The HR Split, by Thomas Dimmick

Thomas DimmickA LinkedIn connection of mine, Donna Genay, recommended that I read a recent post by Ram Charan. The title of the piece was “It’s Time to Split HR” (http://hbr.org/2014/07/its-time-to-split-hr/ar/1).

After reading it, the thought occurred to me that Mr. Charan has really not applied the knife quite where I would suggest it needs to make the cut. Rather than between “administrative” functions and “development” functions, I would suggest that the split really needs to be made on the basis of level in the organization.

Following WWII the US Federal Government began to make significant and ever widening changes into the employment arena. Through Federal legislation, Executive order and regulatory agencies, the landscape of the employment relationship has changed dramatically, beginning with the Civil Rights Act of 1964 and continuing up to and through today with the Affordable Care Act.

Regardless of your view of these pieces of legislation, they are the law of the land and must be upheld by responsible employers. The requirements for ADA, ADEA, COBRA, EAD, ERISA, FMLA and OSHA have changed the manner in which employers and employees relate and interact. The responsibility for properly adapting to these changes has increasingly fallen to the Human Resource department. As a result, the phrase “You cannot do that because . . . “ has become common place in the HR world. This compliance mindedness and transactional thought process now dominates much of the day of many HR professionals. From a business and organizational perspective, it is Cost Avoidance rather than Value Added.

While needed and necessary, this type of activity and thinking does not prepare HR professionals to see the business from a broad perspective. In fact, the argument can and should be made that most of the middle management HR Professionals and more senior HR generalists can and should be replaced with outside consultants. Laws and regulations have become so complex that only skilled specialists and attorneys, trained in their particular area of expertise, can provide trustworthy recommendations. The consultants or outside counsel can and should be used only when needed.

Mr. Charan goes so far as to say, “It’s time to say good-bye to the Department of Human Resources.” He then suggests a split along functional lines. It would be my suggestion that the split be made along the lines of skill and experience. This split should be made by taking the biggest chunk of HR responsibilities right out of the middle of the HR hierarchy.

Day-to-day HR Employee Relations transactions at the employee level are essential. This position, from entry level to about 3 years of experience, should be reporting to the head of the operating unit. It should be considered a necessary rite of passage for any business individual who seeks to manager people.

This basic level of HR experience will not give the HR person performing those tasks a broad business perspective. The work is repetitive, transactional and very limited in its exposure to most other business disciplines such as IT, engineering, product development and market development. With a few years of experience in the employee relations role the HR professional needs to be moved out of HR and into one of the other business disciplines.

On the opposite side of the split is the most senior HR Person in the organization, the Chief Human Resource Officer or CHRO. Transactional excellence is not the training ground for the top HR position. I completely agree with Mr. Charan that it must come from a line function. I might argue that the Finance folks are a bit less likely to be successful in this role as they too tend to be highly transactional. Perhaps a better hunting ground for the elusive CHRO would be from the Product Manager’s ranks. Those people see the P&L and hear the “voice-of-the-Customer” in a way that translates well into something a CEO can respect, something to which he or she can respond in a deliberate and appropriate manner.

The CHRO should be the right arm of the CEO. In this role, a broad understanding of the business must be combined with the knowledge of the people, including skill and talent gaps. This deep organizational knowledge must be combined with the knowledge of the business direction, goals and future as defined by that CEO. It is at this point that traditional HR disciplines of assessment, compensation, recruiting and training become valuable as learned skills. It is in the crucible of line functions that those disciplines should have been learned, not in middle level staff roles. The business plan and vision for the future are the responsibility of the CEO but it is the CHRO that digs into the organization as it exists today, projects what will be the necessary human needs for that future and lays out the plans and actions for how to get there.

Regardless of how it is done, the HR function is in dire need of an overhaul. When big cities changed from gas lights to electric lights for the lighting of streets, Lamplighters became a thing of the past. The change in the legislative landscape is having a similar effect on the HR function. We had better address it sooner than later.