to make
two changes to their management behaviors. Combined, our
research shows these two techniques substantially improve
risk-based decision making:
1. Align strategy and risk processes whenever possible
(and where appropriate). Applying a risk-based context to
strategic decisions improves decision quality by up to 42%.
Scenario planning is a common way to apply this technique.
Executives at leading companies increasingly conduct
scenario analyses on hypothetical strategies. By doing so,
they can identify potential outcomes, associated risks, and
alignment with corporate risk thresholds. These tactics
allow executives to make strategic trade-offs and help them
prioritize strategic initiatives with an informed view of
risks. Beyond their essential, valuable audit work, assurance
functions can help HR leaders pressure-test assumptions
and find inconsistencies.
2. Create a common understanding of acceptable risk
taking (and apply it). Sustaining the right level of risk
taking throughout the year requires executives to agree
on acceptable risk levels and to commit to holding each
other to that standard all year. To do this, CHROs and
their cross-functional peers should create a formal risk
appetite statementwith the support of the strategy and
risk functions. By keeping the statements language simple
and including real world dilemmas, your risk appetite
statement will be more applicable and will improve realtime judgment.
CHROs and HR executives should avoid creating an overly
quantitative framework that does not adequately guide leaders
everyday decisions. These two straightforward questions can
supplement risk-taking frameworks and can help leaders
implicitly evaluate risk in their own minds through a shared
understanding of risk:

How comfortable are we with uncertainty?


Choosing between two options, when would we sacrifice
one for the other?

Achieving Organizational Momentum


Failure to identify and manage strategic risks can be extremely
damaging, but hyper-focus on risk over reward can rob
companies of important growth opportunities. The word risk
derives from the early Italian word risicare, which means to
dare. In this sense, risk is a choice.
Progressive CHROs and other executives work to strike a
healthy balance between viewing risks as positive opportunities
and using proper risk management as a protective shield (not
an excuse to stop action). Ultimately, leading companies win
not because they do a better job at preventing risks but because
they empower management to take and manage risks. In doing
so, these companies avoid the consequences of Organizational
Drag and actually accelerate and improve their decision
making. The result is organizational momentum.
This article is based on Growth Unlocked: Reducing the
Strategy-to-Execution Gap. Download your copy.

4 in 5 leaders think HR data


is inaccurate and irrelevant.
Change their minds.

More than 1 million employees surveyed, more than


15 HR analytical tools, and one focus on what matters most
Get started.

On-demand access to real-time data available at www.clc.executiveboard.com


5 CHRO Quarterly | First Quarter 2015

Enterprise
Leadership:
The Key to
One Company
Strategies
Worldwide, CEOs are strategizing
how to create one company, where
everyone thinks and acts in the best
interests of the overall enterprise.
6

CHRO Quarterly | First Quarter 2015

Leaders Perceive Three Economic Costs to Enterprise Leadership


1. Lack of Control

2. Incomplete Information

3. Rewards Risk

Leaders dont have the control


they think they need to lead their
business and teams successfully.

Leaders are uncertain about


what is required to perform
as an Enterprise Leader.

Leaders dont believe they will


be fairly rewarded for being an
Enterprise Leader.

37%

66%

37% of leaders understand


how to productively contribute
to the network.

66% of leaders think they


cant be successful without
autonomy and control.

35%
35% of leaders believe their
contributions to others will
be financially rewarded.

Source: CEB 2014 Enterprise Leadership Survey; CEB 2014 Enterprise Contribution Survey.

One company strategies extend beyond


increasing organization-wide efficiency; CEOs
aspire to channel their business units collective
capabilities to bring complex solutions to market
and beat increasingly sophisticated competitors,
both new and old. To effectively deploy these
strategies, CEOs need business unit leaders who
can realize this vision by breaking down silos to
increase collaboration, share best practices, and
even contribute resources toward enterprise
outcomes that dont immediately benefit their
own business units.

investments focus on building individual skills


and overlook the greater economic and
psychological barriers to optimal organizational
performance. Specifically, these barriers to
success include leaders fixed mind-sets,
collaboration costs, and perceptions of reward. To
help leaders achieve breakthrough performance
both individual and organizationalCHROs must
redirect leadership investments toward breaking
down these critical barriers.

leaders who are equipped to handle future


organizational needs. To create the leaders that
CEOs need, companies must significantly adjust
their leadership investmentsand fast. In the
past, CEOs and CHROs invested in creating
and sustaining strong individual leadership
outcomes. Although these investments have
succeeded in their primary objectives67%
of leaders excel at key competencies, and 82%
of leaders are hitting their objectivesstrong
individual results are not translating into better
organizational performance.

The world of work has become much more


complex and less predictable, with implications
ranging from greater barriers to decision making
to greater autonomy of teams. Building and
managing a twenty-first-century workforce to
achieve highly interdependent goals requires Three Behaviors That Distinguish
that organizations create what we call Enterprise Enterprise Leaders
Leaders. Enterprise Leaders are defined by two
1. They Take Fromand Give toTheir Peers
types of outcomes:

Redefining Leadership in Todays


Work Environment
Just one-fourth of business units have

Executives increasingly tell us, Our leaders are


good at running their part of the business, but
they struggle to work across the companywhich
is what we need them to do. Many leaders fall
short of this expectation because most leadership

The payoff is clear: A bench of Enterprise Leaders


can boost annual business unit revenue growth
rates by up to 12%. In contrast, well-intentioned
leaders concerned only with their business units
needs achieve much more modest revenue gains
( just 4%). A key to this outsized growth rate is
the spillover effect that occurs between business
units when all leaders act as Enterprise Leaders.
This effect validates the potential that one
company strategies have.
This new way of leading, however, is difficult
to adopt; barely 1 in 10 leaders qualifies as
an Enterprise Leader. To effectively redirect
investments to create more Enterprise Leaders,
CHROs must first understand the three most
important behaviors that distinguish traditional
leadership from Enterprise Leadership.

