Should HR Be Split Up?

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Should HR Be Split Up?
Jaap de Jonge, Editor
Business speaker Ram Charan (2014) argues that most Chief Human Resources Officers (CHROs) are process-oriented generalists and their expertise is in personnel benefits, compensation and labor relations. They are focused on internal matters such as engagement, empowerment and managing cultural issues.
Charam believes CEOs would like to see their CHROs to act as a sounding board and trusted partner and have their expertise in linking people and numbers to analyze strengths and weaknesses in the organization, in finding the right fit between staff members and jobs, and in talent management strategy.
Charan proposes to split the CHRO function into 2: An administrative one (reporting to the CFO) and a new CHRO function that focuses on leadership and organization issues and reports to the CEO.

Do you think splitting up the HR function is a good idea? If so, for what kind of companies and in what circumstances? Do you think that splitting HR up in this way (one officer for tactical and operational HR issues, and one for strategic HR issues) is the best choice?
Source: Charan, Ram "It's Time to Split HR" HBR July-August 2014, pp. 34

Splitting HR Into Separate Groups
David Wilson, SIG Leader
Hi Jaap: I have seen some organizations split their Human Resource (Personnel) function into HARD and SOFT SERVICES services. The hard services (Labour Relations and Compensation) versus the soft services (Recruitment and Training). The two functional areas may report to different parts of the organization. In the State of Texas, the compensation group is part of the State Auditor's Office, while HR services are in the client areas.

I prefer a model, which separates the TACTICAL from the STRATEGIC. In the Canadian Public Sector, I have found very few organization that have created two organizations as suggested by Ram Charan. In 2003, the "Province of BC" moved to a modified shared services model with a central "HR service" and "strategic" HR services in the client departments. This type of model appears to be quite common for large public sector organizations.
Too many HR organizations focus on administrative processes and transactions and they do not focus on strategies and integration. I also believe many HR organizations forget to integrate their strategies and policies, across all HR programs, which tend to work in silos (today).
If Ram Charan is right, the issue many not be in splitting the organization, but in finding the right HR people to create and lead the CHRO organization.
Perhaps another member would know more about their structures in the Private Sector.

Should HR Be Split
Mike Fosu, Member
Hi Jaap, I do not think the HR function should be split. I agree with David Wilson that the solution is to find the right HR personnel with strategic management and organisational development background to lead the HR department.

Should HR Be Split Up
Florence Ansu-Amponsah, Member
No. Not at all. HR, like Accounting, has a lot of branches which boils down to one. What makes HR more difficult is the behavioral aspect of it. Human beings are difficult to handle at times. We need a critical analysis and deliberation before any such decision can be implemented.

Can we Split HR Into Separate Groups?
Minda Gelay, Member
How can we split HR functions? I think the HR functions are naturally inter-linked and they cannot be split op or be treated as stand alone functions. It is better to link HR with strategic management and the right HR personnel.

Yes, It Can Be Done But
kiran pandit, Member
I think the administrative functions related to compensation & benefits and other administrative things can be reported to the CFO and can be executed by Finance.
However, the policy making functions should be retained by HR.

On Should the HR Function Be Splitted
Karl-Heinz Sternberg, Member
Having the Human Resources Business Partners in place, who take care about the strategic view, while having support functions like Talent Management or even a HR back office to serve administrative needs makes a good model.

Don't Split the HR Function
Dr. Alan Williams, Member
I agree they should stay together. I also agree that HR needs to add much more value in terms of proactively identifying the capabilities needed for every job, role, project, etc., and proactively doing something to build that capability.
I would go one step further (as I have seen it working in one multinational): make a policy that the HR Manager and the senior / more strategic HR staff must have actual operational experience at operator and manager level. In the mentioned organization, the HR manager and if appropriate the senior HR staff attended every senior management meeting and were expected to add solid contribution to all discussions. Training and Development (T&D) had been split into a stand alone dept., reporting to the CEO. All T&D staff had, by policy, solid operational and managerial experience in the same company. They acted as consultants to proactively & urgently find T&D resources. Line managers still have the primary responsibility to promptly identify development needs. .

Don't Split the HR Function
Zahra Djebaili, Member
I am agree with @David Wilson... I think that the HR function should be interlinked within the company. Splitting it up is not a good idea.

There is no Point
I know that Charan is just proposing an outline to help solving problems with HR. However, the model he suggested is only changing the titles or name of the departments.
The HR-A (compensation and benefits) could be merged into the finance department, if it only doing administrative jobs. On the other hand, if it is supposed to serve the CFO, as policy maker behind the company compensation system, the HR-LO could do that role. If this is the case, there is no point splitting HR in the first place.

Outsourcing HR / Payroll to Finance Department
Dr. Alan Williams, Member
@kiran pandit: One further point. If the finance department is actually calculating and paying salaries, then confidentiality is at serious risk.
One company, I know, uses an outside payroll agency, which makes all calculations (all computerized), but never sees actual names or actual employees. There are good audit checks. The agency provides a list of account numbers and amounts to a bank, then the company transfers the funds direct to the bank. A senior HR officer is responsible to monitor the system and ensure accuracy, no tricks, etc. It works. It also provides confidentiality (which is more critical in some cultures than others) and it is not expensive.
In general terms, I don't agree with outsourcing of HR work, but I do support the payroll item in the way I mentioned above.

Who should Deal with Compensation and Benefits: HR or Finance?
Anamika Choudhury, Member
Thank you Jaap for bringing this up. I firmly believe that HR should dictate "who" gets compensation and/or benefits, whilst Finance should decide "what" they get. For an HR professional to deviate from core people-centric topics of study into pure finance and budgeting calls for two separate specializations to function in within HR. To be honest, I've never seen any such dual specialist in a purely HR role.
HR should formulate strategies, policies, competency frameworks and fulfill recruitment and training needs, etc. whilst Finance should, in conjunction with HR decide upon grade and competency based compensation & benefits. Consider it as an expense, right... - is in not always dealt with by Finance? For example, in the case of rewards for hard work, HR could lay down the framework and assign numerics to competencies which, once assessed by HR itself, could be forwarded to Finance for associated compensation.
Anyone agree?

HR Partnership with Hi-Po Talent
Silvy Chahal, Member
The problem shared by Ram Charan is absolutely valid. We cannot deny that businesses have been disappointed with HR not providing strategic direction to the business or at least being a sounding board.
However, having line managers or Hi-Po talent from business as part of HR-LO may not be as impactful as a CHRO or HR organization which has worked for many years in gaining knowledge about talent development.
Another aspect can be explained through the 20-60-20 rule by Dr. Rod Napier which suggests that 20% of the professionals are exceptional, adding value that helps organizations move forward, 20% of (HR) folks are locked into a fixed mindset and lack either competence or commitment to deliver real value, and 60% are in the middle. It is easy and fair to criticize the bottom 20%, but it is not fair to paint the entire profession with this same brush.
A good solution could be a partnership between HR and Hi-Po talent which will help the HR organization in gaining a business perspective.


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