Should HR be split in 2?

Proposal to separate administration, strategy unpopular with experts
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 09/15/2014

In outlining the contentious idea that HR should be split into two and the CHRO position eliminated, Ram Charan stirred up considerable discussion recently. A Dallas-based business advisor and author of 15 books, Charan wrote an op-ed piece in the July-August issue of the Harvard Business Review in which he said it’s time to say goodbye to the HR department.

Many CEOs are disappointed with HR people, he wrote. While they would like to use their CHROs the way they use their CFOs — linking people and numbers to diagnose weaknesses and strengths in the organization and advising on the talent implications of company strategy — most CHROs are process-oriented generalists.

"What they can’t do very well is relate HR to real-world business needs," said Charan. "They don’t know how key decisions are made and they have great difficulty analyzing why people — or whole parts of the organization — aren’t meeting the business’s performance goals."

As a result, it would be best to eliminate the CHRO position and split HR into two strands, he said. One would be administrative, primarily managing compensation and benefits, and report to the CFO. The other would focus on improving the people capabilities of the business and report to the CEO. This would be led by high-potentials from operations or finance who would build their experience and eventually move to horizontal or higher-level line management jobs.

"The proposal is just a bare outline. I expect to see plenty of opposition to it," he wrote. "But the problem with HR is real. One way or another, it will have to gain the business acumen needed to help organizations perform at their best."

But Ian Cullwick, vice-president of leadership and human resources research at the Conference Board of Canada, totally disagrees. For one, he’s been really impressed with the calibre of CHROs he’s met, he said.

"They are indeed businesspeople and putting the needs of the business first. So they’re strategically focused."

In addition, Charan’s concept doesn’t make sense because of the strategic challenges that employers are facing and will face, especially over the next three to five years with an "emerging talent decade," skills shortages and the importance of integrated HR into the strategic nature of the business, said Cullwick.

"The CHRO needs to have an integrated line of sight on all strategic and technical programs and processes," he said.

"Good HR policy and strategy assessment and development also requires the CHRO to have that full scope of responsibility and to me there would be significant risks, for example, if a CHRO did not have process and administrative responsibility for things like compensation and benefits... They wouldn’t have access to the data analytics on those programs and processes, to effect better strategy and policy."

You’re potentially compromising good process efficiency on the one hand and future policy strategy and development on the other, said Cullwick.

"We’re in this era of integration and productivity and… to disaggregate the administrative and the processes from the organizational development, strategic side of things would be extremely risky for the business, the talent management agenda."

Helen Lam has mixed feelings about Charan’s proposal. The professor of human resource management at Athabasca University in Alberta said she appreciates the intention to raise the HR profile by emphasizing its strategic role and having it report directly to the CEO, and she agrees a strategic HR person should have a good understanding of various business areas.

"However, I don’t think the structural change of splitting HR is the answer to the fundamental issue of HR not getting the recognition it deserves or not contributing strategically to adding value to the organization," she said.

With integration and alignment key to organization success, why would further separation and silos be created for human resources? asked Lam.

"HR is generally a small department in an organization anyway and, hence, a further split may actually weaken rather than strengthen the overall HR function and contributions."

Lam also disagreed with Charan’s suggestion the strategic HR position should be held by someone with a background in operations or finance, and human resources is just a temporary stepping stone — this seems to undermine HR’s role, she said.

"HR is a profession and there are many theories and concepts involved. To have someone from other disciplinary areas jumping into the strategic HR role without a strong HR background is just as bad, or even worse, than having an HR person taking on the strategic role without knowing other business areas."

The issue of a CHRO not being able to effectively play a strategic role can often be attributed to a combination of organization issues, such as a lack of recognition of HR’s role or a lack of competencies. Both these issues can be dealt with without splitting up HR, said Lam.

And when it comes to competency, organizations need to select the right person for the right job and provide the proper developmental opportunities, she said. For example, HR individuals can be required or encouraged to complete both HR educational programs and general business courses, and be exposed to other departments’ operations through cross-training or project work.

"Now that the CHRP (Certified Human Resources Professional) designation requires members to hold a degree, the general business knowledge base of the HR profession will likely increase as most universities’ HR programs are within the business faculty and students must usually take fundamental courses in all core business areas before they specialize in HR," she said.

But HR education is still leaning towards the process side of things because most people have to go through that before they get to the strategic side, and they need to learn the nuts and bolts of HR, said Margot Uson, president of AlternaSolutions in Kirkland, Que.

There should be more on the education side that deals with strategy — such as basic business knowledge and how other areas of business work, she said.

"That’s the drawback: If you stay only in HR and you don’t know how other areas of the business work, it’s very difficult to add in anything that’s useful to the business, that contributes to the business’ growth and development."

Charan’s idea is intriguing because often people outside HR feel there’s too much concern in that department around administration and bureaucracy and dotting the i’s and crossing the t’s, said Uson.

"There’s just a mass of data that has to be tracked… if you just focus on gathering and managing that data all the time, you’re not connecting with the needs of the business and helping to drive the business forward," she said.

"It’s a real challenge, I think, for HR practitioners to be good in both those fields, so you either split things up, which I think is a bit extreme for Canadian organizations because I don’t think we’re perhaps as big as some of U.S. organizations to be able to handle that sort of thing. We’re having enough trouble just maintaining a reasonable size HR department to begin with."

If an employer has enough resources to have a larger department, then it needs some people to have access to the strategic side of the business, as well as having other practitioners who worry about data management and manipulation, said Uson.

"I don’t think splitting it completely is the answer because then I think you’re divorcing the two groups that still have to work together. Even if you’re concerned with strategy, you can’t be doing that in a vacuum — you still have to do it within the context of the HR role within the business."

The challenge for human resources is finding the time and resources, she said.

"Maybe we’re not good enough at finding out how to stop doing … some of the processes and some of the work that’s gone on for a long, long time in the organization and maybe we should be saying to ourselves ‘Do I still need to do this or can I do it a little better or more efficiently, so it’ll give me some more time so that I can actually participate in the business at a higher level or a different level?’"