Five differentiators of high growth technology CPOs from Fortune 500 CHROs

Growth companies tend to have a compressed business evolution journey and can become hugely successful in short periods of time. Their core business challenge is to sustain growth during transformation and disruption by developing the needed infrastructure without compromising the culture and DNA that got them there.

To enable this, they tend to make “over hires” when it comes to leaders, particularly heads of HR. These HR executives can work at a much larger scale but are being brought in to work at smaller companies, to deliver results at a faster pace.

RRA examined what makes these CHROs, or CPOs (Chief People Officers) as they are commonly called, unique. In March 2022 we analyzed the profiles of CPOs at 25 high growth technology companies and compared them to CHROs of Fortune 500 companies. We then discussed these insights with current and next generation high growth technology CPOs to add real world context.

We hope these insights will be helpful to growth company CEOs, and Talent/Operating Partners and Boards at VC/PE firms, as they look to hire or develop their next CPO.

1. The CPO role is a means to meaningfully diversify the leadership team of high growth technology companies

The reinvigorated Black Lives Matter movement was a catalyst to several social and racial justice movements that received national and international attention. As a result, DE&I became a significantly higher priority for organizations, boards and investors. Consequently, the CHRO has become an increasingly important leader for DE&I and social justice at the CEO and board level.

While HR leaders have always been more diverse than their counterparts in other functions, the HR function has seen an increase in diverse appointments over the last few years. This is a recognition of the fact that someone who has walked in different shoes can add real value in experience and perspective to the role. As a result, diversity numbers for high growth technology CPOs are even higher than those of Fortune 500 CHROs.

2. CPO succession is a rarity, even more so in growth companies 

88% of high growth technology CPOs are external hires. Due to the smaller scale of high growth companies, and the lack of focused development programs available, the direct reports to the CPO often have significant gaps between their experience and what is needed to step into the top HR job.

In contrast, HR executives at larger “academy” companies may have deeper and broader experiences within the HR function, leading to more internals taking the top HR job. Not surprisingly, 55% of Fortune 500 CHROs are internal appointments.

Several CPOs we spoke with are finding creative ways to address this. One CPO talked about “stress-testing” her direct reports in the People Leadership Team to assess who has the appetite and skills to learn the job. When she was on vacation, two direct reports split her job. She returned to find that one enjoyed it, while the other was happy to step out of it. This turned out to be a great experience for the two direct reports, and great feedback for the CPO.

3. The value of sitting CPOs is at an all-time high 

As high growth technology companies prepare for, or are already in, the public market, it becomes more critical for a leader to have had board interactions, particularly those around executive compensation. This is heightened due to the dynamic shifts in compensation as companies fight for talent in a tight market.

This dynamic poses an even greater hurdle to internal succession. As a result, 3 out of 4 high growth technology CPOs have prior experience in the top HR job.

Several CPOs we had conversations with noted that, as the role evolves into one of increasing complexity and scope, companies are leaning towards a more experienced or well-known CPO more often than not.

4. Talent experience is more important than ever 

During a company’s journey from hyper-growth to scaling, the People function goes through a critical maturation from a recruiting function to an end-to-end talent function, with a strong focus on retention and development. This focus on talent is further heightened in the broader context of The Great Resignation and rising attrition.

CPOs are proactively addressing this within their organizations. We are hearing from CPOs that they are reinvesting in talent development and training managers to handle it more intentionally rather than superficially. Many are also rethinking talent management for the remote world with their leadership team.

5. Breadth of experience is a critical success factor

1 in 3 high growth technology CPOs has Management Consulting experience. This could be a proxy for the agility needed in the role.

In addition, several CPOs agreed that a breadth of experience is critical to success in this role, with one CPO noting that the need to make fast decisions is paramount, and prior expat assignments prove to be a good training ground for the top HR job.

Our advice to leaders looking for their next CPO

The importance of the CPO role grows as organizations aspire to be more inclusive. Fortunately, there are diverse pools of HR talent, and many of these leaders will come with a depth of experience.

The 1000+ IPOs in the US¹ and 2000+ globally² in 2021, and companies rapidly becoming more valuable regardless of ownership structure and size of employee base, has meant organizations can afford seasoned CPOs and bring someone in earlier than they would otherwise. As a result, there has been a fast movement of talent over the last 12-18 months, driven by companies’ deeper pockets to afford the best talent.

In such a market, step-up HR leaders can prove to be a great option for companies. However, it is important to acknowledge their experience gaps, primarily in the area of executive compensation and board exposure. Organizations should ensure step-up CPO hires get the right exposure to the board during their onboarding. In addition, they should invest in a strong compensation consultant.

Lastly, the CPO’s chemistry with and belief in the CEO is critical, particularly when navigating uncharted territory. Building that connection is even more important when hiring a step-up CPO. Organizations should facilitate unstructured time and candid conversations between the CPO and CEO during the hiring and onboarding process. This helps build the CPO’s confidence, creates a joint acknowledgement of experience gaps, and ensures alignment on expectations.

Authors

Matthew Guss is a member of the firm’s Human Resources Practice, where he leads senior HR executive assignments across geographies and sectors, including the consumer, technology, healthcare, industrial and financial services industries.
Harsonal Sachar leads Knowledge for Russell Reynolds Associates’ Human Resources Officers and Legal, Regulatory & Compliance Officers practices. She is based in Toronto.

References

<sub>1. All 2021 IPOs - A Complete List | Stock Analysis
2. Analysis: Record IPO binge in 2021 leaves investors hung over | Reuters</sub>