The CHRO’s Critical Role in Times of Crisis
An interview with Jeff Brodsky, Vice Chairman, Morgan Stanley
Published November 24, 2021
Published November 24, 2021
If 2001 was the board’s crisis following the Enron scandal, and 2008 was the CFO’s crisis during the financial crash, 2020 was certainly the CHRO’s crisis. Between COVID-19 and the emphasis on social inequity and injustice, HR professionals were unexpectedly thrust into the corporate spotlight.
Similar to the introduction of Sarbanes-Oxley in 2002 and Dodd-Frank in 2010, the SEC’s new 2020 rules for disclosures around human capital management (HCM) are expected to be a sign of more to come, and the future of business will be equally as focused on people as it is on financials.
Jeff Brodsky, Vice Chairman at Morgan Stanley, provided the opening keynote for the 2021 Equilar Executive Compensation Summit, a four-day virtual conference exploring the complex, interrelated issues around executive pay and corporate governance. As a Senior Advisor on strategic issues related to executive talent, succession, and diversity and inclusion, in addition to leading the company’s COVID-19 response, Brodsky spoke with Blair Jones— a Managing Director with Semler Brossy who has over 30 years of experience in the executive compensation consulting space—about a variety of themes critical to today’s corporate leadership.
The wide-ranging conversation was a deep dive into managing the people side of the business in times of unexpected crises, the future of work, driving real progress in diversity and inclusion initiatives and, notably, actionable advice on how to measure and incorporate these initiatives into compensation and benefits plans. The edited interview below features highlights from this discussion. Watch the full interview on demand here: https://bit.ly/3GoCqXb
Jeff Brodsky is a Vice Chairman at Morgan Stanley and a member of the Firm’s Operating Committee and Management Committee. As Vice Chairman, he works directly with the CEO and board of directors as a senior advisor on strategic issues related to executive talent, succession, and diversity and inclusion. He also helps lead the firm’s COVID-19 response, as well as acquisition integration efforts for E*TRADE and Eaton Vance.
Prior to that, since joining Morgan Stanley in 1987, Mr. Brodsky led HR for many of the firm’s businesses, including Global Wealth Management, Investment Management, the Corporate functions and Discover (before its spin-off). When the Morgan Stanley Smith Barney Joint Venture was announced in 2009, Mr. Brodsky was named the head of the combined MSSB HR team and was appointed to the MSSB Executive Committee.
In 2011, Mr. Brodsky was named the Chief Human Resources Officer, and he held that position through early 2021.
The Rise of HR Function
Blair Jones: HR organizations were thrust into the spotlight as we tried to cope with the COVID-19 crisis and had to react swiftly to a new working landscape and economic outlook. Can you speak about the rise of the HR function?
Jeff Brodsky: If the financial crisis was the CFO’s crisis, 2020 was the CHRO’s crisis. Think about what most firms have been through in terms of taking their workforces entirely remote, or largely remote, and dealing with both physical and mental health issues. If that wasn’t enough for HR departments to manage, in the U.S., social injustice was finally getting the attention it deserved for a really long time.
On the positive side, it has helped business leaders understand and respect the extent that HR are truly business partners. On the other si de, HR has been the first responders during this crisis. I hope organizations wi ll take the time to think about the health and well-being of our own employees and really figure that out.
Managing Remote Roles
Jones: Can you talk about how you managed your role while being remote?
Brodsky: COVID reduced the barrier between work and personal life. As HR practitioners, we’ve always tried to separate the two, but it’s hard when you’re sitting with an employee in a meeting, and they’re in their living room. It just gets a little bit more intimate.
For me, it was really about reaching out at every level of the organization and understanding where people were at. Every day I made a point of calling three people across the firm, in the height of the crisis, and just checking in on where they were professionally and where they were emotionally.
The other thing I would say here is that in a crisis like this, particularly from the seats we all sit in, you have to be willing to make decisions and then see how people react to them.
Our culture [at Morgan Stanley] tends to be a little bit more consensus-oriented, and there were times during this crisis when that worked, and there were clearly times when we just had to make decisions and then evaluate later. Working through fact and fiction made it a little bit challenging.
Remote Work and Attrition
Jones: Right. People might be able to work anywhere at this point with technology. You have that extra added challenge as well.
