Making the step up from HR to the CEO

by 15 Apr 2008

It is rare for a CEO to come up through the HR function. However, it is not unprecedented, and with the right tools and experience, it is possible. Sarah O Carroll speaks to leaders in the field about the best path a HR professional can take in order to pave their way to the top job

The common theme in the career of a CEO is a background in finance or operations, but making the jump from HR director to CEO is seldom seen. However, it is not unprecedented, with CEOs such as James Strong, Anne Sherry and Geoff Plummer all coming from an HR background.

Today, human capital topics are evermore on the agenda at the executive table, and CEOs need to be adept in people issues. Therefore there are many skills that a HR professional gains throughout their career that can be carried into a CEO role.

James Strong is one example of a CEO who started out as a HR professional. As chairman of Woolworths, IAG, Rip Curl Group and the Australia Council of the Arts, and he was also CEO of Qantas Airways from 1993 to 2001. Strong’s successful and diverse career was spawned from his initial interest in HR issues.

Starting on a big construction project in the mining industry, he worked in all aspects of HR, including salary, succession planning and remuneration.

Strong’s interest widened into the business field as time went on, and the lure of international bargaining for fuel, oil and other raw materials led him to become more involved in commercially-focused work. However Strong believes that a lot of the credibility building that he did went back to the management of the people side of the business.

“I think in many ways HR people are in a position to be seen as people who are very good at selecting people and building teams and so on, which is extremely important in a CEO role. I really have always been surprised that there aren’t more people who come up to CEO level through that way,” he says.

Advantages of coming from HR

There are many skills which HR people can carry to a CEO role. According to Alison Sherry, general manager of Hamilton James & Bruce’s Brisbane office, there are many advantages. She says there’s no reason that the HR director of a large company could not step into the role of CEO if they have that full understanding of the business. Being a HR practitioner can provide useful insights into being a CEO because of the knowledge gained around how the people in the organisation really work and the processes around it.

James Strong found that when he stepped into the role of CEO he reaped the rewards of his HR background.

“The biggest task for any CEO is to build a team of people around them because I think we all know that you’re not going to be able to do everything yourself at any stage. So it’s about building a terrific team of people. And if you’ve been a HR specialist, that should be something that you’re very familiar with – watching people, evaluating people, identifying the qualities that you think are outstanding or vital,” he says.

Strong believes the most important thing a CEO will do is to be the architect of a plan that is based heavily around communicating with people.

“Creating a culture which is based on going to people, explaining the business to them, offering them the opportunity to be able to change things where they are, if they’ll take ownership. So that sort of human relations aspect of management still today to me is the one that can make the biggest difference,” he says.

A differentiator of a HR person applying for the CEO position according to Sherry is that they can make an ordinary business into a really successful business through understanding what motivates the people in the organisation.

“That’s often where CEOs aren’t so great; we find if they don’t have that people process understanding, that can be a gap. Whereas I think that’s what a HR director’s background would bring to a CEO’s role,”she says.

A bridging move

So, how can HR professionals put themselves in a position where they would be considered for a CEO role? Moving first into a business role, or being able to prove extensive knowledge of the business function is critical, according to advice echoed by industry experts.

“There’s that period where you go up through your particular speciality but then you realise that to get any further you’re going to have to make what I call ‘a bridging move’ to pick up other areas of activity,” Strong says. “And then that gives people the opportunity to see you working in several areas show you have the ability to comprehend the broader issues in management.”

Cathy Doyle, group executive, Perpetual Investments Business Services, is in the middle of one such ‘bridging move’ having just come from the role of group executive for people and culture at Perpetual. Doyle moved from HR to leading the advisor distribution area which has 45 direct staff and hundreds of thousands of indirect dealer groups and financial planners.

“When I was in a HR role at Qantas, for example, I was never involved with which aircraft we’d purchase. But now I’m actually in charge of the strategy piece, the financials, the compliance and risk component, the product, the channel, the pricing, all that kind of stuff and working with a team. So it’s just really exciting because it’s new, it’s fresh,” she says.

Doyle found lots of the skills she built up in the HR function were easily transferable and beneficial.

“Presenting to boards and different employee groups has stood me in good stead for getting out there and presenting again to advisers and financial planners,” she says.

Her extensive people skills have also benefitted her in her new role in a number of ways especially in being able to influence decisions.

