It’s time to split up HR. That was the title top management guru Ram Charan gave to a controversial article that appeared in the July 2014 issue of the Harvard Business Review. The first paragraph read: it’s time to say good-bye to the Department of Human Resources. Well, not the useful tasks it performs. But the department per se must go.
This aggressive approach to the HR function is nothing new as some experts have been launching regular diatribes against the HR function (HRF). In most cases the comments suffer from an obvious superficiality (which goes unnoticed as they are coming from alleged experts, from whom such frivolity is not expected), and I think that this is one of those cases. I will briefly explain what their opinion is based on, then present a passionate response given by Dave Ulrich in defense of the HRF, and finally I will give my own opinion on the matter.
Ram Charan said that he has spoken with CEOs around the world who have expressed their disappointment with their HR personnel. They would like to be able to use their CHROs (Chief Human Resources Officers) just as they use their CFOs (Chief Financial Officers), as a trusted partner who listens, and be able to trust in their ability to connect people and numbers in order to diagnose the strengths and weaknesses of the organization, find the right fit between employees and positions and advise on how talent impacts the company’s strategy. I recommend reading the original at https://hbr.org/2014/07/its-time-to-split-hr/ar/1.
According to Charan, it is rare to find CHROs who can do those things. Yes, they know about processes, remuneration, culture, empowerment and things like that, but they do not know how to relate HR to the real world of business. They don’t know how decisions are made and, above all, they have great difficulty analyzing why some people do not achieve their objectives. However, he adds, the few that do have something in common: they all come from the line, have worked in production, sales or finance (it’s interesting that he considers finance a line). Based on this impression, which he does not bother to confirm beyond his personal opinions, he comes to an ultimate solution of how to organize HR Divisions: split them in two. One called HR-A (for Administration) would take on all the administrative tasks, including administrating salaries and benefits, and would report to the CFO who would have to see remuneration as a magnet for talent (I have never known a CFO who has held that view on salaries, and not to question their professionalism, but that is just not in their DNA). The other, called CH-LO (for Leadership and Organization) would be led by the people on the line, high-potential individuals who would spend time in HR and then continue their careers in other places. These people would have access to the top levels of the company to carry out their function and would be respected.
His proposal is irritating, not because it lacks for value (it doesn’t, which we will see later), but because he doesn’t bother to go into detail, challenge his personal impressions or reflect on the whys of the problem. I am by no means the only person irritated by Charan’s article. The brilliant and passionate Harvard Business School Professor Dave Ulrich, who became famous nearly 20 years ago when he publishedHuman Resources Champions, reproaches him for the weakness of his proposal in another article published somewhat later (his article is titled Do not Split HR – At least not Ram Charan’s Way). At first he tries to understand why this proposal came about and thinks that the answer is that CEOs have realized that technology, marketing and logistics now can no longer provide sufficient competitive advantage and that it is brilliant people and successful organizational dynamics that provide lasting advantages. Ulrich realizes that what Ram Charan has done, possible inadvertently, is to heighten the value of the HR Function, despite offending its professionals while doing so.
Ulrich proposes a broad set of functions for HR. From my point of view they are unfathomable (I wrote about it in a chapter titled Una function en la encrucijada (A function in the crossroads) in the book Expertos en personas (Experts in people). Prentice Hall, 2004). This article summarizes it into three major areas of action: Talent (providing competitiveness: the right people in the right place at the right time with the necessary skills); Leadership (ensuring that there are leaders at all levels who think, feel and act in a way that generates lasting value); and Skills (identifying the factors that provide lasting advantages, whether it be culture, system or processes. These capabilities will vary with strategies and time).
Doesn’t it seem like Ulrich is looking for a superhero? I have met many good HR directors (the top 20% mentioned by the author) and frankly I don’t think that any of them could do all those things at a high level. These expectations are not realistic. I think that Ulrich’s proposal would be impossible to implement, despite being stimulating and informative.
Before proposing my solution I want to point out a crucial aspect of the HR Department, an aspect that, interestingly, does not get much mention in the theoretical forums. To put it directly: the HR Function is not carried out in the HR Department. The Accounting and Finance function is carried out in the Accounting and Finance Department. CFOs design and manage their processes 100%. HR directors only manage and design the processes for administrating staff. As for the processes of managing and developing human capital, they design them but don’t manage them. These plans are all carried out on the line (evaluation and development interviews, assessment of management potential, rotations, training plans, etc.). Everything of high added value takes place outside their direct area of action. The HR Director (HRD) often has to chase down line executives to get them to do their part. If they are lucky the CEO will be supporting them, but that is far from usual. Isn’t it paradoxical that success is demanded of the HRD in those key aspects of talent management? It’s no wonder that the HRD is the scapegoat for failures in talent management. You would have to look at the Directorate General (when the CEO isn’t concerned with this there’s little that can be done) and, of course, at the line managers.
Having explained this particularity I would say that I am very critical of the way the HR Function is often carried out (I also explain this in greater detail in the chapter mentioned above): often their agendas are not in line with the business, they have scarce knowledge of processes and little ability to influence executives. That is why their voices are sometimes not respected on Executive Committees.
Charan’s proposal, made lightly with curtness and ignorance, contains the beginnings of a possible solution: I think that charging people from the line with great ability with the job of managing talent is a great idea. Now, I don’t think we have to break off that function (which Charan calls CH-LO) from the General HR Function. The entire department must share strategies, approaches and philosophy. I think that the people from the line who worked in HR would have to be very well trained (assuming that the job can be done without training is ridiculous and paradoxical: if it is so key for the company, how can it be that any person who shows up can do it without training?). On the other hand I think that we must be more demanding when selecting HR executives. They must be highly capable professionals with business interests, knowledge of economics and processes, very skilled at communication and true experts in human capabilities. Naturally, the CEOs of these great professionals should be able to rise to the challenge.
Juan San Andrés firstname.lastname@example.org
Management Consultant on HR, organization and productivity