Longtime board member Mike White, whose public company board service includes multi-year stints at Kimberly-Clark, Whirlpool and Bank of America, at present, is concerned about the cyclonic impact of workplace transformation on organizational effectiveness. “The world is changing in multiple and very unpredictable ways, from technology to culture, geopolitics, disruptive competition and media,” says the former CEO of PepsiCo and DirectTV, who shepherded that company’s $67.1 billion acquisition by AT&T in 2015.
These alterations in established patterns are colliding with how people want to work and how organizations structure that work. The ramifications are evident in the ongoing war for talent, steep skills shortages, employee disengagement and the growing tension between remote work and return-to-work policies. Other HR issues include the uncertain impact of AI and other new technologies on present and future jobs, the related need for reskilling and upskilling, and the effects of change on employee mental health and wellbeing.
The pileup of all these challenges occurring simultaneously has made workforce transformation the third most important priority of CEOs, behind long-term growth and technology, according to recent Gartner research. In response, boards are focusing the spotlight on the chief human resource officer. “The person right in the middle of all this is the CHRO,” White explains.
At many board meetings across the world, CHROs are on the calendar alone and along with the CEO to discuss the confluence of complex HR challenges, what is being done to solve these pressing problems and the level of success obtained. At some boards, it is not uncommon for the CHRO to be on the agenda three to four times a year to discuss these diverse issues. The role is not for the fainthearted.
“CHROs confront enormous change and upheaval, with waves of people issues challenging every business,” says Kathleen Cote, who currently serves on the boards of 3Com, Western Digital, MediaOne and VeriSign. “They’re expected to be the expert dealing with new generations of workers having different values and [work/career] expectations while navigating the many-faceted implications of AI, recent pushback on ESG and DEI, flexible work schedules and employee engagement, which is at an all-time low.”
According to Gallup’s Q1 2024 annual poll on engagement, the ratio of engaged to disengaged employees is the lowest percentage in history, particularly among employees younger than 35. Added up, the emotional toll on many CHROs has been severe. “Everything is shifting so fast, with what feels like thousands of changes occurring simultaneously, that CHROs are at risk of burning out,” says Phyllis Campbell, a director at Remitly and Air Transport Services Group, who recently stepped down as a board member at JPMorgan Chase.
White agrees the job is becoming increasingly demanding—and vitally important to a company’s work culture and profitable business growth. “HR leaders have to be able to think strategically, problem solve, be comfortable with ambiguity and balance and rebalance many tradeoffs,” he says. “Leading change of that magnitude is very stressful, especially when the longer term is unclear. But change is required for the business to succeed.”
The Future of Work
According to board members, the following workforce transformation subjects rank high on the board agenda:
• Technology. AI apps are expected to affect present and future jobs and work positively and negatively. Predicated on increasing efficiency, productivity and forecasting, AI also poses the risk of disrupting 300 million jobs by 2030, Goldman Sachs estimates.
• Flexible work. Digitally savvy younger generations widely prefer virtual digital collaborations, whereas older generations generally prefer in-person collaborations. Boards expect CHROs to find the sweet spot between remote work and return-to-work.
• Organizational structures. A growing number of companies perceive flatter organizations, in which traditional managers are replaced by self-directed multidisciplinary teams held accountable for decisions, as more productive, while employees enjoy the autonomy. Managing such sweeping change is daunting, however.
• Skill shortages. The Great Resignation has nearly run its course, but the war for talent persists, particularly skill sets in predictive AI/generative AI, data analytics, cybersecurity and accounting. If talent holes are not plugged by 2030, U.S. businesses could squander $8.5 trillion in unrealized annual revenues, Korn Ferry estimates.
• Training. Given such protracted talent shortages and the rising costs of recruitment and retention, boards are asking tough questions about upskilling and reskilling plans to fill gaps.
• Mental health and wellbeing. Employees are struggling with negative feelings about their work and career prospects, inflation-fueled cost of living increases and perturbations over societal divisions, geopolitical crises, racial unrest, ongoing wars and the sense of a world in permanent crisis.
• Culture. Navigating the politicization of the acronyms DEI and ESG is another board issue requiring CHRO input, elevating the business necessity of the initiatives without promoting a social agenda. As Cote put it, “The CHRO is the CEO’s partner in helping to create, implement and perpetuate a culture that is not dictated by trends.”
