Why Companies Should Invest In Their CHROs

How CHROs provide significant ROI

With stubborn inflation, banking crises, and other economic woes filling the headlines, many companies are searching for ways to cut costs and improve their financial health. This often means reducing headcount, as employee salaries, benefits, and wellness programs are typically a company’s largest expenditures. However, the process of cutting staff should be approached with extreme caution, as your workforce is your most valuable asset and cutting employees recklessly can cause severe damage to your culture and productivity.
 
Some layoffs are more harmful than others. For example, CHROs and their teams are integral to keeping the rest of your workforce engaged and attracting high-quality talent – a role that provides significant ROI over time. An effective hiring, onboarding, and employee retention strategy is critical to keeping companies competitive, especially in a hot labor market that has shown surprising resilience in the face of inflation. Instead of viewing CHROs as a potential line item to be slashed, CEOs and CFOs should view them as strategic partners who can ultimately help the company strengthen its balance sheet.

In times of economic crisis, companies have to weigh the short-term benefits of increasing their cash on hand with the long-term costs of undermining their workforce, culture, and operations. By providing guidance on how companies can fully leverage their human capital, CHROs don’t just improve morale and reduce turnover; they also increase efficiency and put companies in a more sustainable financial position. 

Reassessing the Value of Your Workforce

While some companies are attempting to reduce their overhead with layoffs and hiring freezes, the more pressing concern for many hiring managers is a lack of qualified candidates. Despite persistent inflation, there are still around two job openings for every candidate in the United States, a ratio that has been constant since last fall. As the demand for talent remains strong, CHROs are crucial for ensuring that companies are building the right people strategies.
 
Rather than regarding human capital as a drain on the company’s resources, CEOs and other members of the C-suite should recognize that their workforce is the most powerful revenue generator they have. Employees are a company’s biggest expense and greatest asset – they’re the source of all innovation, they drive customer loyalty, and they’re responsible for maintaining efficient daily operations. However, there are more ways to mismanage your workforce than to fully leverage it, which is why the role of the CHRO is only becoming more essential.
 
CHROs shouldn’t be at odds with their colleagues in the C-suite; instead, they should work in harmony with the CEO, CFO, and other company leaders to build a people-focused workplace and business plan. This means meeting employees’ demands for internal mobility and professional development (which is especially important in a tight labor market), reevaluating benefits packages to provide employees with greater support and flexibility, and determining how human capital should be deployed at every level of the company. 

Building a More Effective People Strategy

In a competitive labor market, the ability to retain talent and get the right people into the right roles offers a major competitive advantage. According to a recent survey of hiring professionals conducted by the Society for Human Resource Management (SHRM), the second-biggest cause of turnover is a “lack of career advancement and development.” This is a striking reminder that companies are failing to provide employees with the educational opportunities and professional support they want, which is causing them to lose people and sacrifice productivity.
 
The SHRM survey reflects other research, such as a LinkedIn study, which found that companies capable of excelling at talent mobility retain employees for an average of 5.4 years. On the other hand, companies that struggle with it see average employee retention of 2.9 years. SHRM also reports that the third most-cited cause of turnover is a “lack of workplace flexibility.” Employees don’t just want options when it comes to their roles, workplace education, and professional aspirations; they also want the ability to work where and how they like, flexible scheduling, and access to benefits that meet their individual needs.
 
A good CHRO should be familiar with employees’ concerns about stress, burnout, diversity and inclusion, mental health, and a wide range of other issues that affect morale and performance. A 2022 survey found that 58 percent of employees say their job is the primary cause of their mental health challenges. It’s clear that companies need to be more proactive in taking care of their people, and the CHRO can give them the tools and insight they need to do so. 

Reframing the Role of the CHRO

CHROs have become more strategic and growth-oriented than ever before. Companies are increasingly recognizing that employee engagement and satisfaction are vital for business growth – and more reliance on CHROs. Just 21 percent of employees are engaged at work, and Gallup estimates that this has cost companies $7.8 trillion in lost productivity. Gallup also found that top performers on employee engagement saw 23 percent higher profitability, 10 percent higher customer loyalty, and much lower turnover.
 
The CHRO can generate significant ROI by implementing benefits programs that employees will actually use (thereby decreasing turnover), allocating human capital more productively, establishing clear paths for talent mobility, and making informed hiring and retention decisions. CHROs serve as a liaison between employees and the C-suite, and they have access to data on turnover rates, benefit adoption, engagement, and a wide range of other indicators of workforce health. By using this data to address employees’ needs and improve performance, CHROs will provide healthy ROI for companies that invest in them.
 
CHROs and their teams are even more critical during periods of economic volatility, as they help companies make pivotal decisions about the composition of their workforces and ensure that employees’ needs are being met. When companies treat CHROs as strategic partners and managers of their most valuable assets – their people – they will see steadily increasing ROI in the years to come.

Rob Whalen is the Co-founder and CEO of PTO Exchange. While building the company, Rob and his co-founder, Todd Lucas, found their mission was to enable flexibility into those benefits that employees earned but could not utilize. They also discovered that by enabling this capability and accountability, PTO Exchange created equity and inclusion for workers to be compensated for their accrued productivity creating a better benefit.