The Round Table where everyone is considered equal

Does HR report to the CEO in your company?

I believe HR should report to the CEO and had the good fortune to meet with a CEO who wanted to discuss the hiring of his companies first HR person.  They are profitable, have a great culture, are currently at 50 employees and going to start scaling. I really enjoyed the conversation. The CEO was not only open-minded but also gracious about me challenging him on his ideas around HR and it’s potential impact on a company. It was a great exercise for me. It was more than just a way to validate HR but to take a proactive voice in why HR should have a seat at the table and the impact it can have.

Of course, I pointed him to two blog posts on the topic by individuals I really admire, Brad Feld and Seth Levine.  Their posts here:

Seth Levine, HR as a Core Competency

Brad Feld, Does your VP of HR report to the CEO?

For the record, I do not believe that HR should report to the CEO for the sake of reporting to the CEO.  Our discussion focused on the benefits of HR reporting directly to the CEO and specifically the benefits of hiring someone who had the maturity and experience to have a “seat at the table”.

His initial thought was that HR should report to the COO or CFO and his specific question was what level person they should hire. I pushed back and asked what he thought about HR reporting to the CEO.

CEO response:

• I don’t know enough about HR to give a review. I understand Product and Sales, but I don’t know much about benefits, hiring practice, etc.
• I don’t know that working with HR is going to give me the experience I need for my career to grow vs. spending time on Product or Sales.
• I am out-of-town a LOT. I am not sure I would have a handle on the day-to-day process of HR.
• Our COO has taken this role in the past and this seems like a logical place for this person to report to.

The above are all very logical reasons. Based on the growth of the company and the evolution of the hiring, it makes sense. Again, I appreciated his openness to my responses below.

• Take this opportunity to learn more about HR. The right person will give you insight into HR at a high level. The exposure will help you make more informed decisions about scaling the company.
• Learning about HR WILL make you a better leader. In the same way that learning about Product or Sales helps you grow the company, learning about how the “people” side of the org will not only make you a better leader, it will give you the credibility to the folks that you are leading.
• A Sr. person won’t need to be looked after day-to-day. Just like the rest of the exec team doesn’t need day-to-day hand holding, a senior person will work as independently as the rest of the exec team.
• A Sr. HR person will come in and learn the business, in the same way, the rest of the execs learn the business.
• HR is cost center and there is a conflict of interest if a cost center reports to the person responsible for making budgets.  It is easier to control costs within your departments with a direct report vs. someone who reports outside of your domain. Will a direct report push back as much on budget cuts????

Additional thoughts in no random order, but based on a person being Sr. enough to have a seat at the table:

I am not a people person.  I would like to consider myself a businessperson first with an emphasis on people.

I look at my role in the company as a lever to free up the CEO of anything that has to deal with people/employee issues. I think that most HR folks can and will take care of the day-to-day of hiring, benefits, etc. I want to provide a resource to folks with a few years of experience and the confidence to the company/executive team that I can and will step in with the senior folks. This includes the C level Execs.  Just because someone is a C level, doesn’t mean they don’t have problems, issues, or need a second opinion. You would be surprised how often a C level person doesn’t hear “thank you”, “congratulations”, or “we should think about this in a different way”. Most individual contributors view C levels as invincible, off-limits, and will not let them know “they rocked it” or “offer help when team dynamics come into play”.

• If the CEO senses a situation developing with the CTO or COO, they want to be able to say to the HR person, “handle it”. Better yet, a senior person will recognize a problem developing and start working on it before it becomes a problem.  If they are not involved in the strategy discussions how are they supposed to recognize what is going on?  I don’t believe that the CEO should worry about people problems or team dynamics.  I don’t want the CEO to take care of that. I want them focused on strategic company issues. 

Every company wants to feel like their VP of Sales can sell ice to Eskimos, or they have the smartest VP of Engineering. I believe it helps when the entire company is not only confident they have a strong HR person, but they know that the CEO KNOWS they have a strong HR person. The company knows that no one is off-limits when it comes to coaching if the Head of HR can handle themselves at this level.

I would estimate that for 90% of the larger companies that have been awarded “Best places to work”, HR reports directly to the CEO.

When you think about what it costs to recruit someone via an outside recruiter, (25% – 30% of the first-year salary) and turnover, a good HR person will have a network and can save you recruiting and retention costs.  (Just like your VP of Eng saves you money on technology, HR can save money on employee costs.)

HR is a cost center and employees are usually the largest cost to the company. How does a company say “employees are the companies most important asset” when HR doesn’t have a seat at the table?  Successful HR people are wired to be thinking about how to be proactive with employees as they relate to the company.

Most companies rely on the CEO to set the culture of the company. The CEO sets the vision of the technology and the product. The CTO and VP of Product make sure that vision is executed.  The VP of HR executes on the culture of the company.

BizDev is strategic about deals as they relate to the company, and the CTO is strategic about the technology as it relates to the company.  This isn’t just about closing any and every deal. This isn’t about trying ANY new technology.  This isn’t JUST about taking care of employees by giving them massages, free lunches, and a pool table.

This is about leveraging the employee force in a strategic way to help scale a specific business.  

The CEO hires a VP of Sales to close the largest clients, the General Counsel to take care of the largest cases, and the CFO to not just watch the finances, but to be strategic in how revenue is handled.  I don’t believe the execs should be distracted with team dynamics. The executive team should be involved and informed, but if they are distracted, HR has failed.

See you at the after party,

HRNasty

nasty: an unreal maneuver of incredible technique, something that is ridiculously good, tricky and manipulative but with a result that can’t help but be admired, a phrase used to describe someone who is good at something. “He has a nasty forkball”.

If you felt this post was valuable please subscribe here. I promise no spam,