Step into the office of the head of corporate human resources today and the odds are you will find a 53-year-old man with a bachelor’s degree who has been with his current employer for 15 years. He has spent about half his work life in HR roles, most often in workforce development. And he would not be that much different from the man holding the job a generation earlier.
While the face of corporate human resources departments is changing as more women and more executives with international expertise ascend to the top HR positions, predictions that HR leaders would increasingly come to their jobs with broad and diverse front-line management experience have failed to come true. Indeed, HR leaders are even more likely to rise up from their own ranks than a decade earlier, according to a new Wharton research paper titled, “Who Gets the Top Job? Changes in the Attributes of Human Resource Heads and Implications for the Future.“
“It’s puzzling and a little surprising,” says Wharton management professor Peter Cappelli, co-author of the research along with Yang Yang, a Wharton post-doctoral fellow. “Everyone says that HR executives need broader experience as well as more business experience, but it looks like it is still a ‘siloed’ career. Compared to a decade ago, they are even more likely to have begun their career in HR and spent most of their time there.”
The Wharton researchers examined the top HR positions in the 100 largest U.S. companies, measured by revenue, in 1999 and again in 2009. They found that only 20% in 2009 came to the job from outside HR in contrast to 30% in 1999; about 40% were hired from another company in both periods. Only four executives at those companies were still in the top HR job in 2009.
According to Cappelli, at the end of the 1990s, leaders in HR circles and other business departments such as marketing and finance were predicting that executives in these specialized areas would, in the future, need to have more inline management experience. At the time, tight labor markets made HR a more critical element of overall business strategy and operations. Now, as that pressure has eased with high unemployment and a continued decline in union representation, the research indicates that HR leaders reflect greater emphasis on traditional experience in human resources itself. “There’s an underlying debate cutting through the business world in all these functional areas: Are we professionals or business leaders?” says Cappelli.
On the one hand, HR management is becoming increasingly professional, he notes, adding that in the past few decades, the Society of Human Resource Management has grown from 4,000 to 250,000 members who are building specific credentials in HR. At the same time, he says, HR executives like to say they are business leaders. “They want to claim both sources of expertise. But these survey results point more to a professional career path.”
“While the field is growing more professional,” Cappelli notes, “the top leaders are increasingly asked to act like general business leaders.” Understanding the difference is meaningful, he adds, because professionals approach problems differently than leaders with more broad-based experience. “General purpose business executives are trying to figure out what makes sense for the organization, while a professional acts like an accountant or a lawyer with a standard set of solutions to problems. The business executive says, ‘Let’s figure out what works for our business and makes the most sense for us,’ rather than turning to a standard tool kit and rolling out an accepted solution.”
In addition to gaining a better understanding of HR career paths, the authors argue that looking at the top HR job provides insights into what the CEO is thinking about personnel and the corporation as a whole. “When a new person takes over that top role, the change in his or her attributes is quite likely to say something about the change in the priorities the CEO has for human resources going forward. Looking at how the backgrounds of these top executives have been changing should tell us something very important about trends in how corporate leadership sees the HR function,” according to the paper.
More Women, More International Experience
Despite little change in the experience of leading HR executives, the Wharton researchers did find some areas showing major differences in the background of HR leaders over the time period they studied. The most significant is gender. Between 1999 and 2009, the percentage of female top HR officials increased from 27% to 42%. In another study of HR leaders at Fortune 500 companies in 1985, there was only one woman.
“This is a huge change,” says Cappelli. He suggests that the findings may indicate that women tend to be attracted to the HR field and are moving into leadership roles in this function, just as they are in other areas of business. The research also seems to show that there is more willingness to promote women in this area while they continue to confront a “glass ceiling” in other areas. A cynical view, he adds, would be that HR is considered to be a less important part of the company and a good place to promote women to improve the firm’s diversity statistics. “You hear that argument, but it is hard to know if that is true or how to refute it. It is true there are more women in the pipeline in this field, so they are not simply plucking women from other fields. They are coming up through the pipeline and at least they are not being blocked.”
