Daria Rudnik (00:02.058)
Welcome to Built by People Leaders podcast. I'm your host, Daria Rudnik, and this show is for HR and L &D leaders in scale-ups and fast-growing companies, those building real impact from within and building AI radio organizations. If you go to dariarudnik.com, you can download the State of HR in the AI Transformation Report, 2026. And today we have an amazing guest. I'm so excited to have this conversation, Ted Forbes.

Ted is a co-author of a book, Making HR Matter, What CEOs Want and How to Deliver It. He's a business trust HR leader, executive coach, leadership, talent development pro, ex key controller, ex wellness guide, ex CHRO chief learning officer. That hat and proud dad. Wow. What a variety of interests, Ted. Welcome to the show.

Ted Forbes (01:00.198)
Thank you so much, Daria. I'm excited to be part of this and I appreciate the invitation.

Daria Rudnik (01:06.478)
I'll start with the question that worries me a lot and a lot of HR leaders. So what do CEOs want?

Ted Forbes (01:15.07)
It's great question. And honestly, we wrote a whole book about it. I think what CEOs want depends on their experience that they've had with HR in the past. And if they've had a good experience with a strategic, impactful, business-focused HR function, then that's what they want. If they have experience with a tactical, compliance-oriented, legalistic,

function, then that's what they want because it's all they know. And that's the premise of our book is that we think CEOs deserve more, but a lot of them don't know what they're missing.

Daria Rudnik (01:57.546)
Yeah, that's really good. I mean, we learn by seeing your role model. If we don't see the role model, how can we learn? Tell us about yourself and your experience in HR.

Ted Forbes (02:08.785)
Well, it's a great lead in to how I got to where I am today. And I'll say straight away, I'm at the tail end of my career. I've worked for the last 25 years in HR in talent management and then subsequently running HR functions at a number of different companies. I've worked at places like United Airlines with 85,000 employees.

I've worked in small startups like Codopaxi with 70 people when I started and 300 when I left. So it's a wide range of opportunity to bring HR expertise to the table. But I think the thing that I want to share with you, Daria, is that I did not start out as an HR person. I went to business school. I got out of business school. I worked in consulting for a number of years.

I was very involved in merger integration work, strategic alliances, joint ventures. And if you recall in 1991, that was when in this country, the World Trade Center bombings happened and the global economy ground to a halt. And my consulting work fell off a cliff.

And I had been doing some consulting work with a company called Capital One, a big financial services organization, and had a good relationship with the head of HR. And when the economy fell off a cliff, I needed a job. I had a wife and three and a half children. And this guy, Matt, was a good colleague who always said, you ever need a job, call me. So I did. I called him and I said, hey, Matt, I need a job.

And he said, come on up and let's talk about what you can do. So fast forward through taking a bunch of tests and whatnot to get hired, he called me up and said, I want to offer you a job. I went up to his office and I said, what do you want me to do? And I thought he would put me in business development or strategy or something like that because that was my background. And he said, I want you to work for me in HR.

Ted Forbes (04:07.535)
And if there was a little bubble over my head that said, you know, the little dialogue bubble over my head, it would have said, no. HR is where people go who can't do anything else. But of course, I needed a job. So I didn't tell him that. I said, Matt, I don't have any experience at all in HR. I'm a business guy. And he said, that's exactly why I want you to work for me. So that was my first HR job. And it was a

really good opportunity for me to bring in a different perspective on HR versus what someone who had grown up in the function might have brought to the table. So that's how I got started.

Daria Rudnik (04:48.023)
Yeah, I love it. mean, bringing business perspective, another perspective, because I do feel that sometimes we in HR don't have it. We have it by talking to leaders, by learning from them, but not specifically by doing business because it's a cost function in most cases.

Ted Forbes (05:11.343)
Yeah, exactly. And my first meeting, I was assigned a role as an HR business partner at Capital One. And the guy who was the chief financial officer of the company at the time had gone to the same business school that I went to at the University of Virginia. And Matt said, why don't you go support Dave, who's the CFO, because you guys went to the same business school.

So I went two weeks into my working at Capital One, I went and sat down at the global finance leadership team meeting that took place every other week. And it happened to be right before the earnings call and they were going through all of the company financials. And I started asking questions about the financials of the company. And all of the people in the finance team started looking at me going, wait, you're an HR guy. You don't know this stuff. And I was like, well, I do.

And that was a great foundation to build on.

Daria Rudnik (06:06.541)
Like you said, if leaders do not have high expectations from HR because they haven't seen good HR, how did you earn this trust apart from asking the right questions? But I mean, what are the best ways to kind of show there was another way there was another way HR can support your function?

