Human Resource (HR) departments are undergoing transformation, questioning their necessity and relevance in an age of outsourcing, as a booming HR software industry has made it easier to automate or outsource personnel-related functions, such as payroll and benefits administration.
HR functions are significant management functions, especially as environmental changes confront organisations, with people issues at the forefront.
People issues are now significant business issues, requiring the expertise of HR professionals to address. But this shift has also resulted in line managers taking control and ownership over HR functions.
While facilitated by HR departments in many different companies, their focus on functional expertise rather than business-relatedness, senior management fails to realise that many line managers lack the expertise and skills that HR professionals possess.
Conversely, HR departments at other companies capitalise on such opportunities, positioning themselves as strategic partners of the management team and working with line managers to resolve people-related business issues.
However this often requires a repositioning of HR departments, involving changing and adapting to new roles, competencies, relationships, doctrines, protocols and operating methods – for both HR and line mangers.
No HR Department?
Some US-based companies have eliminated HR departments from their organisations, choosing to go for flatter structures and greater employee accountability. Two companies that eliminated them are LRN Corp, a firm with 250 employees which develops ethics and compliance programs. The other is Ruppert Landscape, a landscaping company of 900 personnel operating across multiple US states.
In LRN Corp’s case, David Greenberg, the Executive Vice-President, wished to: “…force the people issue’s into the middle of the business“. Craig Ruppert, the CEO of Ruppert Landscape, commented that decentralisation and a lack of HR departments fostered autonomy and accountability among his company leaders. He estimated his managers spent 5% of their time on HR matters, balancing this with business development and operations.
Executives often state traditional HR departments cause administrative inefficiencies through their policies and processes, stifling innovation and inhibiting effectiveness and efficiency. However, workers offer a contrary view, stating the lack of in-house HR staff negatively impacts the firms, especially in bread-and-butter HR responsibilities such as mediating employee disputes and resolving pay problems.
Other problems associated with a lack of HR departments are organisational stagnation, as hiring processes become inefficient and drawn out, due to employees without expertise attempting to formulate appropriate job requirements, compensation and benefits. Company executives also become “decision makers for everything“, resulting in a decision bottleneck and administrative inefficiency.
The Strengths of HR Departments
HR departments offer organisations specific strengths, if aligned with the overall values and mission of the organisation. In 2012, US employers had a median ratio of 1.54 HR professionals for every 100 employees, according to the Society for Human Resource Management (SHRM). The value of HR cannot be denied, when taken in the context of their expertise and skill set, and their overall role in overseeing human capital.
For example, startup ventures launch without personnel teams, but SHRM recommends bringing on HR staffers once an organisation reached 15 employees; the point at which personnel issues become complex enough to require specialised skills.
Steve Miranda, Managing Director of Cornell University’s Center for Advanced Human Resource Studies, and former HR executive at Lucent Technologies, now Alcatel-Lucent, shared that when eliminating HR components, there were often financial and strategic risks to consider.
Line managers often lack the expertise crucial for maintaining competitiveness and compliance with legal requirements. For example, a failure to comply with employment relation and labour laws can expose companies to lawsuits, as in the case of Outback Steakhouse in 2009.
Similarly, they may not be aware of the latest labour trends, the conditions of the labour market, the relevant employment agents and recruiters and may also lack the networks and connections necessary to access qualified personnel and talent.
HR departments operate within the larger socioeconomic and cultural context of their organisations and societies, having to adapt to the dynamism of economic sectors and market conditions. What may work in one context may not work in another, because of different cultures, principles and operating requirements specific to that organisation or market. The underlying reasons as to why certain practices and systems are put in place may not even be there. But HR will always retain it’s relevance
With automation and outsourcing, HR departments are becoming leaner, even as they retain their strategic role in maintaining the competitiveness of firms, overseeing human capital and managing personnel.
What HR professionals, managers and executives need to remember is that context and knowledge evolve.HR is a continuously evolving discipline and field. HR will continue to remain relevant, by virtue of the fact that any business ultimately involves the management of human beings and human capital.
Resources & Further Reading
Henneman, T. (2013).Is HR At It’s Breaking Point? Workforce.
Marr, B. (2013). Why We No Longer Need HR Departments. LinkedIn
Schuler, R. S. (1990). Repositioning the human resource function: transformation or demise?. The Executive, 4(3), 49-60.
Smith, K. (2013). It’s Time For Companies to Fire Their Human Resource Departments. Forbes
Weber, L. & Feintzeig, R. (2014). Companies Say No to Having HR Departments. Wall Street Journal Online
Article Contributed by HR in Asia‘s Team.