What Parameters Determine the Best Organizational Model for HR?

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What Parameters Determine the Best Organizational Model for HR?
David Wilson, SIG Leader
I have worked in a number of organizations. The way the HR function and activities were organized was quite different.
1. CENTRALIZED. The most effective in terms of the number of HR positions was a centralized HR organization
2. DECENTRALIZED. The least effective was a decentralized HR organization.
3. SHARED SERVICE. I have also worked in a shared services organization, where the HR organization was considered as part of a larger corporate structure (i.e. corporate services), based on a model suggested by B. Quinn, R. Cooke, and A. Kris (Shared Services - Mining for Corporate Gold, 2000), which centralized all HR services across all business lines.
4. OUTSOURCED. The fourth option was an outsourcing model, where HR services were contracted to another organization.
What organization models have you worked in and which was the most effective, efficient and economical? Are there factors that would favour (i.e. location, structure, culture, size, diversity, etc.) one model versus another? Why would you pick one model over another? Would you eliminate the HR Department? Thanks for your responses. Regards, David.

Finding the Best Way of Organizing HR
Martin Langen, Member
David, my input: it depends on your organization, culture and HR strategy.
If the size of the organization is large and the company is process focused - centralized and / or shared service centers might make sense. If the organization is small and HR wants to be as close as possible to the business, then decentralized might be right.
As organizations and HR functions develop, it might make sense to change the model all together.
I would always ask: where are you today? Where do you want to be in the future? What does your (internal) customer want? What resources / budget do you have? Cheers, Martin.

There is no 'Best' Organizational Model
Paul D Giammalvo, Member
David, this is bit like asking "which is the best golf club to use?" EVERYTHING in management is contextual and application specific. Hersey and Blanchard alluded to this with their "Situational Management" and I would posit that the same concept holds true for your question. It all depends on the situation.

Need for Examples
David Wilson, SIG Leader
Hi Paul, while I agree with your response, I am hoping that members would provide some examples of the different HR structures and identify why the structure worked or did not work. Hope this clarifies my goal. I hope members will learn from the experience of other practitioners. I also think there is an expression about having a hammer and only seeing nails. Regards, David.

Best Organizational Model for HR doesn't Matter a Lot
M.Ganapathy, Member
I was working in production for the past 30 years. Many times I felt the overall thinking of HR personnel needed a big change. It should be more practical than political science, support organizational growth, and it should focus on solving rather than raising issues.
If it is so, any model of HR function is good depending on the requirement of the organization.

WHAT Circumstances are Most Important
Jaap de Jonge, Editor
@Paul D Giammalvo: Thanks Paul for emphasizing that the best way of organizing HR is situational. Of course you are right and I believe most of us are aware of that.
In this discussion started by David we are exploring these situations and circumstances and sharing our practical experiences What worked best in what circumstances? What way of organizing HR was a disaster? Why?

Best Organisation Model for HR
It all depends firstly on the Head of the Organisation, the Vision, Mission & then Culture, no of People. If the Organisation wants " People First philosophy ", then Centralized Model is the Best.
If the HR Function is there for statutory requirement, then Outsourcing Model is right for the Organisation. The balance TWO - SHARED SERVICES, or DECENTRALISED depends solely on the Type of Industry.

People Matter as Much as the Model that is being used
Pablo Mendez, Member
I have also worked in companies with different models. In my humble opinion the criteria for the most appropriate model include:
- The size and structure of the organization
- Leadership vision
However staff attitude is also critical. The right people with the right attitude can give you very good results even if the model is not the best one for the specific organization but vice versa does not work.
As an example of a worst practice I remember a company where HR was called "Inhuman Resources"... Not a good sign at all.

