HR Leadership Column

Rethinking vs. Redesigning HR

While breaking up the HR function may not be the best remedy for what ails the profession, reconsidering its priorities - including its need for practitioners to have better business judgment - may be.

Monday, July 7, 2014
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Last month, I attended and spoke at the CHRO Academy, which is designed for -- and attendance is limited to -- HR executives holding the top-most HR position in an organization. It's an annual program provided by the National Academy of Human Resources Foundation, for HR executives holding their first top HR position and those who have recently changed CHRO roles with a new employer or have a new CEO.

Another fellow of the Academy, Ram Charan, also spoke, providing a keynote on the expectations that CEOs and boards have of CHROs, gleaned from his many years working as a consultant to CEOs and boards around the world. During his presentation, he also mentioned that he had an article appearing soon that might generate some controversy.

That article was just published in the July/August issue of the Harvard Business Review, titled "It's Time to Split HR."

In it, Charan suggests that most CHROs simply don't have the bandwidth to do the job that needs to be done for the organization. He says most are "process-oriented generalists" who aren't able to "relate HR to real-world business needs" very well.

His solution?

"My proposal is to eliminate the position of CHRO and split HR into two strands. One -- we might call it HR-A (for administration) -- would primarily manage compensation and benefits. It would report to the CFO, who would have to see compensation as a talent magnet, not just a major cost. The other, HR-LO (for leadership and organization), would focus on improving the people capabilities of the business and would report to the CEO."

I have great respect for Charan, but I think his suggestion -- to strip compensation and benefits out of HR and place it within the CFO organization -- is impractical. It's the equivalent of removing responsibility for financial forecasting from the CFO. Just as you can't project financial results without solid forecasting capabilities, you can't improve on the people capabilities without being able to manage compensation and benefits strategy. Libby Sartain, former CHRO for Yahoo and Southwest Airlines, provided some great commentary in the comments section following Ram's article that highlights her concerns with this approach, and I encourage you to read both Charan's and Sartain's arguments.

Despite my criticism, what I like about Charan's proposal is that, in suggesting a redesign of the function, he's highlighting important issues for HR executives to consider. Do HR activities that have been historically housed under the CHRO all really need to remain there? For example, why should HR be responsible for payroll, as it is in some organizations? If benefits administration is outsourced, does HR need to manage that vendor relationship once it has designed a total-rewards strategy that includes the benefits package?

Charan's proposal also encourages CHROs to consider what the best way for them to spend their time is -- should it be on ensuring that the administrivia of the role is handled properly or on becoming the talent architect of the enterprise? (Here's a clue: It's NOT the former). As a CHRO, are you providing your own team members with the developmental opportunities they need to be successful within your organization? Have you considered recruiting candidates with line experience into your HR organization, or encouraging some of your team to get experience in an operating unit? Are you continuously educating your HR professionals about the changing operations of the business? 

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During his presentation at the CHRO Academy, Charan highlighted what I think is an even-more-important issue CHROs should contemplate. Based on his experience consulting with CEOs and boards, he believes the top quality CEOs desire from their CHROs is the ability to have good judgment -- the ability to make well-informed, wise decisions that produce the desired outcomes.

It's such a simple notion, but it resonates with me. As a former CEO, I expected all my direct reports to have good judgment. I wanted them to be informed about the business, the business environment and their profession or area of responsibility; I wanted to know that they carefully considered the issue before them before making any decisions; and I wanted to know that they made wise decisions based on this knowledge and experience. I also wanted them to have the good judgment to see their decision through -- to be able to articulate and explain the reason their judgment was right.

Every organization needs to constantly reconsider how it's structured and organized to best execute its strategy. What may work for one business may not work for others. But good judgment is a force multiplier in any organization. What's your HR organization's reputation for good judgment in your organization?    

Susan R. Meisinger, former president and CEO of the Society for Human Resource Management, is an author, speaker and consultant on human resource management. She is on the board of directors of the National Academy of Human Resources.


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