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Trends in CHRO Pay

Compensation Strategy & Design|Executive Compensation|Talent|Total Rewards

By Sambhav Rakyan | November 15, 2019

In this interview between Anushree Sharma, People Matters Media and Sambhav Rakyan - Global Business Leader – Data and Software and Head of Talent and Rewards, Willis Towers Watson, we delve into the trends shaping a CHRO's pay.

Q: The role of CHROs has evolved over the years – from just managing the talent management practices to leading the organisational strategic agendas. How this progression in their role has impacted their pay?

A: Most organisations now look at their people as their biggest ‘assets’ – if they are engaged and performing well, then the company will do well. Our research has found that high-performing organisations often have employees who are highly engaged. We see that this increasingly has a lot to do with the evolution of the HR role over the last decade.

HR has evolved from being a largely administrative and operational function, to now taking on a more EX (employee experience) role. Similar to how companies work to better understand and anticipate the needs of their customers, leading companies are mining their own employees’ data in order to better understand their workforce’s preferences; they are getting to know their people better, and they are finding out how to keep them motivated and create an environment that fosters inclusiveness and personal growth. They are also looking into the future structure of the organisation, and for this they are developing a better understanding of the business by working with other functional leaders in the organisation and contributing to the business strategy. Organisational agility has become a major factor in staying relevant in the future of work, and this has helped HR leaders to earn a seat at the table in most corporations.

This evolution has of course helped to positively impact CHRO pay as well. For most organisations, it is now catching up with the pay of most other top functional executives, except for the highest-paid roles which are usually the CEO, COO, and CFO. In many APAC-based organisations, CHRO median TDC is at par or catching up with that of CMO and CIO.

In the Asia Pacific region, the impact that the new breed of CHROs is making on the landscape is showing in the stable growth of ATDC for CHROs especially in the regional hubs – at 16.4% for HK and 12.7% for Singapore over the past three years.

Q: What are some of the external factors that are impacting the pay of a CHRO?

A: The workload, required skillset and strategic impact of HR practitioners are all increasingly leading to CEOs and Boards to look for more strategic and creative HR leaders and to hold them to higher expectations once in place.

For instance, companies are increasingly shifting from organising themselves around functions to organising themselves around tasks. As they do this, they must be more flexible in both how they organise (because different tasks require different organising structures) and where they source the needed skills to complete each task. These skills – especially highly technical or hard to find skills – are often only found in non-traditional workers such as part time workers, contract workers, consultants, online talent platforms, and even AI. These changes make sourcing, organising and engaging the talent required for the business far more complex and difficult.

Add to this the increasing focus on HR and people issues from investors and regulators (particularly in financial services) and how as a result companies now need to work through complex issues like gender neutrality, pay parity, inclusion and diversity, and shareholder’s say on pay among many others. HR is also in the driver’s seat as organisations embrace the future of work and upskilling and reskilling of traditional and non-traditional employees to meet all these challenges, which hold profound ramifications for the organisation’s future survival, growth and profitability.

Q: What are some new trends in the non-monetary rewards offered to CHROs?

A: Although pay at the executive level tends to be largely comprised of monetary rewards, we do see some trends emerging in non-monetary forms of rewards for senior leaders, including in HR. Some organisations are offering job rotation, such as reassigning high potential HR leaders to business roles to provide them with a better understanding of business fundamentals and the changes happening in the business environment. This is an important benefit for CHROs, as this would enable them to truly understand the business and how it works.

Another example is the emphasis on Executive programmes such as MBAs to become more commercially attuned. We also see many CHROs using executive coaching and mentoring support.
Also, most CHROs also get experiential learning on foundations/CSR initiatives as we increasingly see HR heads dual hatting the organisation’s volunteering and philanthropic activities.

Q: Are CHROs’ pay also based on ‘Say on Pay’ strategy, i.e. a firm’s shareholders having the right to vote on the remuneration of executives?

A: The prevailing practice in most regions is that ‘say on pay’ votes apply to those executives who are specifically named in the proxy or annual report. This would include the CEO and in some markets the CFO. Otherwise, the executives named in the financial filings varies from company to company but can include the CHRO.

Generally, most large and complex companies will structure pay, including incentive plan designs as well as pay policies and governance, for all key business and functional leaders on similar lines.

Q: What are some of the trends in CHRO’s pay that you have observed in the last few years and your predictions for upcoming years?

A: CHRO pay is coming to par with the pay levels of other top functional leaders. This is especially true for companies with a complex human capital agenda that is central to the delivery of strategy. Future HR leaders will work even more closely with the CEO and the Digital strategy team in “value transformation”.

We see that it is positively trending because of the role’s impact on the success of an organisation’s human capital strategy. The profiles of CHROs are also evolving. Many of today’s CHROs come with deep technical HR expertise and experience in business. And there is a new breed of young CHROs who are heading digital start-ups; they are tech-savvy and able to provide both business and HR perspectives.

Q: How does the C&B structure of CHROs differ across the regions?

A: CHRO pay difference per region is primarily driven by relevant laws and some regulatory/taxation limitations per market.

For most organisations headquartered in the US and UK, the LTI component is a significant part of executive pay. This is especially true for CHROs based in the US, where base pay comprises 32% of TDC, while LTI comprises 46%. LTI tends to be north of 140% of median base salary, while it is closer to 90% for CHROs based in the UK.

In most Asian markets, guaranteed cash takes a more significant portion of CHRO pay. Across the region, LTI for CHROs averages at only 27% of base salary – with Hong Kong providing 43%, the highest in the region. This practice is not unique to CHROs in the region, rather this is common for executive pay in most Asia Pacific markets. However, data from the last three years shows that growth in Total Guaranteed Compensation has been slower than Actual Total Compensation and Actual Total Direct Compensation, implying that there is increase in STIs paid out and LTIs granted.

*First published in People Matters on 08 November 2019.

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Trends in CHRO Pay QA PDF .1 MB
About the Interviewee:

Sambhav Rakyan
Global Business Leader – Data and Software and Head of Talent and Rewards, India

Willis Towers Watson

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