Why are CHROs paid 10 times less than CFOs?  And what to do about it...

     

CHRO

I recently was reading an HR Executive survey on CHRO pay.  The best paid CHRO earns about $8M a year all in.  Pretty impressive. And if you consider compensation as one measure for how much value you add to the world, it’s great to finally see HR get the recognition it deserves. Of course, we could get into a big discussion about the exceptions to this rule: those high-paid, but low value-add parasites earning the big bucks with little to no contribution to the company or the bottom line... but that is a topic for another day.

So are CHROs being recognized for their true value? For argument’s sake, let’s assume that salary level reflects the perceived value of any job, and thus let’s compare the CHRO to other CEO direct reports. You may be surprised to hear (or maybe not) that the highest paid CFO is at $72M a year.  That is 9 times more than the best paid CHRO in the nation. This is not a unique case. Other studies also show a similar trend of paying CFOs well, well above CHROs.  Clearly, as the SHRM article is titled, CHRO Pay Trails Other Top Executives, but the main question is, why?

After all, don’t we hear, more often than not, most CEOs being quoted something along the lines of: “Our people are our most important assets”? Harvard Business Review has even talked about how being a CHRO offers real opportunity, and that the role is one of the most strategic in the company. If that’s the case, why are the Chief People Execs being paid the least? Where is this disconnect occuring?

My view here is that HR has not been able to create the distinction between strategic HR and transactional HR.  And this, I believe, is because HR has not been able to develop appropriate strategic corporate metrics around human capital. Proving ROI has always been the secret to getting more budget. It’s time HR departments begin measuring and sharing out powerful data and proof that they make a big impact on the bottom line.

So where do we start?  The beginning of the journey is at the hiring stage, and how HR can prove their critical role in forming fantastic teams. Checkster has developed a suite of products, including digital reference checks and interview debriefs, that help our customers avoid bad hires. And let’s not forget quality of hire. Checkster’s use of collective intelligence to capture actionable and valuable feedback can help organizations further optimize their hiring practices.

It’s time to start reporting on the significant financial impact of smarter hiring strategies and the value of all HR activities. (Start here with measuring your quality of hire.)  As a CHRO you can use this quality of hire measurement to portray the direct influence of productivity in your organization. After all, increasing your quality of hire by just 1% would likely justify a salary higher than any CFO! Give it a try!

About The Author

Yves Lermusi (aka Lermusiaux) is CEO & co-founder of Checkster. Mr. Lermusi is a well known public speaker and a Career and Talent industry commentator. He is often quoted in the leading business media worldwide, including Fortune, The Wall Street Journal, Financial Times, Business Week, and Time Magazine. His articles and commentary are published regularly in online publications and business magazines. Mr. Lermusi was named one of the “100 Most Influential People in the Recruiting Industry” and his blog has been recognized as the best third party blog.

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