They achieve strong individual leadership


performance by reaching their goals and
leading their teams to do the same.
They show great network leadership
outcomesworking with other leaders
and their teams to transfer and acquire
resources and best practices that improve
organizational outcomes.

Individual leaders use peer contributions to


achieve their own business unit objectives.
However, Enterprise Leaders outperform peers
because they also give back. Enterprise Leaders

Enterprise Leadership
A leaders effectiveness at
meeting his or her individual
objectives, contributing to and
leveraging the performance of
other units or teams, and leading
his or her team to do the same

are 50% more effective at using and providing


contributions to improve the broader enterprise.
For example, they would voluntarily share, rather
than hoard, their key talent. Enterprise Leaders
would prioritize the success of the company,
recognizing they must help their peers solve
challenges, especially when doing so benefits
the enterprise more than does hoarding talent to
achieve personal goals.
2. They Pushand PullTeam Contributions

Employees respond well to this leadership style.


In comparison to other teams, teams managed
by an Enterprise Leader are 23% more likely
to be highly innovative and 15% more likely
to generate solutions to new or unanticipated
problems. In spite of this potential, there are
critical barriers that explain why so few leaders
either give and take to peers or push, pull, and
facilitate team contributions.
Leaders can recognize the personal and
organizational benefits of being an Enterprise
Leader. Blinded by past success, most leaders,
however, simply find that choosing to be an
Enterprise Leader is irrational.
For some leaders, focusing on these three
behaviors seems like a distraction, and investing their personal time to help othersat the
expense of their teamsdoes not make sense.
For others, the problem is as simple to understand as it is complex to solve: they are not
paid to be Enterprise Leaders. Few executives
are confident they will be fairly rewarded (or
remain employed), especially if helping others
will hurt their business units performance. To

How to Recognize an
Enterprise Leadership
Organization
Individual leaders are taught to delegate their
way to success. Certainly all leaders must
delegate, but Enterprise Leaders are 20% more
likely to also work within their teams to find great
solutions, pull them out, and share them with
the broader organization. They seek out proven
concepts with demonstrated results that are
transferable to other operational areas. Solutions
range from improved back-office efficiencies to
new marketing strategies.

An organization of Enterprise
Leaders looks and feels very
different than an organization
without them.

3. They Facilitateand Dont DirectTeam


Performance

Individual leaders provide their teams direction


to accomplish their tasks. Enterprise Leaders
are 30% more likely to connect their teams with
those who can enhance and benefit from the
team performance.
1

In strategy meetings, P&L


leaders present strategies
that have been thoroughly
vetted by their colleagues
and consider strategic needs
of business units beyond
their own.
Leaders enter talent review
meetings already knowing
each others talent well and
with initial plans for how to
maximize their talent in the
coming year.
Cross-functional teams
better understand their shared
objectives and encounter fewer
obstacles to performance.

Two-thirds of leaders agree that autonomy and control are critical to their success.

CHRO Quarterly | First Quarter 2015

make becoming Enterprise Leadership a rational


choice for individual leaders, CHROs must make
three shifts in leadership investments.

Three Shifts in How HR Makes


Leadership Investments
1. Change Leadership Mind-Sets; Dont
Just Assess and Build Individual
Competencies
The current generation of leaders honed their
skills by watching the most successful executives
they worked for achieve great outcomes on their
own. After emulating these leaders for years,
todays executives must now change their own
mind-sets on working independentlywhich
most do not realize.1 As a result, leaders must selfdiscover the need to change. For CHROs, then,
the solution is to not only invest assessment and
development budgets on skills but also change
mind-sets to increase the number of Enterprise
Leaders by up to 12%.
To help leaders self-discover the need to
change their mind-sets, the General Electric
Company (GE) has created an Experienced
Leaders Challenge (ELC). The challenge begins
with self-discovery exercises, which reveal
how a leaders actions affect the organizational
climate. An example exercise might include
observing musicians and determining how the
group dynamic and outcomes change when
each musician moves in his or her own direction
instead of together. After the exercise, the ELC
reinforces the takeaways by having leaders
teach their experience to peers and facilitate an
in-depth discussion of lessons learned and their
implications.
A business simplification challenge validates
the realizations that leaders make in the
self-discovery exercise. Leaders identify a
process, initiative, or part of the business for
simplification to improve the ability to serve
customers, reduce bureaucracy, or increase
the value of the businesss efforts. To drive
Enterprise Leadership, the challenge must do
more than simply remove costs. Furthermore,
the challenge must be relevant to company
strategy, be interdependent and involve multiple
groups, and unlock more business value.
In a recent conference call, GE CEO Jeff Immelt
reported simplification projects have saved the
company $250 million. Beyond the benefits
realized from individual simplification projects,
supporting a new leadership mind-set has
helped lay the foundation for success achieved in
broader simplification initiatives.
2. Invest in Transparency to Make
Collaboration Easier, Not Simply Required
Enterprise Leaders hold a unique information
advantage. They know who they can get help
from and whom they can help. Unfortunately,
most leaders dont have all the information they

