Should We Be Hiring a Chief People Officer?
/94% of senior executives think it’s important to focus on the growth and development of their HR executives so they’re ready to face the future.
Of course, if you don’t have an HR executive on your team, you can’t focus on developing them. At some point, you’ll begin to see the gap where an HR executive should be.
That’s the time to begin thinking about hiring a Chief People Officer. And if that isn’t in the cards for your organization yet, there are a number of other steps you can take to ensure that this critical element of your company is being addressed.
What does a Chief People Officer do?
Chief People Officer is a big job, and it’s one that usually has a place in a larger organization. They’re generally accountable for these things:
Benefits and benefits administration
Salary and compensation
Employee relations
Professional development
Performance management
Recruiting (sometimes)
In most small companies just starting out, the CEO takes on half of those responsibilities and the other half don’t get done.
At some point, they say Hey, we need an office manager or an administrative manager or a chief of staff. We need an admin. That person usually takes over benefits administration and payroll.
They may eventually be tasked with doing some higher level thinking, like coming up with salary bands or market surveys on salaries, developing a process to get performance reviews more consistent.
The challenge is that those are strategic skills, and what they’ve hired for is administrative. The leadership eventually realizes they don’t have a strategic presence — often when the CEO has gotten in above their heads.
See: Performance Development Plans Don’t Work Unless You Follow Through
Signs you need a chief people officer
So how do you know when you’ve reached that point? And what are your options once you’re there?
Most companies start seeing signs that indicate they need someone to own the strategic HR role.
Employee retention problems
Increased friction and complaints within the organization
Struggling with performance management, including feedback, reviews, one-on-ones
Difficulty filling certain open roles
Employment liability or compliance concerns.
Eventually these pain points become intolerable, especially if for an organization where people are the most important reason for the ability to scale and grow and succeed (most of you!).
Sometimes a CEO identifies the issue and tries to find some way to resolve it within the organization. The most common step I see is handing off some of these responsibilities to a COO, or someone in an integrator role in the company.
Unfortunately, the COO is often already overwhelmed with everything they’re doing. They can only give a sliver of their time to HR, and the team hasn’t addressed the problem strategically. They’ve gotten HR off the CEO’s plate but haven’t raised its prominence in the organization.
The next step many companies take is to hire a professional employer organization (PEO). PEOs use a co-employment model where the company’s employees are on the PEO’s payroll. A company gets some of the benefits of the HR/people management of a large organization, including employee benefits buying power and the ability to maintain employees in other geographies.
PEOs generally provide a library of resources, like software, systems, forms. They also may assign companies an on-demand HR manager. In my experience, the value of that HR manager is oversold. This person isn’t inside the organization, in the trenches. They don’t know the employees.
An engineer manager who’s struggling with the COO isn’t going to pick up the phone and call the HR manager at the PEO. They might call a chief people officer within their own organization, though.
PEOs are good for payroll and benefits, compliance, and risk management. Even so, at some point, CEOs tend to realize that the PEO has some benefits but is also expensive and is not giving them everything they need.
See: Designing Competitive Compensation Packages for Today’s Talent
Options for hiring a Chief People Officer
If you’ve realized that you need someone in that chief people officer role, you have a few options. At some point, you realize you need more than someone part-time and more than someone who can do this at a mid-level. I need an executive presence. Maybe because I’m going to go out and raise money. Maybe because I just raised money, and I’m going to double the size of the organization. Your team is big enough, and the stakes are high enough, that it’s time to make the investment.
Hire a chief people officer. If you have the budget and your organization is ready to incorporate a new member into the leadership team, go for it. Having a CPO permanently on your leadership team is something you’ll never outgrow.
Promote someone to a mid-level people role. If there’s someone on your team that shows aptitude, you could promote them to a people manager or chief of staff if you can’t afford someone with more experience. Create a professional development plan that will help them grow into the CPO role. You’re investing.
Hire a fractional chief people officer. They give you a fraction of their time and generally come in with their own systems and processes. If a company’s growth is slow, they may use a fractional CPO for many years and never move up to a permanent or full-time CPO.
Hire an interim executive to serve as chief people officer. An interim executive comes in and learns you, your style, your organization, your culture. They do assessments and help you implement systems and processes that work best for your organization. Companies often choose this route when they’re not quite ready to hire a CPO and they need an executive presence. Perhaps they’re about to raise money or just raised a bunch of money and have doubled the size of their organization.
Often the interim executive also has the experience to handle employee relations, and they’re a strong coach. As team members come to them with questions and issues, they realize they have a safe place with someone who knows the organization, and yet an outside perspective. Interim executives can also help professionalize the organization and help you identify what kind of person should succeed them. They may even be able to help you find and hire the right candidate.
See: Is an Interim Executive Right for Your Company?
Final thoughts
When I was at CDNOW, in my first CEO role, we didn’t have an executive heading up People. We had grown very quickly and I didn’t have the time to develop our director who had been running HR. I had a hole.
I hired Donna through an executive search. As an experienced People leader, she taught me a lot about how people management should happen and was also my coaching confidante. She course-corrected me. She would see me sitting at my desk at lunch and tell me that I needed to eat in the cafeteria with our team. And when the dotcom market crashed, it was her experience that led me through the most difficult time, right-sizing the company.
Working with Donna solidified my perspective that the chief people officer should always report to the CEO. I firmly believe that no other organizational structure would be as effective.
If you’re considering hiring a chief people officer or just realized that perhaps you have a gap in your organization, contact Trajectify to see if our coaching or interim executive services could help.