Brodsky: No good crisis should go to waste. As organizations, we’re going to be figuring out how people work, what that means about remote working and will that make some job opportunities more attractive or less? The next chapter that we’re going to write is how remote work affects attrition and how it affects cultures coming together.
Hybrid Office Work Models
Jones: What is your prediction about what hybrid models are going to look like and what the office of the future looks like?
Brodsky: The future is so dependent on technology. Zoom works when everybody’s on Zoom. The question really becomes what technology will enable a hybrid work environment where some people are in, and some people are out?
For us, we believe people learn from being together. We’re apprenticeship-based. I know for me, personally, being back, the amount of work I can get done walking to the pantry, the men’s room and the elevator could be hours of Zooms. Ultimately, it will lead to more flexibility.
Remote Team Culture
Jones: Though you’re more in favor of in-person work, how do you think about culture with remote teams? How do you make sure it remains strong when people aren’t necessarily together in person?
Brodsky: Culture is what makes an organization successful or unsuccessful. It has to be at the epicenter of everything you do. My fear is that if we go completely remote, people might understand culture, but it’s very hard to feel culture. You need to sit in a conference room with people and see how they ask questions, how they engage and how they deal with conflict.
By the way, that’s not to say that remote can’t work and shouldn’t work. There can be so many different flavors, but you can’t just never bring people together, in my opinion. It could be a two-to-three-day retreat, and you could get a ton done in that space, but there needs to be a time and a place to bring people together.
DEI and Social Justice
Jones: In the last year, not only did we have to deal with the COVID implications, but also there was a whole step-change with the focus on social justice. What have you done at Morgan Stanley relative to DEI in response?
Brodsky: When the social justice movement gained momentum, we wanted to understand, across the firm, how our employees were feeling, and we learned a lot from it. Recently, with the discrimination against the Asian community, we also hosted open conversations. We’ve been very focused on making sure people understand how other people feel.
The firm also launched the Institute for Inclusion. We went out and we asked some of the greatest minds in the DEI space to help us on this journey of figuring out the best ways to change the way people think, change representation, motivate people to stay and motivate people to want to develop. In our very first meeting, one of our Institute members said: “If you go out to the other banks and you hire more diverse people from those banks, that’s not success. Success is going out and making the pie itself bigger.”
If you don’t take unnatural actions in organizations where the majority is white men, you’re never going to change how this gets done.
Jones: So how do you build the pie?
Brodsky: For me as a practitioner, one of the things I’ve learned through data is that representation is easy to measure. We all can set goals around that and hit them or not. It’s not just about representation, it’s really about belonging. How do you measure if people feel like they belong in a company? When you do your engagement surveys and you’re looking at the information, how do white employees respond versus Black employees to the same question? Not the DEI questions, but the questions around career, responsibility and development.
Then ultimately it’s about what we are doing to commit to help people. What are we doing to develop them in a very intentional way, so it changes? It’s hard, and it’s going to take a long time, but it has to be a mindset.
Tying Goal Measurement into Compensation
Jones: I was going to ask you about measurement and how you set goals, and specifically how you then tie it to compensation.
Brodsky: Doing the right things in the DEI space should be everyone’s responsibility, and it’s part of everyone’s job. Measurement in this space is around retention, recruiting, representation, sentiment and promotion. I would like to see organizations have additional rewards for those who go above and beyond and lead in this space.
Jones: How do you continue the dialogue that sometimes can be hard around DEI?
Brodsky: I often get the question, “You’ve been at Morgan Stanley 34 years, you were the CHRO for 10 years, what do you think has made you successful?” My answer has consistently been, “The thing that I think has made me successful is the thing that I thought would get me fired one day, which is my willingness to say what everyone in the room is thinking and no one else is willing to say.” You have to know your audience, but you have to be willing to have really tough, honest, heartfelt conversations with people.
The last 18 months have given us the license to really rip off the Band-Aids and have the hard, tough conversations and let people express the way they’re feeling. It doesn’t mean everyone agrees, but I think we’ve created a space.
Corporate Resiliency and Success
Jones: As you think about Morgan Stanley and its success, it’s a company that’s been around for a long time. How do you as a leader contribute to that resiliency?
