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Business transformation

The CHRO agenda: The strategic business partner 

Published 23 October 2024 in Business transformation • 7 min read

The strategic contribution of the CHRO is vital to successful business transformation, says Epiroc’s Nadim Penser.

“I don’t think HR is a support function. It’s an active contributor to the business.”

Nadim Penser, Senior Vice-President Brand and Communications, Human Resources, and Safety, Health, Environment and Quality (SHEQ) at Epiroc, the Stockholm-based mining and construction equipment and solutions company, is bullish about the contribution that CHROs can make to a fast-changing business environment.

He sees the CHRO as strategic: primarily part of the leadership team, but one who takes a holistic, people-centric view of the organization. Crucially, they are also capable of making a wide-ranging critical assessment of the business – which is where our conversation begins.

The CHRO must ensure that people throughout the company understand the direction of travel, not least because projecting that mission is the key to engaging and motivating talent

Connecting the dots: HR’s role amid global change

“The level of complexity in the external environment has changed pretty dramatically,” reflects Penser. He reels off some of the new challenges that have confronted business in recent years: geopolitical shifts, environmental crises and sustainability issues, the COVID-19 pandemic, the threat of terrorist attacks, and the rise of AI. The breadth of these issues underlines the need for CHROs to develop their systems thinking.

“As a CHRO, I need to stay abreast of what is happening. But, more importantly, I need to look with a critical eye, to see what’s relevant and what’s not,” he says. “What do we want to adopt or incorporate, and what do we leave aside?” The ability to incorporate a measured, appropriate response to external conditions into the internal realities of the organization is essential. “I think that’s a really important piece: the ability to connect the dots,” he says.

Of course, those changes reach far beyond HR. Even highly successful multinationals are looking to reinvent themselves. That includes Epiroc, says Penser. “We are – and need to continue to be – a profitable, growing, and market-leading company, based on innovation,” he says. “We need to find new profit pools and develop new business models to generate future growth while continuing to meet the monthly expectations of our different stakeholders.”

For Epiroc, sustainability is integral to this vision. “We focus on our positioning as a company that is working to accelerate the transformation towards a sustainable society,” he explains. The CHRO must ensure that people throughout the company understand the direction of travel, not least because projecting that mission is the key to engaging and motivating talent. “We’ve done a lot of work on communicating that vision and mission,” he notes. “A clear purpose, which people embrace and in which they recognize themselves, resonates with people.”

Challenging the status quo means actively changing the constituent parts of the company.

Challenging received thinking

Even with a clear strategic direction, transforming a business is never simple. Established methods and approaches can be deep-rooted, as Penser highlights. Originating within Atlas Copco, the Swedish industrial group founded in 1873, Epiroc has operated as an independent company only since 2018. “This is one of the risks for us,” he says. “When you have 150 years of legacy, your comfort zone is in what you already know.”

The company has a strong performance culture, in most regards a strength but, as he points out, potentially an obstacle to change. “The real challenge is how to create awareness and space to transform. It starts with the recognition that [transformation] is what we need to do, understanding that it’s not just about performance.”

Challenging the status quo means actively changing the constituent parts of the company. “We need to introduce new ingredients,” Penser says. There are different ways to add those new ingredients, including partnerships and corporate acquisitions. “We have bought 27 companies in the past five years, most of which are direct players in our transformation agenda,” he adds. Acquisitions typically provide strength in a strategic area and address ‘blind spots’ by bringing new talent with new skill sets into the business. “We are trying to find people who come in with skills and experience that complement, rather than duplicate, what we already have.”

“When you bring people together in an atmosphere of curiosity and respect, you can create fantastic insights. It helps remove your biases as a person and as an organization.”

Diversity: Conversations about change

Diversity is integral to Epiroc’s drive to recruit talent with a broader range of skills and experience. The benefits are indisputable. “When you bring people together in an atmosphere of curiosity and respect, you can create fantastic insights. It helps remove your biases as a person and as an organization, and that facilitates personal and organizational transformation,” declares Penser. “So, we try to pack as much diversity into our ecosystem as possible.”

HR is spearheading that effort. The CHRO and HR leadership team is responsible for scrutinizing and improving every aspect of the firm’s people processes, from the wording of job adverts, to where roles are advertised, to candidate selection processes. But they also have a role to play in evolving recruitment culture within the company. “It starts with the realization that we have blind spots and weaknesses because we’re too narrow at a certain level,” he says.

