Aligning HR to the CEO Growth Agenda

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Throughout much of the 1990s and early 2000s, CEOs were rewarded for cost reduction end cost containment. To compete in the global arena, Boards demanded dramatic improvement in efficiencies. Companies such as General Electric, Motorola, and Allied Signal fueled the trend by reporting 10 times or higher ROIs from their Six Sigma programs. With a clear focus on the bottom line and tantalizing ROIs, companies invested heavily to get lean, outsource nonstrategic work, improve quality, and introduce better products.

The new CEO agenda, while not losing sight has shifted to the top line. Covering the views of 658 CEOs from more than 40 countries, the 2006 Conference Board's Sixth Annual Survey (1) found that:

* In the United States, the top future challenges will be how to sustain and generate steady top-line growth. Profitable growth and product innovation were also high up on the list.

* CEOs based in Europe are most concerned with speed, flexibility, and adaptability to change, followed by profit growth and sustained and steady top-line growth.

* Spurring company growth has become a major CEO concern in Mexico and South America.

* CEOs of Asian companies are more concerned with stimulating innovation, acquiring top talent, and other people issues. Half of CEOs in Asia report that inspiring innovation is their greatest concern.

HR demonstrated in the earlier period that it can be a strategic player in efficiency initiatives by sourcing work and talent for better leverage, outsourcing routine work, and moving some talent costs from fixed to variable. For HR to remain a strategic partner in the new, growth-driven future, it must answer the call to support and systemize innovations that achieve the growth goals now topping the corporate agenda.

This next phase requires significant retooling, according to the HRPS/i4cp 2007 survey "HR's Role in the CEO Growth Agenda." This retooling and reinvention must come most dramatically in the areas of leadership development and organization design. (2) The survey highlighted several issues of concern to most HR leaders, including:

* Helping leaders to frame the growth challenge for the organization.

* Developing new learning programs that lead to clarity of roles and responsibilities in managing growth and new executive team behaviors; and

* Designing and staffing the growth-related organization.

The Growth Gap

Growth, in many ways, is its own reward: Growth attracts talent, creates the capital to grow faster, and can transform the market valuation of a company. Yet many companies have a significant enterprise growth gap: the difference between the sum of the forecasted business units' growth goals and the overall enterprise target. In other words, it is the difference between what the core businesses can deliver and the expectations of the CEO and top management team. This is generally described as a financial shortfall, but the root cause is a gap in the enterprise's capabilities and processes to identify and exploit new opportunities beyond the reach of the core businesses. For example, in a $10B multi-business chemical company, its core businesses were able to generate 5 percent growth though current know-how, but the board of directors and CEO desired 10 percent growth in order to increase stock price and market capitalization. The size and reach of generating new businesses to close the $500M revenue gap made it the prime responsibility of the CEO and Executive Team to create new families of products and services.

Almost 60 percent of respondents to the HRPS/i4cp survey list the primary objective for their organization as organic growth (28.2% say this will come through new product and service platforms). Yet most companies believe and act as if this will be achieved by doing better at and more of the same things. Oyster International research has found, however, that good strategy, understanding of markets and technologies, and analytical support will not insure that the growth gap will be closed. …