The employee-driven portfolio review does not


only feed directly into the local leaders plan for
the coming year. Critically, leaders also use it to
create location narratives, or stories. Narratives
are the formal channels that signal to other
leaders and teams where they can provide highimpact support in the coming year. Leaders
articulate the findings from the portfolio review in
a three-minute video posted on a dedicated portal.
Ultimately, location narratives allow leaders and
employees throughout the organization to quickly
Some organizations have solved this challenge identify patterns of emerging skills gaps and then
by increasing transparency into leaders relative connect with each other to close these gaps.
strengths and needs. This is information leaders
3. Change Leaders Evaluations to Change
are comfortable sharing and, critically, this
Their Perceptions of Rewards
is information they can act on. Showing how
different leaders capabilities fit with business
needs can increase the number of Enterprise
Leaders by 9%. Transparency does not mean
publicizing each leaders personal strengths and
weaknesses but rather proactively explaining
Only 17% of Enterprise Leaders
how the capabilities of different leaders and their
teams align with the organizations strategic
received top ratings in their last
objectives and stage of maturity.
performance evaluation.
would want or need to understand when to
take or give and push or pull at the right time
especially because gathering this information
costs leaders both time and money. So focused on
their own business, these leaders cant findor
afford to findthe right information or cant
create the right level of transparency. And when
they do focus on the greater enterprise, their
misaligned contributions may result in missed
opportunities, wasted efforts, and frustration
throughout the organization.

The design firm IDEO enables its leaders to selfidentify and facilitate enterprise contribution
opportunities through its annual business review
process. Leaders in each location start by creating
a framework that sets the direction for a review
of their units project portfolio from the past year.
Equipped with the framework, employees in a
given location set out in teams to assess results.
They incorporate the outputs from each team
into a collective review of the locations past year
and then use it to hypothesize next years needs
and opportunities.

Three Criteria of a Strong


Business Simplification
Challenge:
1. R
 elevanceThe challenge
should be strategically
important to the success of
the business.
2. I nterdependenceThe
challenge should extend
across multiple groups,
requiring cross-functional
collaboration to solve.
3. ImpactSolving the challenge
should enable the business
to bring more or new value
to the customer, not simply
remove costs.

The clich what gets measured gets done


doesnt apply to the way organizations currently
reward employees for Enterprise Leadership.
Among leaders, 97% do have at least one
objective that falls into the category of Enterprise
Leadership. Even so, leaders say that helping
peers endangers their personal bottom line.
Barely one-third of the same leaders say their
contributions to others work are financially
rewarded. Too frequently, objectives centering
on enterprise-level collaboration are neither
specific enough to galvanize leaders to action nor
accurate enough to capture all the different ways
leaders can meet these objectives. Contributions
are hidden and go unrewarded.

Next Steps: What CHROs Can


Do Now
CHROs are reluctant to adapt or drop their
carefully crafted leadership models that have
required years of careful change management.
Fortunately, Enterprise Leadership does not
require a new competency model but rather
an acute focus on removing the real rational
and economic barriers preventing leaders
from effectively applying their skills. Heads
of HR can take the following actions now to
begin developing Enterprise Leaders at their
organizations:

Use a data-driven approach to assess


Enterprise Leadership at your organization.
Identify rational economic and psychological
barriers to Enterprise Leadership at your
organization.
Communicate future leadership needs,
barriers, and solutions to your C-suite peers,
the CEO, and the board of directors.
Pilot new leadership solutions within a
business unit that has the most significant
rational barriers.
Roll out Enterprise Leadership investments
throughout your organization.

This article is based on new CEB Corporate


Leadership Council research. Register for an
upcoming meeting, Creating Enterprise Leaders,
to learn more.

CHROs know they need to highlight and pay


for Enterprise Leadership. However, instead
of increasing the number and weighting of
Enterprise Leadership criteria, progressive
CHROs realize they must fundamentally change
perceptions of pay to boost the number of
Enterprise Leaders in their organization by up
to 15%.
Flipping the concept of shared collaboration
MBOs on its head, one retailer has leaders
collaboratively design shared MBOs. A leader
taking on a peers objective identifies the parts of
the original MBO he can impact and customizes
his equivalent MBO accordingly. Afterward, the
leader considers how to maintain line of sight
between his actions and how he is rewarded
for the MBO. For example, this process might
involve identifying or adjusting KPIs that align
with the shared MBO and the leaders individual
role. This customization, rather than just the
duplication of the peers original MBO, ensures
leaders see how their actions are rewarded.

The New Work


Environment
Requires Different
Leaders

Enterprise Leaders Drive


Enterprise-Wide Results
Our model builds leaders who are not only strong
individually, but also work well in a networked
environment with others to give and receive value.
Learn how a bench of Enterprise Leaders boosts
business unit revenue by up to 12%.

