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Economic Woes Havent Dampened Search for Key HR Execs

Recruiting has slowed dramatically for many job titles as the financial crisis bears down, but not for top human resources executives.

“It may seem counterintuitive, but we’ve seen an increase in demand over the past 60 days,” says John Doyle, North American leader for Spencer Stuart’s HR executive recruitment practice, based in Chicago.

“Companies are moving forward with unprecedented change initiatives, and CEOs know that their HR executive, along with their CFO, are the keys for moving ahead through the crisis,” Doyle says. “If they’re not happy with who they’ve got, they’re looking around.”

When a company needs a new top executive, the CEO typically calls the head of HR to coordinate the search, but recruiting a new HR executive obviously requires a different approach.

“Instead, the CEO contacts a search firm’s industry consultant, who then brings in a functional HR consultant,” Doyle says. In Spencer Stuart’s HR practice, both the industry consultant and the functional HR consultant meet face-to-face with the CEO.

“At these meetings, all CEOs say the same thing,” Doyle reports. “They all tell you that they value HR. They all tell you that they want a business partner. And then they tell you to go out and get them someone from Pepsi or General Electric.

“So we have to initiate a real conversation and dig a little deeper to discover the actual parameters for the position. At that point, it becomes a working meeting about business issues. Then we can begin to develop a specification and look at potential targets.”

This subtle process launches a not-so-subtle attempt to pull proven HR talent out of one large company and place it in another. Top executive recruiters agree that the key to a successful search hinges on their ability to understand company-specific needs and then produce candidates with true business acumen—the overarching qualification for the top HR job at the world’s largest companies.

Defining needs
Based in Stamford, Connecticut, Wendy Murphy is a leader in the HR executive practice for Heidrick & Struggles, one of the largest global search firms, with 416 consultants worldwide, including 36 consultants in the HR practice. Murphy and her team have recruited top HR executives such as Wendy’s Jeff Cava and TIAA-CREF’s Dermot O’Brien.

“The average search for a chief human resources officer will take 120 days if all parties are engaged, meaning that they are willing to clear their calendars,” Murphy says. “It’s a simple process, but there are many nuances and buy-in issues.”

The first step is to spend time with the key stakeholders.

“You have to gather insight from the very beginning, especially into anyone involved in the selection process and also, very importantly, any resisters—those who do not share the same vision of the HR role or see its specific value,” Murphy says.

With that understanding, Murphy then develops the position specification, which must represent the views of all parties and clearly define the behavioral competencies required for the position.

“You have to be able to specify who is successful in the client’s corporate environment, how the organization functions operationally and how decisions are made,” she says.

Heidrick & Struggles collects extensive data on potential chief HR officer candidates and closely tracks their careers. Murphy maintains personal contact with a significant number of top HR executives.

“As soon as I am engaged, I know where I’m going,” she says. “If I didn’t, I shouldn’t be doing this. When we sit with the CEO and the senior team, I may tweak my thinking based on the insights I gain, but I have candidates in mind immediately.”

Murphy and her team typically present three to seven candidates, depending on the client’s appetite. The client usually asks back two or three.

“The most difficult part of the process is finding the fit with the organization and the click with the CEO,” Murphy says. “HR people are generally the type of people who get along with everyone. They know what a CEO wants to hear, so we have to look carefully for evidence of competencies.”

Investigating the track record
The HR consultants at Heidrick & Struggles look for executives who are able to act decisively rather than be the consensus builders who often dominate the HR field.

“To distinguish between the two takes digging deep with behavioral assessments and asking very specific questions about their past experiences,” Murphy notes. References are critical, and Murphy reaches far beyond the names provided by the candidate.

Among Murphy’s Fortune 500 clients, the qualifications required to land the top HR spot fall into one of three “buckets” of mandatory, demonstrable qualities and skills. The first is a strategic mind-set.

“This includes business acumen, critical thinking and the ability to understand the company’s customers,” she says.

Murphy constantly assesses her HR executive contacts for this quality.

“If I ask a potential candidate, ‘So how are things with you?’ and they tell me that they have just launched a new employee engagement program, I know I’m not talking to the right person. But if they tell me about the business—growth opportunities, revenues and earnings, for example—I know I’m on the right track.”

The second bucket includes the skills and experience necessary to be a subject-matter expert, and the mandatory areas of expertise are governance, executive compensation and global human resources. Board experience is a big plus.

“Talent management is a fourth area, but everyone in management is thinking about talent, and it’s assumed that CHRO candidates are thinking about that too,” Murphy says.

The third bucket contains all the skills necessary for leadership.

“Evidence of leadership skills and strategic ability includes examples of how the HR executive has driven a change process, how the executive has driven accountability into the system and how the executive has used rewards to drive behavior,” Murphy says. “And there must be evidence that the executive led these efforts rather than relying on outside consultants.”

Murphy notes that the top HR spot does not require an MBA, but the degree is counted as a plus, especially if the concentration was in finance.

A related advanced degree is also a plus.

“Certificates of any kind are inconsequential,” Murphy says. “Most CEOs don’t even know what they are.”

The number of years of experience that a company may require ranges from 12 to 30, but 15 is generally solid. Murphy notes that the average years of experience required is drifting down. She also notes that she increasingly sees HR leaders catapulted into the chief HR officer position from divisions at best-practices companies such as General Electric.

Pools and differentiators
At Spencer Stuart, 20 core consultants staff the HR executive search practice, supported by 350 executive search consultants worldwide. The firm has conducted more than 1,000 senior-level HR executive searches in the past five years.

“We’re in the market all the time,” Doyle says. “Our job is to know the candidate pool long before a search begins. We know the HR executives at the Fortune 500 and their direct reports. With this knowledge of the candidate pool in hand, we can customize a go-to-market strategy of a client.”

The top three qualifications for an HR executive at a major company are business acumen, strategic mind-set and the ability to act as a change agent, Doyle says.

“The fourth is that they must be a talent guru. Within that qualification, the subsets of expertise are succession planning, leadership development, executive compensation, board experience and global expertise. The assumption is that all the candidates are HR experts and bring best practices with them.”

For some companies, board experience may be a differentiator. For global companies, international experience, which means having lived and worked overseas, may be a differentiator, and multilingual candidates may have an advantage.

“We always pull from HR executives who are in the top jobs or executives at very large divisions,” Doyle says. “Executives in this latter group, however, often lack experience with executive compensation and boards, so if those two areas are completely critical to the organization—and they often are—we have to stick with the pool of top HR executives at major companies.”

Spencer Stuart’s clients, which include Fortune 100 companies, typically require 15 to 20 years’ experience.

“Without that, a candidate simply doesn’t have the business acumen or strategic mind-set,” Doyle notes.

Spencer Stuart consultants measure business acumen and the strategic mind-set by the candidate’s track record for driving business change and financial performance and the responses from references.

Doyle notes two trends are emerging in hiring for the top HR position.

“One is that we are now seeing the rise of non-nationals recruited from outside the United States for the top HR positions at U.S.-based companies,” he says. “As globalization continues, companies are looking for top talent—period. So we have to look at the global talent pool.”

Another trend is that executives with little or no human resources experience are increasingly moving into the top HR spot.

“This has occurred at companies such as Microsoft and Pepsi,” Doyle says, adding that the executives who have succeeded in landing the top HR position from outside the function usually move into the job with a strong HR organization under them.

“These appointments demonstrate the emphasis on business acumen,” he says.