Brodsky: Obviously, one of the things that took place in 2020 was to prioritize employees. Not that employees aren’t always a priority, but often, we think about clients and shareholders, and we don’t necessarily put employees first.
Pre-COVID, post-COVID, I’ve been on this journey around, “What do we do at Morgan Stanley that makes people really understand that we care about them and that we want them to stay at a time when all the tech firms were creating climbing walls and free food and nap pods?” For me, it was always around healthcare.
When we got into COVID, for example, we had really prioritized mental health. Organizations, particularly larger organizations, need to accept the fact that mental health is health, and healthcare is needed in that space. We were ready to dispense with a typical EAP [employee assistance program] and move to online-based mental healthcare for our employees.
Managing Mental Health
Jones: How do you take what you’re doing and help managers talk with employees about mental health issues to better support their teams?
Brodsky: We have to start with the mental health of the managers. We need to provide benefits and services that get our employees mental health benefits. We need managers to tolerate that people are suffering loss. Everyone has had an experience over the last year, and if we don’t embrace and accept and bring help and get help as organizations and make sure managers prioritize that, it won’t work. Mental health needs to be part of the HR language. During 9/11, we were the largest tenant at Two World Trade Center, and coming through 9/11 and the financial crisis, I thought, “Wow, it’s been an in credible career, nothing can top that.” 2020 topped that, but those two crises really prepared me to lead going forward.
One of the biggest challenges organizations face is that senior people— managers and leaders themselves—need to accept the fact that they have their own issues as it relates to mental health. I would just say to everybody out there, we need to stick together, we need to have conviction about this.
Year End Decision Making and Productivity
Jones: One of the hardest things, that especially this group of practitioners had to deal with, were the year end decisions. How do you determine what’s fair from a compensation standpoint when you’re in the midst of something like this? Can you talk about how you thought about that at Morgan Stanley?
Brodsky: What it really comes down to is productivity. How do you measure productivity? Then, how does that translate into compensation? What are the overtones of sensitivity that we wanted to have in a year where financial services was doing quite well, and the rest of the world was in shambles ? Particularly in financial services, where so much of our compensation is discretionary.
When the crisis recedes, we should be thinking about what attrition and turnover is going to look like at all organizations. People, largely speaking, were happy to have the comfort of that place they worked, that place they trusted, and now they are stepping back and asking: “Well, how do I feel in my life? How do I feel about how I was paid?”
Jones: How do you do that going forward? How do they change?
Brodsky: We haven’t gotten to, or specifically talked about, some of the issues in the diversity and inclusion space and the sustainability space. You could put a whole list of things together that companies need to expe ct from their employees, and certainly the leadership. Data analytics in the HR space is going to be an even greater growth area. The outputs at the end of the comp process are going to be what they’ve always been, but there is a substantial opportunity to develop tools for managers to measure inputs that have just sat out there before.
Jones: Anything you’d like to leave us with?
Brodsky: People have been through a lot in 2020. Whether it’s been loss of income, increased or decreased housing costs—the costs of building a home or buying a home right now are at all-time highs—people need help with that, too. It’s the triumvirate: physical health, mental health and financial well-being. Companies that address this well are going to differentiate themselves and see employees flocking to them more than the companies that say, “Hey, you never have to come to the office.”
And I would add that just because we are HR people doesn’t mean we shouldn’t prioritize our health, our well-being. Remember that you can’t lead and do this, the kind of creative work you need to do, if you’re not OK yourself.
Blair Jones has 30 years of executive compensation consulting experience. She has worked extensively across industries and has depth of expertise working with companies in transition. Prior to joining Semler Brossy, Blair was the practice leader in Leadership Performance and Rewards at Sibson and an Associate Consultant at Bain & Company. Blair holds the designations of Certified Benefits Professional (CBP), Certified Compensation Professional (CCP), and Certified Executive Compensation Professional (CECP). Blair has been named to the D100, NACD Directorship Magazine’s annual list of the most influential people in the boardroom community, including directors, corporate governance experts, regulators, and advisors, for ten consecutive years (2013–2022).
Named to the D100, NACD Directorship Magazine’s annual list of the most influential people in the boardroom community, including directors, corporate governance experts, regulators, and advisors, for eight consecutive years (2013–2020).