Go now to cebglobal.com/leadership to assess, develop,


and support Enterprise Leaders at your organization.
10

CHRO Quarterly | First Quarter 2015

Four Resolutions
to Bolster Your
Influence in 2015
Seeking more strategic influence inside
and outside the boardroom? Dont rely
on good relationships.
Although CHROs have historically experienced roadblocks
maintaining relationships with the CEO, board, HR team, and
peerswhile trying to exert greater influence on strategic
decisions, they have, in recent years, been able to overcome
these challenges. Today, CHROs report great working
relationships with the businesss leadership; in fact, nearly 50%
of them meet with the CEO weekly. This increased interaction
with C-suite leaders suggests that CHROs have some of the
essential ingredientssuch as increasing face time with the
CEO and board, establishing direct relationships with peers,
and developing a strong HR leadership teamneeded to play a
pivotal role in their organizations.

New Year, New Tactics


As the HR function evolves, the value a CHRO could bring from
HR to the business is nearly unlimited. But HRs impact on the
company depends on the CHROs ability to influence and to
effectively sellnot just presentHR insights to the board.
In the new year, resolve to focus more on the HR priorities
that will deliver value to the business. Then, rethink your
conversations with your CEO and board by framing key
activities as opportunities to inject HR influence in the
business.

1. Embed talent in board conversations.


What theyre really
looking for is how the
companys strategy
links with the strategy
youre driving from a
talent standpoint.

High Hopes
With hopes of being key players in their organizations, most
CHROs enthusiastically bring their most compelling HR inputs
(e.g., engagement data, benchmarking content, perspective)
to meetings, ready to impact business outputs (e.g., profit,
employee performance). However, barely half of them consider
themselves influential. Despite their ambitions, simply bringing
HR data to the table is inadequate and talking only about HR
issues can reinforce perceptions that the CHRO is not a business
leader, but a functional expert.

Influence Does Not Come from Amiability


CHROs tell us they struggle to increase their influence on the
greater business, despite positive interactions and discussions
with their CEO and board. CHROs must understand,
however, that the focus of these conversationsnot just their
occurrencedetermines how successfully, and to what extent,
CHROs exert their influence.
For example, CHROs who are only asked to discuss executive
compensation with the board may miss opportunities to
highlight talent risks below the executive levelrisks that
could undermine corporate strategy. Although the CHRO and
board may meet regularly and work amiably, these interactions
lose valueand the CHRO influences the company lessif the
board pigeonholes HRs areas of expertise and limits HRs
discussion points. This inability to really engage with the board
and to bring about enterprise-wide change will prompt most
HR leaders to wonder, Am I focused on the right areas, or do I
need to adapt how I deliver my information?

Boards at top-performing
companies are twice as likely
to have a deep understanding
Kevin Cox
Chief Human Resources Officer
of talent issues than are
American Express
boards at lower-performing
competitors. To engage your board, provide greater levels of
assurance on critical talent risks impacting business strategy
by reverse-engineering strategic priorities to isolate talent
risks. For example, if innovation is a focus, discuss attraction
and retention strategies for diverse talent. Read more in Three
Critical Talent Conversations.

2. Strengthen executive performance


and succession discussions.

Nolitha Fakude

Get into the head


space of the CEO
to understand what
he wants to achieve
when he is talking
about high-performing
organizations and a
high-performance
culture.

The best CHROs share


candid
feedback
with
their CEO, and they also
collaborate more closely with
the board on CEO succession and performance. Substantiate
your interactions with the board and CEO: instead of only

Executive Director,
Sustainability and Business
Transformation
Sasol

11

being a process consultant, provide objective performance


feedback that directly supports your organizations succession
processes. This evolution from passive consultant to engaged
advisor requires expertise in six unique roles, each with
opportunities to influence the process. Learn to navigate each
role with A CHRO Guide to CEO Succession Planning.

3. Improve CXO transitions.


You know, when you
have a great working
relationship, the
business leader values
your assessment of
who would be the
best selection for that
critical role.

how this datain addition to HRs activitiescould positively


impact business outcomes.

Prepare Yourself to Sell


To ensure that you influence and teach stakeholders in your
interactions with the board, consider your answers to these
key questions:

Jorge Figueredo

The best CHROs have a keen


eye for making the right bets
on talent. When assessing
leaders, they lead with data
to ensure objectivity, and they supplement conversations with
their opinion when asked. When CHROs apply a consistent yet
flexible approach to transitioning each new-to-role executive
and leader, their bets on talent are more accurate and more
likely to pay off. Bolster your data and opinion with specific
action plans for transitioning CFOs, CIOs, CMOs, and other
C-suite executives.

Executive Vice President,


Human Resources
McKesson Corporation

4. Align HR and enterprise strategic planning.

Simon Riis-Hansen
Senior Vice President,
Executive HR
The LEGO Group

We need to overinvest in teaching


leaders to be not only
very consequential
and consistent when
investing in resources
in everything that has
a strategic fit but also
more consequential
when taking away
everything that does
not support that.

CHROs must align enterprise-level HR strategy with business


strategy and disseminate it throughout the function. So when
leading highly dispersed and matrixed HR teams, CHROs
must vigilantly ensure that scarce HR resources are not
spent unwisely, or worse, on poor strategic work. To do
so, strategically assess your teams capabilities using CEBs
Business Alignment Tool and Functional Maturity Diagnostic,
and learn where to redirect and maximize resources.