Epiroc recognizes that it has a particular challenge around gender diversity, says Penser. While the company’s management team is increasingly diverse and headed by a woman – Epiroc’s president and CEO, Helena Hedblom – the wider employee base is predominantly male, as is typical of engineering firms. That is changing, however, albeit gradually. In the past four years, he says the proportion of women has risen from 15% to 20%.

As with any program of change, CHROs can expect some resistance around diversity initiatives. In this case, which comes from men, who have collectively benefited from the status quo. “Some come back and say, ‘What opportunities are left for me?’ or say this is positive discrimination – that we’re recruiting women because they’re women, not because they’re competent,” Penser says.

He regards such reactions as a natural part of the journey of change and believes CHROs should engage with resistance, working to change mindsets. “Part of what we’re trying to do is to have really good conversations around this – to explain why this is important,” he says. CHROs can get the message across using role models and leadership development and training, among other tools.

Penser has been working to create ambassadors who can facilitate conversations about diversity, a strategy he has developed in response to his own experiences of racism. “My hypothesis is that, generally, racism is based on ignorance,” he says. “The same is true of other forms of prejudice.” He believes that “learning by meaningful conversations” can open people’s eyes. For instance, one company within the Epiroc group facilitated conversations between groups of recent hires, highlighting behaviors in the male-dominated environment that women found unacceptable. “This sort of experiential learning through dialogue is an extremely important element of the diversity [drive],” he says.

He is adamant that CHROs should not be concerned about raising tensions around change initiatives. “If we have no tension in our organization, we’re not innovating,” he argues. “It’s like stress. You need to have a certain level of stress, as it creates the energy to move forward,” he adds. “We’re deliberately challenging our ecosystem through acquisitions and hiring new talent as part of our transformational journey. But we try to make sure we frame it the right way and channel the energy towards constructive solutions.”

Why the CHRO should have a say

That brings us back to Penser’s core views about the role of the CHRO in an organization as central to its transformation. “I don’t think HR is a support function. It’s an active contributor to the business,” he says. “If you start off with that mindset, the question is, then, ‘How can I contribute to the business?’”

In his view, too many HR people “wait to be invited” to contribute, when they should step forward. “You need to see how it all fits together and put yourself at the table by integrating opportunities in the ongoing strategy, linking people, organizational design, learning, and talent,” he says. “You make yourself a strategic partner. First and foremost, the CHRO has to operate as part of that management team. To me, that’s a given.”

That outlook is apparent when we ask Penser which three words he would use to define the role of the CHRO. He chooses ‘adaptivity,’ ‘transformation’ and ‘people-centricity.’ While CHROs have a newly strategic outlook, the human dimension of the role remains fundamental. “At the end of the day, it’s the people that generate results. A holistic view is extremely important,” he says.

It is a reminder of HR’s pivotal role in ensuring businesses have the talent they need, particularly when it comes to digital skills that are in demand across many sectors. Competing more effectively for that talent starts with another shift in how CHROs operate.

“HR has a tendency to be internally focused and talk jargon,” he argues. “I think we need an ‘outside in’ perspective.” CHROs need to dig deeper to understand how employees experience the organization. “We need to start from where other people are. How is this person feeling? Does this person understand their context? How does this person experience the workplace environment?”

He also suggests that CHROs need to spend more time thinking about branding. “Differentiation will come through the brand,” he says. Brand positioning, brand management, and authenticity are crucial. For Epiroc, again, that means nudging the company out of its traditional comfort zone. “We’re an engineering company, so we tend to be focused on ‘left-brain thinking’ – on facts and spec sheets – but, today, we need to have an emotionally appealing brand, linked to the experience of our people,” he concludes.

It is a reminder that the link between the brand and people extends both externally, to clients and customers, and internally, to the people who help produce it. The CHRO will be a vital strategist in ensuring that the people-centric approach branches in both directions.

Expert

Nadim Penser

Senior Vice-President Brand and Communications, Human Resources, and SHEQ at Epiroc

Nadim Penser is Senior Vice-President Brand and Communications, Human Resources, and SHEQ at Epiroc, the Stockholm-based mining and construction equipment and solutions company.

Authors

Lars Häggström

Senior Adviser, IMD Business School

Lars Häggström is Senior Adviser at IMD and a former CHRO at Stora Enso, Nordea and Gambro.

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