In the past, board committees intermittently evaluated these varied HR issues. Today, they’re often examined by the full board. “Boards are demanding time with the CHRO to talk about the future of work and how the workforce will support the business strategy and clients [in line with] the organization’s values and culture,” says Campbell.
New Tech and Work Regimes
An oft-cited phrase among business leaders is that “every company is a technology company.” The phrase was coined by software pioneer Watts Humphrey in 1999, well before the extraordinary changes in work conveyed by innovations like business process automation, software-as-a-service applications, cloud, data analytics and the current crop of generative AI and predictive AI applications.
“AI builds upon all the other big inventions of the last century, like electricity, the transistor, Internet and mobile, each a precondition for the next technological application to flourish,” says Javier Saade, whose public company board service includes SoftBank Investments, Porch Group, DocuSign, Univision and TWO.
“What makes AI so interesting and challenging is that it goes to the core of what makes humans ‘human,’ our capacity for innovation to drive efficiencies and productivity,” says Saade, managing partner at management consultancy Impact Master Holdings. “The concern with AI is that if we do not remain active, we may potentially become irrelevant, which makes AI an important human resources issue for companies and the board.”
While balancing the positives and negatives of AI commands attention at many boards, White says the three companies on whose boards he serves are in the early stages of modest deployment in call centers and writing software code. “We’re in the first innings,” he says. “I don’t know of anyone saying, ‘let’s go all in now.’ Nevertheless, we realize that AI is a powerful tool that will impact the workforce. We also discuss the material risks of misusing AI, getting it wrong and potential bias.”
Cote, a former CEO at Computervision and Worldport Communications, agrees there are risks and benefits. “I see the value of AI as a tool that does redundant and mundane clerical tasks, freeing people to make judgments and derive conclusions from the information,” she says. “The risk is that it’s not implemented with consideration for all the implications in a proactive way.”
Finding the optimal balance between remote work and in-person work is another topic of concern for many boards. “Neither extreme—100 percent work-from-home or 100 percent at the office—is rational,” says Saade. “Nevertheless, the genie is out of the bottle. There are times when working remotely works just fine and times when in-person meetings allow for serendipitous connections. It’s not necessarily one or the other—it’s a continuum.”
Several board members perceive the issue as a “generational clash” in desired modes of work. Whereas senior leaders in older generations commend the value of physical collaborations and grouse about the difficulties of keeping remote employees engaged and holding them accountable, younger employees insist they thrive when working from home and cite wasted time commuting, the negative impact on work-life balance and the high cost of living in cities.
Campbell says many millennials and Gen Z employees “see things through the lens of their personal and family lives first. If the employer is willing to accommodate that, they’re good. Otherwise, they’re apt to make a job change. It’s a mega trend that boards are struggling with. It’s all so new.”
Striking the right balance is not easy, Saade acknowledges. “Perhaps the stage of one’s career may be a factor. In my case, the connections early in my career created the knowledge base to advance,” he says. “The dichotomy and challenge is that members of Gen Z, all of them digital natives, are early in their careers and are convinced everything can be done digitally. There’s a tug-of-war between competing philosophies.”
Teams and Diversity
Flatter organizational structures are another workforce innovation under stringent board review. Although the concept has been batted around for a generation, the development of virtual collaboration tools has put it front and center at companies like Bayer. To dramatically lower costs and lift the share price, the pharmaceutical company reportedly is in the midst of replacing managers with as many as 6,000 self-directed multidisciplinary teams. Other companies, including Zappos, Google, Haier Group, Buurtzorg, Valve and General Electric, have introduced versions of decentralized and autonomous team-based structures with different degrees of success.
White maintains that the nature of business has become so highly integrated that cross-functional teams make sense as an organizational model. He notes that many millennials demand a collegial and collaborative team-oriented culture.
Cote says teams offer employees the opportunity to absorb new skills from colleagues to advance their careers, equating it to a form of “succession planning several layers down.”
Nevertheless, the wholesale replacement of one organizational structure with another is a big step, requiring change management strategies to ease employee stress and morale over their new roles and career prospects. “Leadership must be prepared to help employees transition to the new structural approach,” says Cote. “I’ve been horrified by some restructuring approaches where people get an email that they’re fired. A more humane approach is needed.”
