How Reporting Relationship and Job Title Can Impact CHRO Pay

August 22, 2018 Scott Allen

Given the popularity of our previous  blog on Chief Human Resources Officer (CHRO) pay, we wanted to follow up with a deeper dive into the topic using relevant data from Aon’s Total Compensation Measurement® (TCM) Survey. In this post, we’ll examine the influence of two key factors that can impact CHRO pay: reporting relationship and job title.

Reporting to the CEO vs. a Different Role: Does It Make a Difference?

The TCM Survey collects information on reporting relationships for all executive and senior management positions. Using this information, we reviewed the pay of those reporting to the CEO compared to those reporting to some other role. The vast majority of the time (84%), the CHRO reports directly to the CEO.

Assuming the scope of the CHRO role is similar or comparable across companies and industries, we would not expect the CHRO’s reporting relationship to impact or cause differences in pay. However, even when controlling for revenue size, CHROs who report to the CEO are paid significantly more than their peers who report to some other role.

Figure 1 highlights the difference in pay between CHROs reporting to the CEO vs. those reporting to a different role using all the CHRO data in the TCM Survey.

Notice the 85% difference between those who are the CEO’s direct reports vs. those who aren’t? Keep in mind that CEO direct report results are larger companies ($4.7 billion median revenue) compared to those reporting to other positions ($3.6 billion median revenue) — which accounts for some, but not all of the difference.

When we control for size, large gaps still exist. The largest gap in pay between reporting lines occurs among companies with $10 billion or more in revenue followed by companies with between $2.5 and $5 billion in revenue.

Better Title, More Money?

We also examined whether the CHRO’s title plays a role in creating discrepancies in compensation. For context, the most common titles for head of Human Resources, which we’ve used for analysis here, are Executive Vice President (EVP) and Senior Vice President (SVP), each with slightly more than one-third of all titles, while Vice President is used for one-quarter of the CHROs as shown in Figure 2.

As you move from VP to SVP to EVP, the median total compensation generally increases as illustrated in Figure 3.

As noted in Figure 3 above, across all companies, the pay breakdown is as follows:

  • VP = $650,248
  • SVP = $1,059,015 (a 63% increase over VP)
  • EVP = $1,360,026 (a 28% increase over SVP)

Overall, Senior Vice Presidents make about 40%-50% more than Vice Presidents, and Executive Vice Presidents make about 15%-20% more than Senior Vice Presidents.

Mirror Mirror on the Wall, Who Earns the Most of Them All?

The data clearly shows there is a difference in pay between job title and reporting relationships that is significant in many cases. When we combine these two factors we find the highest paid CHROs are EVPs reporting to the CEO, with a median pay of $1,380,379. That amounts to about 35% more than an EVP who is not reporting to a CEO. A similar pattern holds true at the SVP- and VP-level, where the difference ranges between 26% and 50%.

Next Steps

From the analysis we conducted, you can see that reporting relationship and title are factors that can influence CHRO pay. These findings suggest that the traditional approach to benchmarking, where all incumbents matched to the benchmark are included, may be understating or overstating the compensation for an incumbent. Our TCM database is designed to conduct more detailed analyses, similar to what you’ve seen in this post, to provide you with greater and more nuanced insights on executive pay.

We used Aon’s Total Compensation Measurement® (TCM) Survey to conduct this analysis, and you can too. If you have any questions for our executive compensation experts or would like to participate in the TCM Survey, please contact us now.

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