Ted Forbes (06:27.417)
Yeah. Well, what we write a lot about in the book is, and you mentioned this in the introduction, the idea of being a business first leader. And I think most HR people may have some level of understanding about the business model of their company, but they could always learn more. And the secret, I think, to bringing what we call relevant HR in the book

and we call it that because it's the opposite of irrelevant HR, is the notion that you are a business person first and an HR person second. And I think it's a matter of bringing that perspective to everything that you do. So if you understand how your company makes money, if you understand the industry that it's in and the dynamics of the industry, if you understand the strategy and the players and all those kinds of things,

and then you use that as the entry point to designing the work that you do in HR, then you're connecting your HR work directly to the business. And that, to me, is the secret.

Daria Rudnik (07:35.565)
Do you have a storyline, even example? I mean, it sounds great, but like how in can we do that?

Ted Forbes (07:42.672)
Yeah, I have a ton of stories because I've had a long career doing this. I'll give you an example. So one of the ways that we talk about in our book of connecting HR to the business is what we describe as income statement thinking. And very simple idea, how do you connect the work that you do in HR to the income statement of your company?

And we go a little bit further and perhaps provocatively and say, if you can't connect your HR agenda to the income statement of your company, then you need to ask yourself, why am I doing this? So let me give you an example. This came from when I worked at backcountry.com, which was an online retailer of outdoor gear.

We had a monthly business review meeting, as most companies do, and we were managing very carefully. We were owned by another firm, an investment firm, that looked at EBITDA as our key metric. And so when you look at what drives EBITDA, what drives EBITDA is good cash flow, good profitability. And one of the key levers in any organization is its labor cost.

So you could look at labor cost as a line item in the income statement and simply talk about our labor cost as this. But there are many, many more things that we felt aligned to labor cost. And so I work with our company's chief financial officer, and we designed a metric that we called fixed labor cost. And it was the salary, of course, for all the fixed labor costs.

But it also included things like benefits cost and relocation cost and bonuses and perks and all of the different things that we offer to our salaried employees as part of their overall compensation package.

Ted Forbes (09:47.64)
So what came out of the fixed labor cost metric was an aggregate of a lot of different drivers that people in HR would say, well, I own relocation, and I own benefits, and I own perks and all of the different things that I own. But we put them together into one metric so that when we sat down in the monthly business review and we talked about fixed labor cost, we had one line item.

And we had a budget for that line item. And every month, we measured it plus or minus. The idea was to stay plus or minus 2 % of neutral on fixed labor cost. And it was a very simple way to talk about how it impacted EBITDA, because if our fixed labor costs got too high, our EBITDA would go down. And our CEO would say, OK, well, what's going on here, folks? So that was an example of taking the HR work that we did and tie it to

the income statement. Can I add one more little nuance to that? So I love to tell this story. So we had a chief technology officer. This was an e-commerce business, and it relied heavily on technology to be successful, which of course was absolutely the right way to think about it. But our chief technology officer loved to hire expensive talent. And so when our CTO

Daria Rudnik (10:48.247)
Sure.

Ted Forbes (11:12.067)
wanted to hire somebody who was going to cost more than what we thought the position should be. And this is from an HR perspective. When you think about leveling and banding and the max, min, and midpoint of a salary range, when he wanted to hire somebody that was higher or outside of the salary range, we just ran the numbers and said, well, here's how it's going to impact our fixed employee cost number. Do you want to go talk to the CEO about that with me?

And it was an easy conversation because he was like, well, if I hire somebody who's too expensive, it's going to reduce our EBITDA. And my boss isn't going to like that. And neither are our investors. So it was a simple way to say, OK, if you tie something like a compensation decision on hiring an employee, which happens all the time in HR, to its impact on the EBITDA, which is what our CEO was being held accountable by the board for.

it makes it a very transparent conversation. And that's an example of how, yeah, yeah, go ahead.

Daria Rudnik (12:11.757)
And especially if their bonuses are tied up to that.

Ted Forbes (12:16.601)
Yes, exactly. And all of our bonuses were tied to that. That's the thing. Everybody on the executive team's bonus was tied to the company EBITDA performance. So if our chief technology officer did something that reduced EBITDA, it impacted the whole team.

Daria Rudnik (12:33.591)
Well, I do understand HR can save costs. We can hire cheaper people, reduce turnover and things like that. But let's talk about development, which is an investment, like leadership development, people development and well-being. And it's pretty hard to actually directly tie it up to income statement and to any kind of

Ted Forbes (12:48.484)
Okay.

