A Structured HR Department or Simply an HR Orientation?
Tom Wagner, Managing Principal – RSG Talent
Recently, I read an article in one of the professional journals regarding organizations that don’t have HR departments. Outsourcing has eliminated many internal functions within an HR department, and many organizations are reconsidering the value provided by an HR department. As organizations continue to look for ways to manage cost centers, they continue to evaluate what are the necessary indispensable departments for an organizations success and deliberate on those to reduce or even eliminate, which includes the HR department. Since I have spent the majority of my 30 plus year career working in an HR-related capacity, I wanted to share my thoughts on whether there is in fact a continuing need for an HR department within an organization.
First, in the spirit of full disclosure, I don’t see the necessity of an HR department as a vital component of an organization’s success. There are many important contributions that an HR orientation can make to an organization, however, as a heavily resourced and funded department that keeps a business focused on its mission and goals, ie, reason for being, it is hard to make a case that HR is an essential ingredient in the success or failure of the business.
I would argue there are some very important contributions made by an HR department including the following:
- Recruiting is one of the greatest contributions or functions HR fulfills. Organizations need to stock themselves with talented people who can carry out important duties supporting their mission and goals.
- Compensation management is another contribution HR makes. Organizations must pay their talent equitably to keep the organization competitive within the market and also retain their workforce especially top performers.
- Performance Management is another crucial contribution HR makes to an organization. Performance management programs are imperative to an organization as they provide associates with the necessary structure to grow their skill sets and careers while those same programs allow the organization to identify high-performers, middle-of-the-road performers who are necessary to keep the business moving forward, and laggards who are keeping the organization from meeting their goals.
- HR Administration is one final key function HR provides within an organization. Keeping payroll up to date, accurate and on-time, and compliant with regulatory guidelines is a must. Maintaining and updating workforce policies and procedures and effectively communicating those policies lead to a well-managed workforce. The administration of benefits is expectation most employees have, and it’s a necessity for organizations to provide whether out of competitive necessity or good citizenship.
So, with so many contributions an HR department making within a business, why would an organization not desire to have a well-funded heavily-resourced HR department? As important as these functions may be to an organization I would argue that an organization can use well-trained managers within business units to manage some of these functions while other functions can be supplied by outside vendors on an ad hoc basis or through the hiring of specific subject matter experts with a deep focus in a specific HR functional area. An organization with a strong HR orientation where business managers or vendors handle these functions can lead to great success while limiting costs and developing more cohesive business units.
The successful organization is one that understands it’s business, markets, customers, suppliers and other underlying fundamentals that keep it competitive as a business of choice and an employer of choice in the market, and not necessarily one with a structured HR department. An HR department is not a necessary part of that formula, but making sure individuals within business units or outside vendors are providing a strong HR orientation to the organization is.
An anecdote demonstrating the need for this comes from a time when I was working with a former associate of mine as he was making a job change. This individual ultimately accepted a role as a CEO of a large hospital. While this individual had some experience managing people he didn’t really have the depth of experience managing people you’d expect a CEO to have. With all of his excitement and enthusiasm for the new challenge that lay ahead of him, I noted to him his lack of experiences managing people would be his biggest challenge has he assumed this role. After six months of being in the role, which was going well for him, we talked about the role and any challenges facing him and the first item he raised was how much time he spent dealing with people issues. He, not HR, was in fact the one dealing with people to solve problems and make the business more successful, and he knew going forward he needed to focus his development in that area. Whether it’s the CEO of a hospital or the manager of a business unit, an HR orientation will drive greater success within an organization more so than having a structured HR department.