For decades, HR has been criticized for being bureaucratic, dysfunctional, and out-of-touch with the reality of what businesses need to do in order to be successful. The latest issue of the Harvard Business Review now goes one step further and calls for "blowing up HR!"
I believe that change is needed, but "blowing up HR" is not the answer. Instead, the solution should relieve the pressure on HR to make changes that it hasn't been able to make and allow it to do what it does best.
The business environment has changed dramatically over the last 20 years, and it will continue to evolve. These changes need to affect how talent is managed, recruited, organized, and rewarded. Some aspects of work, however, have not changed. There are laws and societal norms that organizations need to comply with. There are also necessary administrative processes, which involve human capital, such as paying it and ensuring that it is treated in a legal and ethical way.
Every organization needs a dedicated group focused on the compliance and administrative activities that HR manages. Often these are the activities that irritate people because they make HR seem bureaucratic, inflexible, and "cop-like" at times. They can be performed, to some degree, by the multiple cloud-based administrative systems that are available today, but they cannot be eliminated. Every organization needs an HR function that handles basic administration and compliance activities. Inevitably, HR will be seen as bureaucratic, resistant to change, and sometimes unresponsive to the realities of the business world.
A long-term research study by John Boudreau and myself has found that over the last 20 years, there has been very little change in how HR allocates its time. It still spends the same amount of time performing its administrative activities as it did 20 years ago. As a result, HR often fails to engage in important issues related to business strategy, organizational change, organization design, sustainability, and a whole host of other important organizational effectiveness issues.
As we point out in our recently published book, Global Trends in Human Resource Management: A twenty-year analysis, the best way to deal with these issues may not be to "blow up HR," but to create a new unit that focuses on organizational effectiveness. This may or may not include "traditional HR," but it should definitely include business strategy, sustainability, organization design, organization development, and the interface among them and talent management. The creation of this "organization effectiveness" function may be key to ending the criticism of HR for its failure to address key business issues in organizations.
Following this reasoning, we note in our book that the reason why accounting and finance are separate is that they do very different types of work. Similarly, marketing and sales are also separate for good reason. Instead of breaking up accounting, organizations created finance groups to look at the strategic issues and to manage strategic decision-making in their area. Marketing is separate from sales because they need to deal with entirely different kinds of issues. Although few love accounting and sales, no one talks about eliminating them.
In the case of HR, the skills needed to deal with changing the nature of the workforce and its interface with the organization's design and structure are very different than those that are needed to do traditional HR work. Processing payrolls, administering benefits, and assuring compliance with affirmative action laws and regulations is not the same as developing a talent management strategy that fits an organization's business strategy.
Instead of "blowing up HR," it is better to position HR in organizations as an effective administrative unit that supports the smooth operations of an organization and to create a separate group that deals with the key talent, organization design, and strategic issues that emerge within organizations today.
There are already a number of organizations that are moving or have moved in this direction. There is no "right way" to do it at this point in time, but hopefully experience will make it clear how best to position an organizational effectiveness department and an HR department within an organization's structure. A key issue here is whether the head of organizational effectiveness reports to the CEO, and whether the HR function reports to the head of organizational effectiveness, CEO, or COO. But we'll save that discussion for another blog.