Stick to Your Resolutions with a New


Approach
Once CHROs can communicate the right priorities that will
resonate with key stakeholders, the challenge becomes not
only what to communicate but also how to ensure that the ideas
resonate. Nearly all CHROs report great relationships across
the business, but they must evolve their personal relationships
into effective buyerseller relationships to successfully
promote HR activities and influence corporate strategy. Our
research shows that the best salespeople teach their prospects
before expecting their commitment or purchase. The same
concept applies to CHRO interactions: CHROs cannot only
present HR data to the CEO and board; they must also explain

12

CHRO Quarterly | First Quarter 2015

What business or functional need should the stakeholders


be learning about from me?
How should the stakeholders respond given my
information?
Why should the stakeholders consider what I am offering
to be valuable?
How can the stakeholders make decisions with the
information I give them?
How will I know if I have influenced the outcome?

The Best Year


Make 2015 your most influential year yet. By focusing on the
right four priorities and effectively selling how your work can
translate to business success, youll give the business the most
value from HR while increasing the prestige of the function.

Hear from Your Peers:


Why I Took the HR
Maturity Diagnostic
Making HR budget trade-offs is never
easy. HR increasingly feels pressure to
become more efficient and effective
at everythingwith the same, or less,
resourcesbut overall company strategy
finds some HR services more important
than others. HR leaders who can
accurately identify their highest-priority
maturity gaps can invest intelligently
improving at some activities and
sustainably cutting others to execute
them more cheaply.
The HR maturity diagnostic, included in your CEB Corporate
Leadership Council membership, can help you maximize
functional performance, just like its helped our other members.
More than 400 senior executives across HR have launched our
suite of maturity diagnostics to do the following:

Understand their critical maturity gaps.

Prioritize areas for improvement.

Identify next steps for critical areas.

Plan a long-term path to desired maturity.

Accelerate execution.

Learn what prompted three participating organizations to launch


the diagnostic, and see how theyve used the results to develop
their teams.

Jemena: Enabling Growth and Enhancing


Credibility
After a change in shareholder ownership, Australian energy
company Jemena had to reevaluate its five-year business strategies
and plansincluding HR and talent. To do so, Jodie Blake (the
executive general manager of HR, Health, Safety, Environment,
and Quality) needed to clearly understand current functional
performance and reliably assess future capabilities and needs.
Instinctively, Ms. Blake and her HR leadership team knew the
functions strengths, weaknesses, and value to the business, but
they needed credible, validating data to share with other functional
leadershipparticularly to inform the long-term corporate mission.
Using our maturity diagnostic, they thoroughly evaluated the
functions effectiveness. The assessment ultimately revealed highpriority areas of functional performance that were not receiving
adequate investment, such as workforce strategy management.

Sparton: Transforming the HR Function


Electronics manufacturer Sparton Corporation reestablished
its HR function in 2010 after a company turnaround. Since then,

Sparton has challenged the HR teamled by Larry Brand, vice


president of HRto create an array of foundational and next
generation functional capabilities.
Over the past five years, the HR function has matured in several
key areas. However, Mr. Brand and his leadership team now realize
their long-term strategic plan must focus not only on building
capabilities but also on strengthening high-performance, highleverage areas and closing performance gaps in high-priority areas.
To do so, Spartons HR leadership team used our maturity
diagnostic to assess its effectiveness at several critical HR activities.
The results ultimately validated the teams existing strategy,
revealed previously unconsidered activities for future investment,
helped the function avoid wasting resources on low-priority
activities, and accelerated the development of key functional
capabilities.

NWEA: Empowering Talent Management


Northwest Evaluation Association (NWEA), a provider of
educational assessment offerings, is investing in developing,
integrating, and selling solutions (not just single products) and
expanding into larger, global, and more complex markets.
As a result, talent is more important than ever, and the HR
functionled by Toni Jaffe, vice president of HR and Organizational
Developmentis accountable for 1) creating an enterprise-wide
talent management strategy, 2) localizing that strategy for distinct
functions, and 3) providing the tools and guidance needed for line
managers to recruit, develop, and engage the very best talent.
Our maturity diagnostic helps Ms. Jaffe achieve these objectives.
The HR leadership team uses the basic architecture of the
diagnostic (i.e., seven core HR function objectives, 38 discrete HR
activities) to articulate the talent management strategy for the firm
as a whole. Now armed with the organizations talent management
strengths and weaknesses, the HR leadership team can target
tools and guidance for line managers to enable effective talent
management beyond HR and throughout the organization.

Quick Stats: HR Maturity Diagnostic


Easy-to-use, online diagnostic for functional


leadership
Reports delivered via a virtual, Executive
Advisor-led consultation typically two to three
weeks after completion
One deployment per membership year

Get Started:
1. Search Maturity Diagnostic on the CEB
Corporate Leadership Council site for a
brochure.
2. Contact your account manager or e-mail us at
HRPractice.FMD.Support@executiveboard.com
to discuss participation.

13

Where Will You Join Your Peers in 2015?

