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For years, the Chief Human Resources Officer was the invisible member of the executive board – responsible for employment contracts, works councils, and salary negotiations. Today, he or she sits directly beside the CEO in an increasing number of companies. Not out of goodwill – but because an 86 percent skills shortage, €49 billion in annual value creation losses, and a demographic wave of 13.4 million retirees by 2039 have turned talent management into a strategic survival issue. People strategy is now top-management business. The only question is: Which companies have grasped that reality?

From Administration to Strategy: The Quiet Rise of the CHRO

The transformation of the HR function isn’t a management fad – it’s a direct response to shifting market conditions. When the labor market favored employers, HR needed above all operational excellence: contracts, compliance, payroll. But when the market flipped – and skilled professionals became the scarcest resource – the requirements changed fundamentally.

In the U.S., the evolution is most advanced: According to Russell Reynolds Associates, in 80 percent of Fortune-200 companies, the CHRO reports directly to the CEO – not to the COO, not to the CFO, but to the CEO. The logic is clear: If talent is the most critical resource, responsibility for talent belongs at the highest decision-making level.

Germany tells a different story. In many DAX-40 companies, HR responsibility is not a standalone board position but rather a shared duty assigned to another board member. SAP has Sabine Bendiek as its Chief People and Operating Officer. Deutsche Telekom appoints Birgit Bohle as its Board Member for HR. Siemens names Judith Wiese as its Chief People and Sustainability Officer. Yet these are exceptions. In the German mid-market, the CHRO title is virtually non-existent.

That has consequences. Gartner states in its 2024 HR Report: 73 percent of CEOs cite talent management as one of their three top priorities – but only 36 percent of HR leaders actually sit on the executive committee. This gap directly undermines the quality of people decisions.

Sources: BCG Creating People Advantage 2026, Gartner HR Report 2024

Why the CHRO Belongs at C-Level: Three Arguments

Argument 1: Talent decisions are investment decisions. According to the Center for American Progress, a C-level mis-hire costs 2.5 times the candidate’s annual salary. At a board-level compensation of €500,000, that equals €1.25 million – for a single wrong hire. If the CFO co-decides on investments of this magnitude, then the HR leader must co-decide on people decisions of equivalent scale. That only happens if he or she sits at the same table.

Argument 2: Culture is not a side effect – it’s a competitive advantage. McKinsey’s recurring analyses show that companies in the top quartile for employee engagement achieve 23 percent higher profitability than the average. Corporate culture cannot be delegated. It is defined – and lived – from the top. A CHRO seated at C-level can steer culture as a strategic variable. An HR head operating two levels down can only react.

Argument 3: AI is reshaping job profiles faster than any recruitment process. Generative AI will save approximately 3.9 billion working hours in Germany by 2030, per McKinsey. That doesn’t mean jobs vanish – it means job requirements transform radically. The CHRO must anticipate this shift and prepare the workforce accordingly. Doing so requires more than HR expertise: it demands access to the company’s strategic planning processes. And that access exists only at C-level.

What the Modern CHRO Does Differently

The traditional CHRO was an administrator. The modern CHRO is a strategist with three core functions that go far beyond classic personnel management:

People Analytics: Data-driven people decisions are no longer futuristic – they’re standard. The global HR analytics market is projected to reach an estimated USD 12 billion by 2032. Modern CHROs use data for attrition forecasting, skills-gap analysis, and workforce planning. They tell leadership: “In 18 months, we’ll lose 15 percent of our cloud specialists to competitors unless we adjust compensation.” That’s a fundamentally different conversation than: “We need more recruiting budget.”

Employer branding as a strategic function: In a labor market with an 86 percent skills shortage, employer brand determines who wins the best talent. LinkedIn data shows that companies with strong employer brands spend up to 50 percent less per hire and receive 50 percent more qualified applications. The CHRO owns this brand – and thus a measurable competitive advantage.

Organizational design for AI: According to McKinsey, 86 percent of executives say their company could use AI more effectively – and 79 percent say they lack the necessary competencies. The CHRO is the one who restructures the organization so AI works with employees, not against them. That includes redefining roles, building new capabilities, and steering change management. This is not HR in the traditional sense. It’s organizational transformation.

Three German Companies Leading the Way

SAP: Gina Vargiu-Breuer serves as Chief People Officer and Labor Director – and sits at C-level. Under her leadership, SAP has elevated workforce transformation to a strategic pillar. The company systematically invests in AI upskilling for its own workforce and has launched internal mobility programs that transition employees from shrinking areas into growth domains.

Deutsche Telekom: As Board Member for HR and Legal Affairs, Birgit Bohle oversees the people strategy for a group of over 200,000 employees. Telekom was among the first DAX companies to introduce a systematic skills taxonomy and uses People Analytics to forecast upskilling needs – rather than chasing them reactively.

Siemens: Judith Wiese holds the dual role of Chief People and Sustainability Officer. This pairing is no coincidence: Siemens tightly links its people strategy with sustainability goals, investing €442 million annually in training and development across 19 regional training centers. The result? Despite the skills shortage, Siemens ranks among Germany’s most attractive tech employers.

What CEOs Should Do Now

The question is no longer whether your company needs a CHRO at C-level. It’s whether you can afford not to have one.

Step 1: Audit your current setup. Where does HR responsibility currently sit in your organization? Does your HR leader report to the CEO – or two levels down? Does he or she have access to strategic planning? If not, you lack the foundation for forward-looking people decisions.

Step 2: Build People Analytics capability. You wouldn’t make an investment decision without financial data – so why make people decisions without people data? Attrition forecasts, skills-gap analyses, compensation benchmarks, and bottleneck assessments should be as routine as quarterly reports.

Step 3: Treat employer branding as strategic investment. Your employer brand is measurable. Metrics like Verified Reads, application quality, and Time-to-Hire reveal whether your positioning resonates. Editorial feature articles in relevant media aren’t just marketing channels – they’re strategic levers for visibility among the right candidates.

Step 4: Understand AI transformation as a people transformation. Every AI initiative is a people initiative. If 79 percent of executives say their organizations lack AI competencies, that’s not an IT problem – it’s a people-development challenge. And the person responsible for developing competencies is the CHRO. Ensure he or she has both the resources and authority to deliver.

The Uncomfortable Truth

Companies treating their CHRO as an administrative officer will lose the war for talent – not because they offer inferior products or lower pay, but because they recognize structural shifts in the labor market too late and respond too slowly.

The demographic wave – causing €49 billion in annual value creation losses – cannot be halted with job ads. It demands fundamental realignment: how we upskill, how we automate, how we lead and retain people. These are board-level decisions – and the CHRO is the one who prepares them, justifies them, and executes them.

People Strategy 2026 is top-management business. Companies that understood this early will be the winners. Others will learn – though the price of that lesson remains uncertain.

Frequently Asked Questions

Further Reading

• Skills Shortage as a CEO Responsibility: Strategies Beyond Recruiting
• From CIO to Board Member: The Career Path for IT Leaders
• AI Is Not a Tech Problem: Why 27 Percent of CEOs Fail at Their Own Culture

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