Daria Rudnik (13:04.263)
monetary ROI. How do you justify that?

Ted Forbes (13:09.807)
So let me answer that wearing my talent management hat. And it has to do with how you think about who the high performance individuals are in your organization. So everyone in HR is familiar with a nine box model. It's performance versus potential. And we use it all the time to identify high pose. And I personally don't like it because it has all kinds of thorny issues.

But we actually used a nine box in a very productive way to connect talent to the income statement. And let me tell you how we did it. In a fast growing organization, we found that the most important people, what we call the growth drivers of your company, and these are people who drive revenue, by the way, and profitability, those people are the ones who have two characteristics. And we plotted this on a nine box. And it's in the book.

Our vertical axis on our nine box for identifying the growth drivers was the extent to which an employee role modeled the culture effectively. And on the horizontal axis, we plotted the extent to which a company, excuse me, to which an individual added extraordinary economic value to the company. Okay?

So on one axis, you have cultural role model. On the other axis, you have adding extraordinary economic value. And we could plot that. We looked at the culture side of it and said, these are the people, the people at the top of the vertical axis are the ones who we want to put in front of new hire onboarding. We want to send them to investor presentations. We want them to represent the company at conferences because they are the people who exemplify our culture.

And we felt that growing a company was directly connected, and we have data to prove it, directly connected to having a strong, healthy, vibrant culture where people could thrive. They'd be more productive. They'd deliver better and innovative results. And then on the horizontal axis, we had the idea of adding economic value. And the way you can add economic value is you can open up new markets. You can design new products. You can find new customers.

Ted Forbes (15:31.696)
You can create more efficient ways of producing products. You can find better distribution systems. So there are all kinds of ways that you can play around with people who drive value. And we were able to look at what people did and say, how do they add value to the company? So if you take those two axes and you get in the upper right-hand corner of it, your most important people, the people you want to bet the growth of your company on, are those individuals who

create extraordinary value economically and who are the role models for your culture. And it's usually, you know, it's like any hypo way of thinking, you're going to find that somewhere around 15 to 20 % of your people fall into that. But now here's how we tied it to the income statement. We invested differentially in those people. We gave them better opportunities for

promotions, we put them on the succession plan, we let them know that they were on the succession plan. And as we created a sense of their ability to add more value to the company, that motivated them to do more of that. So we could actually look at someone whose specialty was product development and see that by telling them that you are part of the growth engine of the company, the extent to which they drove that value would increase.

and that made the company more profitable.

Daria Rudnik (17:02.605)
Okay, I mean, I love it. It's great. It's amazing. I'm just thinking of a poor accountant who's sitting at the desk.

not able to produce any significant economic value or total reward specialist. How do you like what? Yeah, how do you relate them?

Ted Forbes (17:26.415)
Well, it's a great question. what goes on, what I did not say, and you've asked me about it, as you should, is that our process did not mean we didn't invest in those people too. So the difference is that for the people who are the growth drivers of the company, we invested more because we saw that there was a higher ROI by investing in them.

But at the same time, we still had a learning and development program. We still had ongoing training. We still had opportunities for people to visit different sites and see how the company operated. So we didn't just forget about those people. We paid attention to them too, but we paid more attention to the people who drove the economic engine of the company.

Daria Rudnik (18:16.589)
I mean, I so much enjoy this conversation because it's not about what you do. It's about the mindset, like how you think about what you do. And it's not, okay, we need to develop leaders. Yeah, everybody does that. But why, how, what kind of leaders, for what, how do we measure the results? having this perspective first is so valuable. thank you so much for sharing those stories. You mentioned you have a...

characteristics or traits over successful CHRO. How people can become that kind of HR people leaders?

Ted Forbes (18:55.845)
Yeah, I love talking about this. So if I can answer it this way, I think it might be a fun conversation for us to have. So when we go back to this idea that we write about in our book called Relevant HR, we have a whole section in the book that says relevance starts with the mindset.

And I get asked the question a lot, how do I find people who can add this perspective as an HR leader? What should I look for? If it's a CEO, they'll say to me, Ted, what should I look for in an HR leader? And I'll just give you a quick run through some of the ideas. And what I want you to notice here is that nothing that I'm going to talk about has anything to do with HR expertise. OK?

So if you're searching for your next senior HR leader and you want someone who adds value to your company from an income statement point of view, you want people who have a broad and curious mind. You want people who ask a lot of questions. Why is this? Why is our industry operating the way it is? Why do we have this issue at our company? So someone who's very curious and thinks broadly. I mentioned I went to business school at the University of Virginia. I was trained in a general manager's program.