NORTH AMERICA
Atlanta
Boston
Charlotte
Chicago
Columbus
Dallas
Mexico City
Minneapolis
Monterrey
New York
Palo Alto
Toronto
Washington, DC

EUROPE
Dublin
Frankfurt
London
Madrid

SOUTH AMERICA
Bogota
Lima
Santiago
AFRICA
So Paulo
Johannesburg

AUSTRALIA &
NEW ZEALAND
Auckland
Canberra
Melbourne
Perth
Sydney
ASIA
Dubai
Hong Kong
Kuala Lumpur
Singapore

CEBs HR Practice 2015 Meeting Dates


Creating Enterprise Leaders
Executive Retreat1
24 February Johannesburg
5 March
London
TBD April
Kuala Lumpur
Executive Briefing2
10 February Minneapolis
26 February Johannesburg
4 March
Chicago
10 March
London
11 March
Dallas
17 March
Dubai
17 March
New York
19 March
Madrid (In Spanish)
31 March
Atlanta
8 April
Santiago
(In Spanish; Half Day)
15 April
Palo Alto
TBD April
Singapore
7 May
Frankfurt
20 May
Dublin (Half Day)
20 May
Mexico City
(In Spanish; Half Day)
4 June
Washington, DC
(Public Sector Only; Half Day)
12 August
So Paulo
(In Portuguese; Half Day)
Staff Briefing
5 March
12 March
17 March
15 April

Chicago
London
New York
Toronto

The New Path Forward: Creating


Compelling Career Paths for
Employees and Organizations
Executive Retreat1
1213 May
Chicago3
1718 June
New York3
2425 June
Palo Alto3
6 August
Sydney
3 September
London
17 September Johannesburg
TBD
Hong Kong
TBD
Singapore

Staff Briefing
13 August
10 September
6 October
21 October
27 October

Executive Briefing2
4 August
Auckland
5 August
Chicago
11 August
Melbourne
18 August
New York
20 August
Atlanta
26 August
Monterrey
(In Spanish; Half Day)
6 August
Canberra
TBD August
Perth
8 September
London
16 September Bogota
(In Spanish; Half Day)
6 October
Palo Alto
29 October
Toronto
TBD October Lima
(In Spanish; Half Day)
4 November
Charlotte

Executive Retreat1
1617 September
1819 November

Sydney
London
Palo Alto
New York
Atlanta

The Future of Corporate HR


New York
Chicago

CEB Summit for HR Executives 2015


30 September2 October
1315 October

Chicago
London

Note: Dates and locations are subject to change.


1

CHROs/heads of HR only.

CHROs/heads of HR and their direct reports;


limit of two per meeting.

Two-day meetings run from 1:00 p.m. on Day


One to noon on Day Two. Meeting includes a
networking dinner on the evening of Day One.

CEBs HR Practice 2015 Meeting Descriptions


Creating Enterprise Leaders

The Future of Corporate HR

FebruaryAugust 2015

SeptemberNovember 2015

Only 27% of business units have the leaders they


need for the future. Although leaders average
effectiveness at key competencies remains relatively
unchanged, the environment in which leaders must
perform has shifted significantly. The leaders who are
most effective in todays new leadership environment
are Enterprise Leaders; they lead their teams to high
performance as well as contribute to and leverage
the performance of other units and teams.

Evolutions in technology, the workforce, and


performance are fundamentally transforming
the value proposition of HR. Many organizations
struggle with an increasing gap between the
businesss needs and HRs ability to deliver value.
As a result, 81% of CHROs are planning to
change their operating model. Learn how leading
organizations are changing HR organization design,
workflow, and investments.

Learn how organizations are creating the leaders


they need for the future by addressing the three
economic costs of being an Enterprise Leader.

CEB Summit for HR Executives 2015

The New Path Forward:


Creating Compelling Career Paths
for Employees and Organizations
MayNovember 2015
Shortages of critical talent are constraining
organizational performance. In fact, heads of HR
indicate that lack of critical talent is the single
biggest factor affecting HRs ability to support
organizational outcomes.
To attract, engage, and retain the talent they need
to be successful, organizations are rethinking
their traditional career paths and talent mobility
practices. Learn how to restructure your
organizations career framework, identify and
prevent career stalls, and drive talent mobility.

How to Attend

SeptemberOctober 2015
The HR functions premier event brings together
executives to learn, network, and engage with senior
leaders from across all HR and talent functions.
Providing insight and resources that progressive
organizations are using to build the HR function
of the future, the conference helps HR leadership
teams respond to trends reshaping the talent
landscape.
New for 2015, an expanded three-day format
features more opportunities to network, learn from
peers, and access insight from all of CEBs talentrelated businesses.

Contact your account manager or e-mail meetings@executiveboard.com.

Voice
of the

CHRO
16

CHRO Quarterly | First Quarter 2015

Every quarter we interview


a chief HR executive to gain
his or her perspective on
current issues facing the HR
function. This quarter we
spoke with Rich Floersch
on topics rangingfrom
preparing the next
generation of HR leaders to
creating a high-relationship,
high-performance culture.

Richard Floersch is the Executive Vice


President and Chief Human Resources
Officer for McDonalds.
Rich Floersch is responsible for McDonalds HR function,
which supports 400,000 employees in more than 100
countries. He is a member of the senior management team
and has been with McDonalds for more than 10 years.