“Because you’ve got good people skills you can communicate quite well and they see you as somebody who understands stakeholder management. So I can very quickly do stakeholder assessments in my head and ask different pricing questions,” she says.

“Consulting skills are also incredibly important and they’ve translated really well. So whilst I’m in charge of day-to-day operations of Australian equities, I really don’t have that much decision-making power. It’s actually influencing to get all the key people to sign off what I want to get through,” she adds.

Challenges of transitioning

Proving yourself commercially capable, building your confidence, raising you business credibility and learning all aspects of the business are some of the challenges facing HR professionals who aspire to becoming CEO one day.

When James Strong moved from the HR area to a business function there were two areas he had to hone in on to be successful – operations and finance. He spent a lot of time with the people in these areas as he didn’t have a strong enough background in them initially.

“I took the voyage with the new incoming [finance and operations] executives of staying very close to them and learning that side of the business,” Strong says.

“If you want to be successful, you’ve really got to get on top of those as well. So they were top priorities for me,” he adds.

Another challenge HR people will face is the lack of faith from other departments in your abilities to make the transition from a support to a line role.

“Those you haven’t worked with before, when you say you’ve come out of a HR role, they automatically assume you don’t have a financial brain,” Doyle says.

The key to combating this is confidence coupled with knowledge. According to Alison Sherry it’s becoming more prevalent and more obvious that HR people are able to move into CEO roles but it’s all about gaining the breadth of the skills set by moving laterally in the company and then having the confidence in your abilities to seek more senior roles.

“What I’ve seen translate quite effectively is a HR person going for the CEO [position] of the largest company. They actually translate into a CEO, particularly here in Queensland, of the small to medium enterprises, and that’s a great stepping stone as well,”she says.

According to Doyle, confidence is everything and you have that instant five minutes to reset their perceptions of you when you step into the new role.

“You’ve got to change their perceptions quickly. I never explain why I’ve been put into the role. I never go in and defend it because I’ve earned space. I just go into the next role and operate that way,”she says.

Andrew Horsley of executive search firm Horsley & Company says that due to the internal competition when applying for the role of CEO, the HR director has to show that they can move beyond the HR function.

“They have to put beyond doubt that they as a HR director have the abilities as good as, if not better, than anyone else coming up through the other functions,”he says.

There are a number of ways which this can be done and recruiters searching for a CEO will not automatically disregard a résumé from a HR professional if they can show they meet certain criteria.

According to Alison Sherry it’s all about effectively framing your ability to drive change and be able to show quantitative outcomes of how you as a HR person have affected change.

“When applying for a CEO role, if you just talk about the soft side of HR or the hard side being performance management and IR, if you just talk about that, you won’t get a look in, because it has to be financial outcomes to the business and being seen as a true business partner and influencer, a driver of change, that are the qualities that have to be picked up to move into a CEO role,” she says.

From a CEO point of view Strong believes that for an HR person to be in with a chance of stepping up to the CEO role they will have to have shown a genuine interest in every aspect of the company and not just their own area. It’s very important according to Strong not be to too narrow minded and don’t ‘play games’.

“You see a lot of HR people who attempt to manipulate because they’re sort of in a position to advise about succession and management development and so on. They think they’ve got powerful weapons in their hand but that’s a very bad mistake because what I would call that narrow approach just shows that somebody is not suitable to do anything else,” Strong says.

“It’s manipulative and it shows the exact wrong type of personality that you’re looking for in a CEO, which is to be much broader and outward looking.”

Other key things when making the move from HR into a business role are making sure you are ready and when you feel you are, then take the risk. In order for a HR person to reach CEO level they will have to step out of their comfort zone and make the move.

“You’ve got to take some risks. I could have very safely stayed in HR for another five years. But I’m shifting out now,” Doyle says.

Getting some external leadership experience such as in a not-for-profit organisation is also helpful.

“I’m chairman of Odyssey House so I’ve been able to do a senior leadership role that’s required auditing skills and finance skills and fundraising skills and marketing skills. Even though it’s not-for-profit it’s been hugely beneficial,” Doyle says.

Other recommendations are don’t be afraid to ask for advice and stay close to the finance people throughout your HR career, because the hub of all information and decision-making in organisations are financial.

It’s also important to speak up and express your desire to someday move out of HR into a line role if that’s what you want, according to Doyle.

“Don’t think you’re selling out the function by saying you’d like to do other things. I actually think the more HR people we get into line roles, the better our organisations will be,” she says.