The Wharton analysis also shows that while the average age of executives has declined in the past 10 years, top HR executives are three years older than in 1999. “Why is not completely clear,” says Cappelli. “It could be a sign that the area has been stagnant as opposed to others.” In addition, it might suggest that HR remains below the radar of boards or shareholders who are more likely to dismiss other more visible executives for poor performance — particularly during the recent economic meltdown.
Cappelli and Yang also note a slight decline in education levels for HR executives. While the percentage of top HR executives who have at least a bachelor’s degree and a master’s degree has increased, the average years of education declined. The most recent HR executives had fewer graduate degrees in law or PhD programs. The authors speculate that this decline may be due to less demand for specialized backgrounds, particularly in labor law as the importance of union negotiations fades.
Although the average years of work experience for HR leaders is roughly unchanged, the amount of that experience in human resources rose. The most common experience outside the HR function, and one that registered a large increase since 1999, is international and overseas assignments. Almost half the HR heads in 2009 had either overseas or international business experience, a 300% increase from 1999. This was more common among the 60 Fortune 100 companies that made the list in both 1999 and 2009 — the oldest and largest of the companies. The research also showed that HR leaders had gained significant experience in corporate affairs and communications, with almost 20% of the 2009 leaders spending some time in that area of the business. In 2009, the study notes, only 9% of the HR executives had experience in production operations, but that was up from zero in 1999. “The rise of international experience appears to be striking,” Cappelli says, adding, however, that the increase is perhaps due to a rise in international experience for all managers today.
Another aspect of HR careers the authors studied is the percentage of top leaders who are “lifers” — having spent their entire career with their current company. That figure dropped sharply over the decade, from 38% in 1999 to 28% in 2009. While companies were not filling their top HR job from the outside at a greater rate than a decade ago, they have been filling the pipeline that led to the top job more from the outside, the authors speculate. The data shows that the 60 older, more established Fortune 100 companies that made the list in both study periods were more likely to have lifetime employees in the top HR job.
In looking at the data, the authors identified a set of companies where HR leaders in 2009 had the most experience outside their current organizations. These so-called “academy” companies where the HR executives were most likely to have worked are Citibank, Hallmark, Dell, Pepsi and Pepsi Bottling Group, Morgan Stanley and Verizon, in that order. These companies came in ahead of GE, which the authors note is commonly thought to be a key breeding ground for HR executives and had been the most frequently cited company for outside experience in 2000.
Talent Management and Surveys
Within human resources management, the authors also examined the type of HR experience that led most often to the top job. The number-one area was talent management, with 25% of HR leaders having experience in that aspect of human resources, followed by compensation and benefits. Notably, the biggest increase in experience was in employee surveys, which the authors suggest could indicate a greater emphasis on “HR metrics” in the years between 1999 and 2009. Salary and benefits are the major cost for most companies, and Cappelli suggests that top management is concerned with measuring and accountability when it comes to this large outlay. “The adage, ‘You can’t manage what you don’t measure,’ reflects this move to get more serious about control systems, especially where the costs are high.”
A “more sanguine conclusion is that perhaps HR leaders do not need experience outside of HR to play an important role in business decisions because understanding of such decisions is now so much more widespread,” the authors write. “Even a decade ago, the idea that one should consider operational decisions [that are] based on return on investment was novel: Now it is commonplace. For better or worse, the top HR role appears to have become more of an internal affair.”
Overall, the researchers found that the careers of top HR executives in 2009 more closely resemble those in 1985 than those in 1999, when more of the top HR executives came from outside the function than in either of the other two periods. The authors argue that while job mobility and outside hiring seem to be recent trends, the levels are not that much different today than in 1985. “We might have expected more job hopping and outside hiring as well as more moves into the HR role from other fields over time, but the data do not support that view,” the paper states.
Whatever the trends, Cappelli and Yang open their paper arguing that even HR practitioners tend to underestimate their own importance in the business world. HR leaders, they emphasize, can play a key role in shaping broader societal trends, such as the shift toward two-career families and the management of corporate downsizing. “While HR lacks the glamour within the business community of fields like strategy, its actions have a profound effect on the lives of employees,” the authors write. “Human resources is a crucial point of intersection between the broader society and business.”