Thank you for speaking with us. Youve pursued


almost a dual HR career, alternating between
compensation (i.e., specialist) and generalist roles.
How does this experience influence your approach to
coaching your own HR leaders?
RICH: Im a big believer in versatility gained through broad
experience, whether as a specialist or generalist. Breadth of
experience helps us adapt to new situations.
When someone asks me, What kind of experience would
you recommend for your position? I dont point them to
a particular specialist or generalist role. I say, You should
consider moves into both positions. That way youll be better
positioned to figure out if you want to stay a specialist or
generalist. At the end of the day, broader experiences gained
through development or lateral assignments are what many
heads of HR look for in their successors.
Although my background is in executive compensation, Ive
done more talent management than executive comp over the
past 20 years. So if I had to pick one specialist area to prioritize,
I would place talent management at the top right now.It is
such an important imperative for CEOs and companies today.
Thinking more broadly about the CHRO role, how
do you see the career path evolving for the next
generation of CHROs?
RICH: I dont think theres a cookie-cutter approach to
developing future heads of HR, and I think most of my peers
would agree with me. To me, it boils down to the skills and
experiences that allow you to perform as a head of HR.
First, you need to operate effectively across cultures. When
people say they want to become a head of HR, Im always
interested to find out how intellectually curious they are. Are
they interested in other parts of the world, different cultural
dynamics, and different political systems? If you are curious
in these areas, youre likely going to be in a better position to
operate effectively cross-culturally.
Second, you need to possess fairly good analytic capabilities,
in addition to strong business acumen. If you want to test and
build your analytic capability, I recommend doing a stint in
compensation and benefits.

Third, you must be a strong communicatornot just in small


groups, but in large groups, too. Most communication at the
CHRO level takes place in large groups. You need to build
trust while communicating in a clear, actionable fashion
so that people understand the intended message when the
conversation ends.
Finally, you need an anticipatory capability to see around
corners for emerging issues. Whether its about public policy
or industry changes or about having the right talent to succeed
for the next two to three years, you need to be proactive and
anticipate risks or threats that may appear in the future. Having
that ability helps make a good CHRO.
What underrated skills do people overlook when
aspiring to a CHRO position?
RICH: Heads of HR should have some of the best assessment
skills for talent selections within the company. You can build
that skill over time or perhaps take advantage of an external
development program, but being known within your company
for excelling at talent selections is absolutely critical.
To your point about anticipating issues, weve seen
CHROs advocate what they call an outside-in
approach to train their HR staff. For example, they
may invite a panel of other heads of HR to talk to
their team.
RICH: I always go to outside meetings with the mind-set that
Im going to pick up two or three ideas, come back, and share
those with my team. I encourage all my team members to have
representation in outside associations. In addition, for my
direct reports, I want them to speak at least once or twice a
year to outside groups about what is going on at McDonalds.
That way they can share what were doing at McDonalds while
continuing to build their external networks.
A major paradox facing leaders today is balancing
the needs to compete and cooperate with one
another. Similarly, youve mentioned elsewhere that
McDonalds aims to be a high-relationship, highperformance company. How do you balance these
good, but seemingly contradictory, traits?

17

RICH: When I joined McDonalds, I remember asking the


CEO whom I was interviewing with at the time, What is it
youre looking for? He said, very simply, I want someone
to come into HR, take what we have todaywhich is a highrelationship cultureand add on to that a high-performance
culture, but I dont want to do it at the expense of high
relationship. I want both.
When I heard that, I was excited to get started because it
was very clear what he wanted from a cultural standpoint.
I loved that he said, Listen, if youre going to come in here
and do it at the expense of high relationships, then youre
not the right person.
I do believe this is what most employees are looking for,
tooa high-relationship culturebecause we spend a lot
of time together. At the same time, you want to work for a
winning organization thats growing. So these things arent
contradictory at all, and if youve got the right culture, that
paradox can be turned into a very powerful cultural advantage.
At McDonalds, weve made it very much about the team.
We set up all our performance management and incentive
systems around team first and individual second. Why is
this important? Were only effective when we have strong
franchisees, strong suppliers, and a strong company; its a
three-legged stool. If all three of us are successful, then we
win in the marketplace.

To the extent that you can make adjustments


to your performance management system, your
rewards system, the way you select people, the way
you message where youre going as an organization
all those things should be done with a premium
on speed and action.

What one piece of advice you would go back and


share with your 2003 self to build a high-relationship,
high-performance company?
RICH: I learned that youre likely to get into a situation where
people want to pace change. They might say, Lets spread it
out; lets not change too much at once. However, when you
have a challenging business condition, Id rather err on the
side of more change than try to pace it properly. Speed is
so important, as it conveys a sense of urgency and a level of
importance about what we need to do differently. Its all about
getting our employees to act and behave differently.And
leadership actions set the tone.
So, I would tell myself not to give in to people who say, Thats
too much change for employees to absorb today. To the
extent that you can make adjustments to your performance
management system, your rewards system, the way you
select people, the way you message where youre going as an
organizationall those things should be done with a premium
on speed and action.
How does that premium on speed and action change
the way leaders operate?
RICH: At McDonalds, we pride ourselves on executing with
precisiondown to the point where we measure things like

