It is no secret that the events of the last two years have had a profound impact on the world. The pandemic exposed deep-rooted vulnerabilities in the systems that dictate life in America and around the world, and last summer’s protests following the murder of George Floyd brought about a renewed focus on social justice. Given this fraught landscape, it is only natural that the impacts of these issues seep into the workplace—a reality that human resources departments have been forced to confront head on. Human resources professionals have always carried a heavy burden, but there seemingly has never been a more challenging time than now. If the 2008 financial crisis was a moment of evolution for the chief financial officer, the events of 2020 and 2021 have been that moment for the chief human resources officer (CHRO).
The CHRO is tasked with a wide array of functions. Overseeing the human capital solutions of the company, they are expected to create an impact and a return on the money invested in a company’s talent. Ensuring a healthy return requires actively engaging with employees and working to create the best outcomes for the individual and the company. While the workload of the CHRO is already quite heavy given the traditional responsibilities of the job, recent world events have provided brand new challenges. Ensuring a strong connection among employees, their managers and the company’s top executives is key, and new considerations regarding remote and hybrid work have compounded the difficulty of this already considerable task. Now, more than ever, cultivating a successful company culture will require creative solutions.
During a 2021 webinar highlighting the vital role of the CHRO, Equilar sat down with two human resources experts to discuss the changing nature of the position. During the conversation, Kim Rutledge, Executive Vice President of People at Q2, outlined what she believes has made her successful in her position. “I would say that pushing assumptions to the side, being willing to reexamine the things that I think I believe … has led me to a consultative approach that is very much appreciated,” said Rutledge. Success in an HR leadership position requires empathy and flexibility for dealing with employees, as well as a data-driven mindset to achieve favorable business outcomes.
As the number of responsibilities associated with the CHRO has grown, so has compensation for the role. Equilar’s 2021 HR Executive Pay Trends report detailed the state of CHRO pay in 2021. Median total compensation for HR executives in the Equilar 500 rose from $1.9 million in 2020 to $2 million in 2021, a 6% increase. This steady increase in pay is a trend that remains true for companies of all sizes. Compensation for HR executives increased by at least 4% in each of the four revenue ranges included in the Equilar study. Executives working for companies with revenues from $10 to $20 billion saw the largest spike in pay, increasing by 10.2% year over year. Unsurprisingly, while compensation for CHROs is growing across the board, the biggest payouts are found at the largest companies. CHROs working at companies with a revenue range greater than $50 billion earned $3.3 million at the median in 2021. This is more than double the median $1.5 million earned by HR executives at companies with less than $10 billion revenue.
While median compensation for CHROs in the Equilar 500 increased overall, executives in some industries were luckier than others. The healthcare and technology sectors fared well during the pandemic, awarding their executives the second- and third-highest median pay packages at $2.7 million and $2.4 million, respectively. The communication services sector offered the largest pay packages at $3.5 million at the median, a 54.6% increase from 2020. Awarding such high compensation during a global pandemic was not possible for less pliable industries. HR executives in the basic materials and utilities sectors both saw a decrease in median pay. As the world slowly draws closer to some sense of normalcy, compensation trends for CHROs and other executives may look very different, but for the time being, it pays to work in a sector that can weather the harshest effects of pandemic life.
CHROs working at companies with a revenue range greater than $50 billion earned $3.3 million at the median in 2021, more than double the median $1.5 million earned by HR executives at companies with less than $10 billion revenue.
Women completely dominated the highest HR executive roles in 2021. 74.6% of top HR roles in the Equilar 500 are held by women, up from 59% in 2020 and just 41.7% in 2017. Female CHROs also prevail over their male counterparts in terms of compensation. Women in the top HR executive positions in the Equilar 500 were awarded $3 million in median total compensation in 2021, nearly twice as much as the median $1.6 million awarded to men. Over the course of this transition to female leadership in the last four years, male CHROs saw a 5.7% decline in median pay, while female CHROs earned a median 70.1% increase in compensation.
Historically, HR is a female-dominant department, especially when compared to other segments within an organization, but HR leadership has not always reflected this level of diversity. Ani Huang, Senior Vice President of the HR Policy Association, addressed this discrepancy during Equilar’s CHRO-focused webinar. “What we’re seeing is a natural progression away from [unrepresentative male leadership in HR], where it’s clear that the pipeline of talent is majority female in a lot of cases, so it just makes sense that the CHRO-level person would be female,” said Huang.
This rapid shift toward female leadership is especially significant because the CHRO is currently the only major C-suite role in which women hold the majority of positions. According to Equilar’s quarterly CEO Tracker, just 4.3% of new CEO appointments in 2021 have gone to women as of the end of Q3. While the power and prominence of the CHRO position is rising, the pipeline from CHRO to CEO is still relatively uncommon. This may evolve in the future, but as it stands, women remain considerably underrepresented at the highest level of the C-suite.
Human resources departments and their top executives are taking the lead as Corporate America navigates this new, unfamiliar world. Bearing such a heavy burden has been rewarded with higher compensation overall, with female CHROs and executives in pandemic-resilient industries benefiting the most. Given the new and ever-evolving responsibilities bestowed upon CHROs, along with the traditional tasks associated with the role, proper leadership has never been more important. For better or worse, the nature of work has changed in the last two years, and CHROs will undoubtedly be integral in forming the landscape of modern work moving forward.
Brendan Cullen is Senior Research Analyst at Equilar.