It’s tough at the top: why CEOs and the new PM may share a challenging future
11th January 2019 7 minutes read
When you’re an HR high-flier, the world is full of options – but two of the most popular are going it alone as a consultant and reaching the top job as CEO. People Management meets those who’ve travelled these paths to find out what’s really involved.
The gig economy is the workplace story of 2017. Freelance workers are boosting the UK economy by more than £100bn – and it’s a fair bet, given how attractive working for yourself has become in the popular imagination, that self-employed HR and L&D professionals account for a respectable chunk of that total.
You might make the decision to go it alone for any number of reasons, from financial necessity to a desire to work in a more flexible way or focus on a particular specialism.
Lucy Clemas of Turner HR had already chosen to go freelance nine years ago, but when her family circumstances changed and she became a lone parent, bringing in an income was essential. She says: “What started as an embryonic idea became something I had to make work. I had to become comfortable selling myself first, and doing the HR stuff second.”
Benjamin Black of Blacklarke Consulting discovered he liked the flexibility of consulting when he took on a six-month contract with a major bank. “I soon realised that the only way to guarantee flexibility was to be self-employed. The contract gave me the chance to speak to lots of other experienced people, including professional interims who were doing other freelance work at the same time.” He reduced his days and took the extra time to evaluate opportunities and network, choosing to market his strengths in managing change and supporting companies through mergers and divestments.
A natural option for many HR consultants starting out is to work for their former employer, but this needs to be managed carefully. Carmel O’Reilly, a career coach and learning and development consultant, argues that boundaries are important. “One of my consultant clients was happy to work with her former employer as long as there was no conflict of interest. The best way to do it is to be completely honest,” she says. It’s also a means of gaining experience to sell into other clients and reduce your reliance on one source of income.
For some, a realisation that they have gone as far as they are likely to go in their current role can be a spur to branch out. Angela O’Connor set up The HR Lounge, a team of HR consultants with different specialisms, when she realised she had reached a ‘maintenance level’ in her role in 2011. “I was going to interviews, but nothing really stood out. I wanted to run a small business that brought different expertise together,” she says. She now works around two days a week on delivery, and three on planning and simply running the business – an aspect of self-employment many consultants overlook. “You can’t escape bureaucracy. You still have to look after tax and insurance – how to run a business legally,” she says. “If something goes wrong, there isn’t a department to sort it out for you.”
HMRC’s website offers answers to many of the basic practical questions that arise when setting up as a consultant, but it can be useful to bring in advisers too. Gary Miles, former director of business school Roffey Park, worked “non-stop” for 40 years before he decided to retire and set up as an independent consultant last year. “I worked with a financial adviser before I made the leap, because I wanted to make sure I’d be OK financially. I lived and breathed Roffey and I miss it, but I couldn’t keep on doing it forever,” he says.
The first year of operation for many consultants can be a shock – particularly if you’re used to taking home a monthly pay cheque – so it’s worth doing some in-depth analysis of your finances and how you’ll survive. When coming up with a day rate, consider not just the work itself but any preparation involved. Stress the areas where you can add value – many small businesses can access employment law or practical advice via helplines at a reasonably low cost, for example, so how does your support make a difference?
Contingency plans are also crucial. Black was diagnosed with a serious illness last year and was unable to work for several months. He’s since been given the all-clear but did not have the luxury of a corporate wellness plan to fall back on. “If you work for a company, you take for granted things like sick pay, the what-ifs,” he says. “I did have contingency plans, although I didn’t expect anything to happen. It’s also about contingencies for your work with clients – what happens to your project if something happens to you?”
One of the freedoms of being self-employed is being able to dip into projects of different sizes and deal with a variety of issues. Clemas currently divides her time between restructure projects and helping small businesses that lack the resources to run their own HR function. Over the years, she has also taken on interim contracts. “It’s easy to distance yourself from the business when you’re a consultant, so it’s good to be back as part of an in-house team for a while,” she says.