18

CHRO Quarterly | First Quarter 2015

drive-thru timesbut we must evolve our culture to be more


accepting of making quicker decisions without having all the
answers. Were talking about areas where we can move more
quickly with maybe 80% of the information we need, because
getting the remaining 20% may take much longer. So this whole
notion of being comfortable with more ambiguity and less
precisionin an organization where precision is a hallmarkis
something we cant do enough work around to change.
It can be difficult to achieve the right level of risk
taking in an organization. How are you helping leaders
better manage risk instead of trying to eliminate it?
RICH: Obviously were going to need to accept more mistakes,
and likely more failures, along the way. That said, there is
a positive aspect to this approach, and I know a number of
people are talking about resiliency as an emerging leadership
attribute.
I find when people have gone through tough, challenging
assignments or have even had some failures within their
career, they are more resilient. We all know were going to
have failures in our careers. And when you go through these
failures and reflect on what you could have done differently, it
can actually build confidence for the future and create a greater
tolerance for change.
So theres an interesting dynamic. Companies that do a good
job of supporting people through challenging times and of
recognizing that employees can become better leaders by
experiencing some level of failure will have a more resilient
management team and will be able to better manage through
organizational change.
Whats the one leadership issue youre surprised no
one is talking about?
RICH: Current leaders are largely rewarded based on their
innovations from within their own organization, but I believe
there should be a shift.The ability to tap into ideas outside
your company should be an emerging leadership trait. Due
to the democratization of technology, a much broader group
of people globally have access to information and are in a
position to generate innovative ideas. So, you need to seek out
more innovation from outside your organization. If you dont,
you may end up with only a fraction of the innovation that you
could have had. To me, it can be that dramatic.
Finally, what question is top of mind for you right now
as you think about how your HR team can drive growth
at McDonalds? What would you ask your peers?
RICH: One hot topic Im keen to discuss is the evolution of
HR operating models. Were looking to add more capacity
or capability to our function in a time when its very difficult
to add resources. So, how do you smartly redirect resources
into areas within your HR organizationthose where you
have significant gapswhile becoming more efficient by
eliminating some of the things we do today? Im sure most
heads of HR are grappling with this question right now. So
thats a question Im going to tee up when I get together with
other heads of HR in 2015.

Its not always


this obvious.

But it can be.


CEB knows what mattersand what workswhen it comes to
boosting business outcomes. Each year, we equip more than
16,000 senior executives around the globe with insight, tools,
and actionable advice to transform enterprise performance.
Learn why CEB is the obvious choice for 90% of the Fortune
500 and more than 80% of the largest listed companies in
the world at cebglobal.com.

19

CHRO Quarterly | First Quarter 2015

Improve
HR Analytics

They Ask
The Questions Key Stakeholders
Will Ask You
CEO and the Board

What You Need to Know


Over the past year, only 15%
of senior business leaders have
changed a business decision
in response to HR analytics.
Are you significantly investing
in HR information systems and
creating a talent analytics team?
Increasing the sophistication of your
functions talent analytics without
also increasing their applicability
to the business can limit your
investments business payoff.
HR leaders may find interesting
trends with these tools, but these
discoveries still may not solve the
right business problem.
Heres what you need to know
to improve the analytic impact
of talent data.

20

CHRO Quarterly | First Quarter 2015

What do you predict are the most


important human capital risks well
face given the market and our
current strategy?

HR Leaders

What analytic capability investments


do we need to make in our HR staff?

HR Business Partners

How should I reframe the way I


present HR data to leaders and
managers to increase my credibility?

You Act

We Support

The Approach Leading CHROs Take to Resources to Help You Act More
Turn Talent Data into Analytic Impact
Quickly and with Confidence
Redefine Your Talent Analytics Approach

CEBs HR Analytics Model

Assess the structure and goals of your current analytics


strategy and activities to identify opportunities that will
increase business impact.

This model defines the characteristics of leading analytics


organizations that improve talent outcomes through more
effective analytic strategies.

Prioritize Human Capital Metrics


Action Toolkit
Use this toolkit to identify the unique list of metrics that
align with your organizations strategic priorities.

Build HR Capability to Translate Data


into Business Decision Support

Re-Goaling HR Analytics Teams


for Actionability

Strengthen and broaden your HR teams ability to apply


business judgment to talent data.

Design the right skill set and hiring strategy for analytics
staff by focusing more on data judgment.

HR Business Partners Role in Talent


Analytics
Refine HRBP competencies to improve business partners
application of talent data to business challenges with this
step-by-step guidebook.

Equip Line Leaders to Make Better


Talent Decisions Using Data

Building an HR Dashboard for Business


Impact

Build tools and presentations that effectively


communicate analytics to the line to drive action.

Use these tips to create effective HR dashboards


and avoid common pitfalls.

Telling Stories with HR Metrics


Support business objectives and decisions by
compellingly communicating talent data and insight.

21

The CHRO Insight Series


CHRO Quarterly
Magazine
Business insights and
implications for heads
of HR on leading their
organization and HR function,
featuring personal stories
from leading HR executives

HR News Report
Quarterly functional insights
on advances, challenges,
and opportunities in HR
categorized by 10 key
functional areas

CEB Corporate Leadership Council


www.clc.executiveboard.com
+1-571-303-3000 (North America)
+44-(0)20 -7632- 6000 (Europe, Middle East, and Africa)
+61-(0)2-9321-7500 (AsiaPacific)

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Global Workforce
Insights Report
Quarterly workforce insights
on global and country-level
changes about what attracts,
engages, and retains
employees, based on data
from 18,000+ employees
in 20+ countries

CHRO Video Series


Personal insights from
leading heads of HR on
the most important
relationships and activities
CHROs must manage

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