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Pushback on Dividing HR

 

Thursday, September 4, 2014
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A column by noted HR thought leader Ram Charan > in the July-August issue of the Harvard Business Review, "It's Time to Split HR," clearly got the attention of many in the HR community.

The online version of the column alone -- proposing that HR departments be divided into two entities: one for administrative duties and the other for leadership and talent-development functions -- yielded more than 200 responses, most of them countering < Charan >'s incendiary hypothesis that splitting HR up in this way would help fix the profession and function he claims isn't working in its present state. (The full HBR article and comments can be found at http://hbr.org/2014/07/its-time-to-split-hr.)

In response to the resounding backlash to < Charan >'s piece, HRE reached out to three top HR thought leaders to solicit their takes on the proposal, the furor it sparked and what -- in their estimations -- it will actually take to fix HR.

Libby Sartain, board member at Manpower Group and AARP, and former CHRO for Yahoo! Inc. and Southwest Airlines Co.

Ram < Charan >'s books on boards and leadership have long been insightful guides for me. But his comments on splitting HR, while provocative, are off the mark.

I agree that it is time to rewire HR to focus on building talent capability to drive strategic initiatives and that the administrative functions of HR should be split from the strategic functions. But this should happen inside of HR. Many HR departments are already structured that way, and significant administrative functions have been outsourced or automated.

HR leaders are exploring how to best create value for their organizations through talent management and considering what can be shed from the HR portfolio. Yet HR must own the levers and tools that drive everything an organization does to recruit, retain, develop, reward, drive performance and build culture, just as it must own the talent agenda.

The CFO's role has evolved from number crunchers to the CEO's sounding board as organizations became more focused on portfolio management than production management. Yet they retained the administrative financial functions. HR now evolves as well, as talent becomes scarcer than capital and as CEOs realize that the talent architect/advisor is as strategic as investment advisors.

What Dr. < Charan > suggests would set back the progress we have made over the last two decades. It is not practical -- nor does it offer a real solution. We need better HR leaders and better tools for diagnosing organizational strengths and weaknesses on the talent capability side of the equation. (These are being developed every day by large corporations and start-ups.) We need to continue to shed our portfolio of complex processes and policies that do not add value or stifle talent development. We need rewards and incentives that drive performance.

Having talent-minded CEOs and colleagues who see their important role in building talent capability are also essential to an organization's success.

Fred Foulkes, professor of organizational behavior at Boston University's School of Management

Every few years an article appears bashing HR, sometimes even claiming the HR department should be eliminated. But it is both shocking and disappointing that Ram < Charan >, renowned consultant, superb teacher and noted author, would continue this line of thinking with his proposal to split the HR department.

If the current CHROs cannot meet the CEOs' realistic needs and expectations, I would suggest they need to be replaced rather than reorganize the HR function into HR-LO (for leadership and organization) who reports to the CEO and HR-A (for administration, including comp and benefits) who reports to the CFO.

There can be no doubt about the importance of talent, from recruiting to development to succession planning. But as wise HR leaders and CEOs know, there is much in both compensation and benefits that is strategic. Just ask any board comp chair how much time the comp committee today spends on executive comp and healthcare.

True, HR leaders need to have a business focus, whether this comes from starting in a line position, having a rotational line assignment at some point in their career or simply acquiring business acumen on their own.

But there's also no denying there's a body of knowledge in HR that is important. That's why line managers do not generally become general counsels, CFOs and company medical directors.

Just as there certainly are cases of career HR professionals who are not effective in the top HR job, there are also cases of high-potential line managers who were given the CHRO position for development purposes and weren't successful.

Moreover, if the head of HR-LO is led by a high-potential line manager who is, himself or herself, in contention for a more senior job, it disrupts the relationships he or she needs to have with line peers to be effective in the HR job. How can one be open and honest about talent concerns in front of a peer who may be a rival for the CEO job?

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That is why I believe the right business-focused strategic CHRO needs to lead the entire HR function -- and needs to report to the CEO. Placing the non-talent part of HR in finance, with the false assumption that it is all administrative work,

is not a wise

suggestion.

Dave Ulrich, Rensis Likert Professor of Business at the University of Michigan, and partner at The RBL Group

Like many others, I have enormous respect for Ram < Charan's lifetime of dedicated work. He has consistently written, spoken and advised on how to build competitive organizations. His recent HBR article creates a wonderful opportunity to dialogue about the role of HR in today's organizations. Let me offer some perspectives on that dialogue.

First, HR is not about HR. Any HR discussion should start with what a business requires to win, not with debates about the HR structure, practices or analytics. We have argued for 20 years that strategic HR begins with strategy and then HR helps make strategy happen. We now believe that outside in HR starts with market conditions and customer and investor expectations. HR can shift from being a mirror that reflects strategy to looking through a window where HR delivers customer expectations and increases investor confidence.

Second, HR outcomes matter more than activities. HR brings three outcomes to business discussions: talent, leadership and capability. Because of HR work, employee productivity increases through competence, commitment and contribution; leaders at all levels of the organization build confidence among employees and investors; and organizational capabilities such as innovation, collaboration, service and efficiency exist, characterizing a stable and accurate culture.

Third, HR for HR consists of improving HR governance and competencies. HR governance means that HR organizations match the business organization.

In single-business organizations, HR functional practices pervade the organization. In multi-divisional organizations, HR has been organized into centers of expertise and embedded HR roles. HR competence means that HR professionals have the knowledge and skills to consistently deliver value.

These are wonderful times for HR. It matters for business leaders; it brings unique insights to business discussions; and it improves governance and competencies to deliver sustained value.

Ram's [column] gives us an opportunity to focus on where we are going more than where we have been as a profession.

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