Another HR issue commanding board scrutiny is recent opposition to ESG and corporate DEI policies. The pushback has prompted several companies to redact language referring to climate change and diversity policies previously included in their 10-K filings. Despite the careful editing, the companies remain committed to DEI initiatives, though less so the tedium of calculating ESG metrics.
“Frankly, I don’t know of any company that says having diverse perspectives and inclusive cultures that deliver new insights isn’t absolutely the right thing to do,” says White. “Every board member is trying to intelligently navigate this issue in an increasingly politicized country.”
Campbell agrees, commenting that if DEI is anchored to strategy, culture and talent and tied to diversity of thought and innovation, the board should not yield to criticism. “CHROs should go to their CEO and say, ‘we need to double down on this, even if we get shot at and criticized occasionally.’ Don’t back down, but also don’t throw it in the face of opposition groups.”
The Best Workplace
A company that prizes investments in technologies that take the monotony out of work, provides training in the use of AI and other new technologies, develops more flexible work arrangements, espouses multidisciplinary teams as career-building exercises and bridges the generational divide by appreciating each person’s contributions, work ethic and diversity of thought will be a magnet of employment.
To do all these things at once requires leadership, an uber-CHRO capable of juggling multiple HR predicaments without losing sight of what is best for the organization’s strategy, culture and people. “A company can’t be 20 things,” says White. “CEOs, in partnership with the CHRO, need to have a clear understanding of what the organization stands for, what defines the culture. That’s the underpinning of every decision.”
The best CHROs have amassed diverse work experiences across different functions, processes and systems, but their most important attribute is character, White contends: “They must be approachable and empathetic, but also tough-minded.” Asked to elaborate, he says, “CHROs are the conscience of the employees, but they have to make tough calls on return-to-work policies, succession planning, attracting and retaining talent and compensation decisions. They’re the critical leader helping senior teams lead and manage change.”
In Campbell’s view, the best CHROs “are able to talk about the future of work and how the workforce supports the business strategy, clients and the organization’s values and culture. Yesteryear’s HR leaders, whose work lives were all about administrative tasks and transactions, don’t have the expertise to navigate today’s people issues in alignment with the go-forward strategy.”
Cote has a similar perspective, describing a superlative CHRO as someone with a “strategic view of what is needed to successfully execute the transformation of work while anchored to the organization’s core culture and principles and the go-forward strategy.”
Undoubtedly, someone capable of managing this plethora of workforce challenges is a force multiplier. A case in point is Anilu Vazquez-Ubarri, former CHRO at public company TPG Capital and, since September 2023, the private equity firm’s COO and board member. Vazquez-Ubarri’s previous job at Goldman Sachs was chief diversity officer and global head of talent. These diverse experiences were brought to bear at TPG in steering a course through the pandemic and the racial unrest that erupted over the same period.
“It takes a crisis or two to highlight what the world would be like without a particular role and why people need to recalibrate the value of that role. There are so many skills we bring to the table,” says Vazquez-Ubarri, who also serves on the board at publicly traded Upwork. “I reached out to my peers for advice via the CHRO networks. I encourage boards to make sure their CHRO has the ability to do the same.”
She adds, “The CHRO is a very lonely role. You take care of everyone else, and no one takes care of you.”
Her comment brings to mind White’s appraisal of the best CHROs as empathetic beings. “Their work is occurring amid massive cultural and communication disruptions, from the backlash on work-from-home policies, fears over AI displacing jobs, employees protesting on social issues and other stressors that pile up to cause frustration and anxiety,” White says. “They can’t just pull out a playbook and do what was done in the past. The solutions are often nonconventional because the times are nonconventional.”
Of course, boards can’t depend on stalwart leadership alone to solve today’s complicated HR puzzle. Cote says board members need to commit time on the calendar to “have a comprehensive discussion of how the company is thinking about the workforce, communicating with the workforce, keeping them engaged and coping with change. Many board members are dealing with these same issues at our own companies. This is much more than a review of DEI goals, financial results or turnover.”