How to Organize the HR Function?
Oscar BALDO, Member
Hi David, I am glad to read your question, which is a crucial point, knowing that most HR directors traditionally focus on internal communication strategy, and are having trouble in resolving the organizational structure of their department.
My approach works by asking 2 questions:
1. What are the HR activities (services) proposed by the HR Department, and
2. What is the structure of the company in terms of businesses and locations.
Letís suppose the HR Department wants to manage a Payroll activity, an HR Administration activity and an HR Business Partner activity (which involves training, recruitment, career management, discipline measures etc):
- The Payroll activity: if your company is located in a single country, the HR unit in charge of the payroll can be concentrated in only one place whatever the number of sites (factories). The Payroll could be even outsourced. But if your company is a multinational, each local HR relay should have its own Payroll unit due to different (local) social rules. For each of them, you can outsource the payroll activity locally, but in the meantime, you have to implement a way to collect the salary data from every international site. In this way you will be able to consolidate it in a central system (see below HRIS).
- The HR Administration activity: the same logic applies as for payroll, and there should be a central system (HRIS) to collect in real time all employee data of the group.
- The HR Business Partner activity: this activity is very collaborative with the business lines. And each business line has to possess its own and dedicated HR business partner(s). So in this case you design the HR Business partner team according to the locations (sites) and business(es) in each location.
In a nutshell: HR Administration and Payroll are structured according to geographical considerations, but the HR Business Partnership is structured on the business lines.
Ideally, to link all the HR entities (including the employees/managers HR Self Service), a global HRIS is necessary for the HR functions that have to be performed for the whole group (multinational).
In conclusion, you can design your HR department as a matrix organization depending on the structure of the company. I hope this could help. Regards. Oscar.

The Best Organization Model for HR
I sincerely appreciate your post on HR models. The model to be adopted should be based on your organization structure, culture and more importantly the leadership of the organization.
I work with a hospitality company in Nigeria. Here a centralized HR model is in use because the firm is purely services-oriented and operational efficiency is of prime relevance to the management. In this case, outsourcing will far away.
It is crucial for whoever is given the responsibility of determining which models best suit the organization to understand the core business of such organizations. .

Best Org. Model for HR
MabuZayed, Member
Well, good question... There are many factors to consider, such as:
1. The size of the organization
2. Whether it is a local, regional or multinational business
3. The type of business it is engaged in
4. What role does HR play (strategic or operational).
5. The kind of HRIS systems that exist
Having said that, an organization has to decide on the value that each model brings. For example:
- A centralized model maybe rigid but it may bring standardization.
- A decentralized model is vital for an organization that competes fiercely for talent.
- Adopting a shared model maybe an effective model for an organization that believes in the strategic role of HR.
Anyway, I recommend referring to Dessler's books on Human Resource Management for further insights.

HR Process Classification
Dr.Natesan.K, Member
Hi David, HR functions by and large are determined by the context and size of the organisation. In our organisation, we have divided HR into:
1. Operational HR attached to operations to quicken certain processes such as recruitment, PMS, etc, and
2. Corporate HR on policies, planning and strategy implementation.
Your classification covers all.

Determining the Best Organizational Model for HR: Form must Follow Function
Paul D Giammalvo, Member
@David Wilson: To quote from American Architect Louis Sullivan:
"It is the pervading law of all things organic and inorganic,
Of all things physical and metaphysical,
Of all things human and all things super-human,
Of all true manifestations of the head,
Of the heart, of the soul, cool
That the life is recognizable in its expression,
That form ever follows function. This is the law.

No Rules of Thumb to Determine the Best Organizational Model
Paul D Giammalvo, Member
@ David and Jaap, then we should rephrase your question to ask "what are the parameters which determine what the "best" or "most appropriate" organizational structure is in any given situation?"
I am pretty confident you will find few if any "rules of thumb" or guidelines. There is precious little research showing which organizational models work in which circumstances.
What you may want to consider is research done by the military. If any "organization" has produced credible research on "organizational structures" it probably is the military. And I am sure there are published papers from Sun Tzu to von Clausewitz to Eisenhower to David Petraeus.
But the bottom line remains, there are, IMPO simply too many variables to try to come up with convenient "rules of thumb".

Best Model for HR
John Carlisle, Member
First of all, I am not an HR person, although I did once head up Personnel for a multi-national SBU for a while, long ago when organisation and human development were still fundamental to HR.
I have been a consultant for thirty years, and, with three exceptions, in the organisations I have consulted to, HR was the most despised department in the company. One reason is that it aligns itself with the command and control principles set by the executive. A second is that it is highly politicised, and a third is indeed the question we are talking about that HR does not have a model of an effective organisation for the whole organisation.
I would recommend that every HR person who is genuinely wanting to improve, read Dr. W. Edwards Deming's Out of the Crisis, and understand his System of Profound Knowledge in their quest for a business model.

