Why do so few Reward Directors go on to become Chief People Officers? We explore the strategic contribution Reward can make and offers advice to senior professionals, who are looking to take that next step.

For the second year in a row, Eton Bridge Partners have worked with BoardEx to produce a report analysing the routes taken by HR specialists into Chief People Officer (CPO) roles. In the first year, the data considered new CPO appointments in the UK between 2019 and 2021. This year, the report looks at these appointments, across Europe, between 2021 and 2022. Our research, so far, has found that, seemingly, experience in Reward is not critical to succeeding in achieving a CPO appointment and that it is rare for Reward Leaders to make this move.

The Reward Director role, in many organisations has unique access to the board, compared to its counterparts in the other centres of excellence because of its specialised nature and influence at RemCo. We are therefore intrigued to understand why we see this move so infrequently.

Reward has struggled for some time with PR and generalisations that it is a technical, complex, and niche aspect of the HR Function. One possible reason is that Reward has been seen to equip a CPO to make decisions, rather than being seen as a function that can drive strategic decision-making itself.

We work with many commercial and progressive Reward people with brilliant ideas. They have the potential to be seen as so much more than the person who sits in the corner and does the maths. Especially as the Reward role has been broadening in recent years and can have a very direct and positive impact on attraction and retention strategies. When used correctly, Reward has the opportunity to influence the culture of any organisation.

Boards are increasingly recognising the importance of HR and Reward

We have seen a huge shift over the last five years, particularly during the Covid-19 pandemic, in terms of the increased appreciation of the value that HR delivers to organisations. In tandem with that, there needs to be a recognition that Reward is no longer simply the place where you go when you need to calculate the package a new joiner should receive.

Arguably, the Reward Director possesses a significant amount of the desirable skills that make a commercial CPO today, including an understanding of business financials and an eye for data. Reward Leaders and their teams possess the ability to not just capture the correct data but interpret it to be meaningful across the business. Credible data is allowing boards to make informed decisions working towards key business goals by leveraging verified, analysed internal and market information.

Reward is no longer a technical, back-office function and has a huge potential strategic role to play. It can underpin strategies across HR and equip CPOs and boards to make commercial decisions that link the people strategy with the overall business strategy. It has a broad view of market fluctuations, engagement of current employees, and factors such as inflation. We’ve seen the impact Reward leaders can have on a business, in so many ways, including incentivising the ESG agenda.

Attracting talent must be about more than salary. It should encompass developing a culture people want to be a part of, whilst encompassing retention, recognition, engagement, and the overall employee value proposition and lifecycle.

Using reward as a tool for driving change is just one factor that reward leaders might consider

Group Leader of Total Reward, London Stock Exchange Group

The evolution of the Reward Director role

A carefully designed Reward strategy can influence retention and motivation at key moments in the evolution of a business as well as the employee lifecycle. Reward can create strategies to incentivise staff to stay as well as remain engaged during different business change agendas. By being a part of the HR and business strategy in the early stages, Reward will be able to design a strategy that positively promotes retention during these uncertain times, from an IPO, PE sale or delisting. Arguably, Reward can, and should, be part of the strategic formulation of any deal from a much earlier point in any discussion.

During a recent interview with a Reward Director who has taken multiple businesses through IPO, we explored how Reward is often brought into the conversations too late when some of the behaviours and disengagement were already present within the business.

If Reward is involved much earlier, it can be part of the strategic formulation of the deal as well as the emotional connection that employees have to that change. As Paul Henriques says in our interview ‘The role of Reward in a successful IPO’.

Prior to the IPO announcement, Reward can have at the ready a retention scheme to keep key employees with the organisation through the IPO life cycle. This can release some of the psychological stress and keep employees engaged throughout the entire timeline. (Reward) can make the process easy to understand, and ensure that staff feel appreciated and valued. Both of which are key elements of a successful IPO.

Reward has a unique relationship with the board through Remco, relationships with investors, the company secretary, and corporate finance, compared with its counterparts in HR. We are aware of brilliant HR Leaders who have a background in Reward, who believe this experience has set them up for success.

Patrick Bradley, CPO of Brambles, is one of these HR leaders;

Reward leadership roles set me up really well for a transition to Chief People Officer roles.  In particular, the great grasp of people data analytics that reward roles provide is so essential to modern Chief People Officer roles;  the experience, exposure, and confidence dealing with PLC Boards, investors, and corporate governance; and a secure understanding of how big businesses function in terms of strategy, the essential metrics, performance indicators, and financials.

How Reward Directors can position themselves as future CPOs

From some of the conversations I have had with Senior Reward Leaders, for many of them, the CPO role is not an attractive route. They are comfortable in Reward, financially the benefits are not dissimilar to the package of a CPO role and in many organisations they have the strategic influence at board level, whilst being able to specialise in the area of their strength – the numbers people.

For those Reward leaders who do see the CPO role as their next step, there is an opportunity for them to feel empowered to leverage the unique position they are in and to build relationships, as well as, show they have a wider strategic focus. With some support and nurturing, they can change the current narrow perception of their function.

There are several ways in which Reward professionals who aspire to the CPO seat at the boardroom table can demonstrate that they have that essential broader focus and are ready to step up.

1/ Build strong relationships with the board. Meet separately with the CFO, the CEO and the non-executive directors, and share information with them. Develop your reputation internally as a trusted advisor and create a narrative for events such as the RemCo meeting. At the same time, make sure you learn about the organisation and its strategic plans – what really makes your business tick and know the financials of the business.

2/ Listen to the employees and make your Reward decisions based on the factors on which they place the greatest value. Have the flexibility that ensures your decisions can adjust to the particular circumstances of your business.

3/ Reward people are traditionally characterised as being quite introverted, so work on your communication skills. Show that you can demonstrate to the business the contribution that Reward makes to its success. Bring that to life for employees – and for the board as well.

4/ Forge strong partnerships with the other centres of excellence within the HR function. If you work closely with them, you can ensure they have more respect for the value you bring to the business – and they are more likely to see you as a potential leader and CPO.

5/ Build your external network. Many Reward people mix solely with other individuals who work in the same area. That ensures they can recommend you only as their replacement, which means your next step will be another Reward role. Network with people in a broader range of leadership positions, including CPOs, CEOs and CFOs.

Ultimately, Reward leaders are certainly well-positioned to take on a role as a CPO, bringing their deep understanding of how compensation and benefits attract, retain, and motivate employees.

We’re excited to continue our research into the pathway of a Chief People Officer and interested to hear your thoughts on how a Reward career can be an asset to future CPOs.