There has been an interesting debate that has been started resulting from a Harvard Business Review magazine article by Ram Charan. In the article titled “It’s Time to Split HR” he writes that that the traditional CHRO is not working and that the responsibilities should be divided between
Administration (led by HR generalists reporting to the CFO) and Leadership and Organization (led by high potential line senior leaders reporting to the CEO). This solution – while innovative and controversial – will not solve the problem of how to make HR a strategic partner in the organization. It does raise the important fact that the Human Resources organizational role has to change. This is where the discussions get interesting
The primary argument that Ram Charan presented on why he recommended splitting up HR is:
The Human Resource function is seen as administrative.
This is a common criticism that is warranted because many departments and HR leaders act in this way. As Charan writes in his article: “Most of them are process-oriented generalists who have expertise in personnel benefits, compensation, and labor relations. They are focused on internal matters such as engagement, empowerment, and managing cultural issues. What they can’t do very well is relate HR to real-world business needs. 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”.
Where the Human Resource function works effectively it is because the senior leader has real life line management experience.
Charan cites several examples of exceptional CHRO leaders who he attributes their success to the fact that they had significant general management experience. He says that this line experience allows the CEO to use them... “ as sounding boards and trusted partners — and rely on their skills in linking people and numbers to diagnose weaknesses and strengths in the organization, find the right fit between employees and jobs, and advise on the talent implications of the company’s strategy”.
Is Ram Charan correct? Should the HR function be split?
There have been a number of strong counter arguments that have been posted in the Harvard Business Review. The two best are:
What It Will Take to Fix HR – Cathy Benki and Erica Volini
Do Not Split HR – At Least Not Ram Charan’s Way – Dave Ulrich
What both of these articles agree on is that Human Resource leaders do need to think and act more strategically. The criticism of the HR function being mostly administrative is justified based on past experience. The solution presented by Charan though is too simplistic and that placing the strategic elements of HR into the hands of a rotating door of high potential managers will create a severe lack of continuity, consistency and clarity. It essentially places the most essential need of the 21st century organization – talent – into an experimental department that may or may not perform well. That is very risky.
What is needed is for the CHRO to assert themself as a strategic leader by demonstrating the following:
Strategic value creation
As Benko and Volini point out in their article “85% of value creation stems from brand, intellectual property and people – all intangible assets”. The CHRO function is the most knowledgeable in talent identification, sourcing, retention and engagement. They need to demonstrate how they can bring the best people into their organization, create effective onboarding programs and nurture and develop this talent so that create substantial value.
Quantification – HR Analytics
Analytics has to become the means for which the CHRO communicates with the CEO. Driving decisions thru data is common throughout the organization. The HR function should not be any different. At The Frontier Group we have done several HR Analytic programs for client companies that wanted to create a dashboard to measure their effectiveness. We have seen how this creates value.
The Ram Charan article did re-ignite the healthy debate on the strategic role of Human Resources. At The Frontier Group we have seen how smart HR leaders embrace this challenge and help drive talent development in their organizations. The solution is not to disband HR but rather to challenge its leaders to think and act more strategically.