So we study marketing and finance and operations and organizational behavior and strategy. And we study them all equally because the belief was that you need to think like a general manager. And a general manager looks at all the different functions of a business to think about those levers that they have to pull. We look for people who are very authentic, people who represent who they are and are very easy to be in a conversation with.

We look for folks who have great networks. So if you have a deep and vibrant network of people across your industry, across your company, across your function, that's a great asset. We look for people who understand technology. That's more important now than ever with AI just changing things on a daily basis. We look for people who are mentors, people who have the ability to mentor effectively.

Ted Forbes (21:17.669)
We look for people who are data-driven, analytical, and we look for people who have a mindset that says, I recognize that business and people are not two different things. They come together. So those are some of the things when we look, you know, when a CEO says, what should I look for? I go through that list of characteristics and say, this is what you should look for.

and none of it has anything to do with HR expertise.

Daria Rudnik (21:52.161)
What do they say to that?

Ted Forbes (21:54.278)
They, well, you know, I get three reactions. I get stunned silence because they've never heard this before. I get people who say, excuse me, Ted, you're full of shit. I need an HR expert. And I get people who say, tell me more about this.

Daria Rudnik (21:55.981)
You

Ted Forbes (22:16.591)
And I like to work with the people who are in the tell me more about this mode because this is part of my mission in writing this book is I just, have a strong perspective. I think it's important to share and I want to share it. So I like to encourage CEOs to hire people who think about business broadly, who have curious minds, who are networkers and mentors and those kinds of things.

And then of course, I'm going to go back and say well tell me what you've done in running a people function. But when I look at that second question, tell me what you've done in running a people function, I'm going to ask them how do you connect your work to my company's financials?

Daria Rudnik (23:02.445)
Okay, well, that's a great list. Curious mindset, authenticity, like general manager, broad network, understanding tech, super critical, being a mentor and being like analytical and data driven. These are, I mean, these are things, mean, any senior leader needs right now, but also kind of being able to understand how people are connected to business because business is driven by people.

understanding this direct impact is critical. Well, Ted, that was an incredible conversation. So valuable, so much information, great stories. Do you have any final message for our listeners so that they can take it, go out there and be better HR leaders?

Ted Forbes (23:52.932)
Yeah, I would say two things to business executives who are not HR people. I would say ask your HR function to deliver more. Set your expectations higher and demand that your people function, your HR function shows you how it can be a lever to drive your company's economic performance.

So that would be my advice to the operating manager. To the HR people, I would say step back and think about what you're doing differently. So many HR people, and I like to say that HR people do what HR people do because other HR people told them that that's what HR people do. Right? Step out of that.

Open up your mind, take an assignment outside of HR, go work in finance, go work cross-functionally, or if nothing else, go build a relationship with the financial planning and analysis people in your company and ask them to walk you through the company's financials, through the cash flow statement and the balance sheet and the income statement, so that you can begin to understand that and then think about how do I help move this forward.

Because here's the thing, many HR people are afraid of numbers or else they use a lot of numbers that are meaningless. And the important thing is to be able to speak to your fellow business leaders in the language they use, which is numbers. But it's also really important to use the right numbers. Think about outcomes and results, not activity.

Daria Rudnik (25:45.333)
Yeah, that's true. We don't care how many people attended the training. We care what's the result of it, how sales improved.

Ted Forbes (25:53.871)
Yeah, exactly. So I don't know, Daria, if that captures a good answer to your question, but that's the way I think about this.

Daria Rudnik (26:04.671)
That is a great answer. Thank you for that. Thanks for sharing your wisdom. Thanks for sharing those stories. Tell us how people can find you, how they can reach out to you and learn more about you and your book.

Ted Forbes (26:17.401)
Yeah, thank you so much. two things, if you want to connect with me personally, I'm very active on LinkedIn. So just look for Ted Forbes. It's easy on LinkedIn. And if you want to read the book, which I hope you do, it's available on Amazon and it's called Making HR Matter, What CEOs Want and How to Deliver It. It's 200 pages long. It's an easy read.

And I like to think that my co-author David and I have written it in a way that's an easy, easy way to follow. And also some of the stories that I mentioned today are in the book and there's a lot more. go

Daria Rudnik (26:59.543)
Yeah, and all the links All the links are in the notes to this episode. So just click the link and follow that on LinkedIn, read the book. And again, that was an incredible conversation. Thank you so much for being here, Ted. Thanks to all our listeners for listening till the end of this episode. If you like it, please subscribe to our YouTube channel.

Give it five stars on Apple Podcasts and Spotify and stay tuned for the next episodes. Bye.