Saade concurs that attention must be paid, “given so many forces at odds with each other,” he says. “Board members need to ask more questions than ever before because there are more unknowns. It’s up to us to discern what is noise and something that may affect strategy.” The HR leaders capable of explaining these solutions to the board and effectively putting them to work may be bound for higher glories. Vazquez-Ubarri says she knows of at least three other former CHROs who are now COOs and one who is a CEO—Mary Barra at General Motors. Saade, who knows Vazquez-Ubarri personally, offers a similar sentiment. “Certainly, as CHROs become more important to a company’s success and profitability, they will have more visibility at the board level. It no longer matters where the people considered for the top role come from. What matters is what skills they bring to the job.”
‘A New World of Work’
“For years, businesses considered people replaceable parts; if someone didn’t pan out, someone else was switched into the job,” says Josh Bersin, a leading workplace industry analyst and author. “Today, human capital is measured by the skills, passion and training of each individual. You lose someone, you may never be able to replace that particular constellation of skills.”
His comment underscores the power that people wield in today’s post-pandemic workforce. The confluence of so many changes in the ways people work and collaborate—evident in the radical redesign of organizations, the use of AI and other technologies and shifts in how people are compensated for their contributions—suggests a “new world of work,” says Bersin, who follows the changing nature of work and organizational effectiveness closely in his role as dean of the Josh Bersin Academy, a global HR development school.
Art Mazor, Deloitte’s global human capital practice leader, agrees. “Companies are revisiting their value proposition for employment and what it means to be part of their organization, [insofar] as people’s social expectations, interest in more flexible work schedules and opportunities to expand their skill sets,” says Mazor, who has spent the past 30 years as an HR transformation leader at PwC, Accenture and now Deloitte.
The two HR experts offer advice on oversight of workforce change:
Compensation
Bersin: “Certainly, when someone in their 20s has as much capability as someone in their 50s, you’ve got a big pay equity problem, one that is exacerbated by how much things cost today. Corporate pay practices are outmoded…. We need to move away from the old model of a bell curve in compensation and pay high performers and highly skilled people outsize pay, in a fair and equitable manner. Boards and CEOs have to get comfortable with this.”
Mazor: “Cutting-edge approaches allowing workers to select between base, bonus and even equity are emerging. While not yet mainstream, these practices warrant attention for their potential to revolutionize compensation models. Pay frequency is also under scrutiny, with organizations boosting the frequency of base pay increases and bonuses to ensure that rewards align more closely with performance.”
Flat Organizations
Bersin: “When I wrote the book Irresistible a couple years ago, people were just beginning to talk about flatter organizations. Now, every company is flattening their organizations. Why? Because there are too many levels of management that inhibit collaborations and innovation. I did a project with a Fortune 100 company that had 4,500 top executives with strange, unique titles grandfathered in. We vastly streamlined that number. Today, the organization can quickly adapt to changes, organizing people into teams so they’re more productive.”
Mazor: “The old top-down management formula, where the company gives people a job and tells them how to work, isn’t applicable anymore. It slows down innovation and how work gets done. People want flexible opportunities to be creative, to be part of the most innovative projects. They want feedback. CHROs know this is the way to get the most productivity from the workforce, but there’s often a disconnect [with senior management].”
Flexible Work
Mazor: “The pandemic accelerated the shift toward remote work on a global basis. People want to work, in person, digitally or some collaboration thereof, but the reality is it’s still evolving. Companies are spending time revisiting their value proposition for employment, what it means to be a part of their organization. CHROs are being more transparent with employees in their communications, taking their feedback to redesign the best ways for work to be done and what the workplace will look like.”
Bersin: “I’ve long said that hybrid work is here to stay since it’s good for people and therefore good for business. The concept of full-time jobs is outdated, with people working by the hour on different projects, often as members of multidisciplinary teams. Companies worry about the impact on culture, but our work with clients suggests that hybrid work results in a more connected and collaborative organization.”
The Role of the CHRO
Bersin: “CHROs used to come up through HR. A lot of companies don’t do that anymore. Instead, they look for someone really good with a multiplicity of technical and people skills who understands the domain of HR and has done this before. They’re like highly paid consultants who go from company to company to fix problems, given the authority to be change agents. The best are willing to throw away the rule book on ‘how things are done here,’ revising pay practices, internal mobility and hiring practices in the current war for talent.”