Best Organizational Structure for HR
David Wilson, SIG Leader
@Paul D Giammalvo: Yes, we could rephrase the question - I'll refer this issue to the Editor. ... Jaap?
However, please note, If I refer to the separate works of H.H. Curtice, R.J. Cordiner, E. Dale, R.L. Daft, L.F. Urwick, L.C. Sorrell, H. Stieglitz and others, I will find research and literature on topics such as span of control, departmentalization, segregation and coordination of activities, organizational patterns, centralization versus decentralization, and other topics. I would also find reference materials by reviewing H. Mintzberg related to the design and functioning of the organization, including the bases for grouping work and positions. Mintzberg also discusses decentralization, but cautions that we have to fit design to the organization's situation, size, systems, stability, etc.
As for the Military, I spent 22 years in various roles - the Military is great at defining strategies, but not so much with structures. Typically, the military understands that structure follows strategy.
On the other hand, Drucker suggests finding the right structure is not intuitive. He suggests that we need to identify the building blocks, activities and structural load. What I was hoping for in this conversation was a dialogue on what people have experienced, so that through their contributions we can learn.
Unfortunately, there is little research on the best models for HR organizations - and yes, you are right - there is no one answer that will fit all situations. However, is it possible that practitioners might learn from their experiences, which they may later relate to organizational theory? In some cases, without the dialogue, we might just be like the six Blind Men and the Elephant. Regards, David.

Topic Title Changed
Jaap de Jonge, Editor
@Paul D Giammalvo and David: Good suggestion. The title of this discussion is now changed from:
What is the Best Organizational Model for HR?
What Parameters Determine the Best Organizational Model for HR?
This reflects more directly what we are looking for.

HR is no Longer what it Was
@John Carlisle: You certainly have captured what HR was. But it has been evolving and making strides to becoming a relevant business partner. So the label most despised is no longer the mantra for HR save in a few organizations. There has been an in-house cleaning of the profession, so to say.

HRM Placement in the Organization
kvssiyer, Member
Think global but act local.
This is a combination of centralization and decentralization which works best in the HR function. A grass root level communication channel should be open to track the feelings of the people in which case it becomes decentralized.
But where you can consolidate and standardize you should centralize.

No Best HR Model
muyiwa okesanya, Member
It is my opinion through my work experience(s) that there is no best HR model that will address HR problems of all organisation, because there are so many internal and external environmental factors influencing the optimal way of organizing the HR function in firms.

Determining the Optimal HR Architecture
Miguel Lara, Member
Hi David, I agree the size (large or small) of the HR department, the HR vision, and HR strategy should focus on activities which provide added value within the organization. This is the first step to define what is the best structure, determine the model giving best results, and establish different employment modes and relations.
The HR configuration can be indispensable in determining the operations, tactics, and strategies that allow the organization to implement the best HR practices in order to motivate employees (Lepak & Snell; 1999).

Why Human Resource?
Leonardo Santos Magalhaes
As a consultant in project management I worked with HR in many organizations to develop innovative environments and increase competitiveness. I think that to begin HR must understand their role, their current competence, as well its desired objectives and strategies to support the organization.
Centralized structures are effective in developing HR policies and people, but to achieve demands of innovative initiatives may require cultural and organizational changes, even in the HR structure.
I also believe that each manager or executive must have HR responsibilities and so the organizational structure becomes a matrix, which is more complex to manage.
Google has impressed me with their HR initiatives and how they do it by measuring the benefits of being flexible with people. This concept has spread beyond the borders of countries, but I'm not an expert to study the best way to structure HR .

The Harvard Model (Map of HRM Territory), the Matching Model and the Guest Model
Mucherwa Oliver Ngoni, Member
I hope the following labels of three existing models could enhance the debate:
- There is the Harvard Model, also called the Map of HRM Territory which emphasises the existence of multiple stakeholders and the soft side of people;
- The Matching Model inclined towards the hard HRM;
- The Guest Model which is a fusion of aspects that resembles both soft and hard HRM. Guest points to 4 crucial components that underpin organisational effectiveness: strategic integration, flexibility, high commitment, and quality.

Choosing HR Management Model
I know the first model (centralized) and I think that an HR department is necessary, because it makes centralizing needs according to the goals of the company and the current situation. I also think that centralized management fits where is only one strategic business area.
However, that model is not favorable when companies split, itís an optimal solution.
Decentralized management is useful for big companies where various cultures coexist, but there would be a possible contradiction between an individual HR evaluation and the collective character of the organization, itís a productive solution.
Outsourcing fits for small and starting companies. Itís efficient to locate sensible jobs, those essential and those going to disappear, itís also an efficient solution.
The shared service HR management model is useful when there is less and less synergy in the company and makes it quite efficient to do turnovers. Itís an economical solution and the one I would choose.


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