But in a market where being a consultant or swapping ‘gigs’ is increasingly common, how can you know you’re making a difference? “If a client wants repeat business, refers me to someone else or I get direct feedback from someone I’ve worked with, that’s how I know,” says Clemas. “Too often as consultants, we complete something and go on to the next thing – it’s important to stop and reflect.”
When Esther O’Halloran was made managing director of bakery chain Paul in 2012, she asked chairman Maxime Holder why she had been chosen for the job. “Usually it’s the finance director that gets promoted into the top job,” she says. “But he told me: ‘You know the business, you know how it works and where people fit in – and I trust you.’”
O’Halloran, who now works as a business consultant, is one of a rare breed of senior HR professionals to have reached the top role. They remain the notable exceptions: Anne Mulcahy, former CEO and chair of Xerox, was previously vice president of HR; Mary Barra, CEO of General Motors, moved up from global HR VP. In the UK, according to Robert Half’s annual FTSE 100 CEO tracker, 55 per cent of chief executives have a finance background, and around one in four hold a qualification in accounting.
So what made O’Halloran break the mould? She believes it was a rounded experience of the whole business, not just the people function. “Before I went into HR, I’d had a business operations role, so I understood things like customer satisfaction, profit margins, logistics and distribution. Even when I was in HR I spent very little time in the office. I was going round the shops, out in the van, seeing the production line.”
Most HR professionals recognise that exposure to the wider business is a good career move, so why aren’t we seeing a healthier pipeline of them reaching the top job? Maria Stanfordused to be group HR director at Selfridges Group, and now works with executive search firm Green Park. “I think HR professionals can be their own worst enemy,” she says. “Some say: ‘I could never be a CEO because I’m in HR’ – but you have to challenge those personal biases.” Given the number of women in the middle-management echelons of the function, she adds, it may suggest there is a lingering bias over promoting females into senior roles.
Robert Bolton, partner in the global HR Centre of Excellence at KPMG, believes that becoming more data-driven could propel more HR professionals into CEO and managing director roles. He says: “When you’re CEO, you have to respond to analysts and shareholders and data takes front and centre position. There’s no reason HR and people issues should not be more evidence-based.”
But context matters too, says Laura Harrison, the CIPD’s strategy director: “If you are a FTSE 250 company where the predominant occupation of the CEO is to be the face of the company to shareholders, making the leap into that role without a financial accounting background would be quite a vulnerable position to put yourself in. But if it’s a smaller business with a different ownership structure that’s focused on customers and people as much as shareholders, the transition would probably be better.” She points to Andy Street, who went from HR to the top job at John Lewis – a business that, while large, remains intrinsically people-based.
One of the stumbling blocks, according to Sean Smythe, consultant and chair of the south London branch of the CIPD, is that the career path in HR tends to be functionally focused. You might move into ever-more senior HR roles or specialisms, but not gain that essential experience of running a business unit. To gain access to key business discussions that go on between the CEO and the financial director, “HR needs to really get under the skin of the business”, he says.
Right now, people issues are arguably even more central to the success of a company than ever. HR can steer crucial decisions on attracting talent at a time when many sectors face a skills shortage, and can play an important role in corporate governance by holding management to account. Could the tide be turning? Two years ago, Korn Ferry teamed up with HR guru Dave Ulrich to examine C-suite leaders. The traits of chief human resources officers matched most closely with those of CEOs, leading them to conclude that more firms should consider senior HR professionals for the top role.
Many larger companies have created a group HR director or chief HR officer role that can provide a ‘helicopter’ view of the people function but also participate in more strategic discussions. “A group role is good preparation,” says Stanford. “It gives you an overview of the business.”
Harrison, too, believes we will see an increasing synergy between HR directors and CEOs. “The time is coming when we might have to fight harder for human capital than financial capital. The most senior HR directors are able to have a challenging conversation on human capital. Already, all businesses spend a huge amount of time talking about money but they will need to think about human capital in the same way.” When they do, it may be HR directors who speak the language of the business most proficiently.