Why Some Companies Are Giving HR The Boot

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“To know your Enemy, you must become your Enemy.”

Sun Tzu, The Art of War

There have been quite a few articles on how HR is failing, and now there are articles being printed on how companies are getting rid of HR! What is of even more concern is that some of those articles are being written in HR magazines. Without being too alarmist, I feel a bit like Paul Revere of HR – and saying the enemies are coming, the enemies are coming.

Knowing the enemy

I use this tongue in cheek, as the other functions are far from enemies – but for purposes of this article – let’s assume they (another CxO) wants to get rid of HR. How would their argument(s) go?

Knowing the boss

No one could disband HR without approval from the CEO. So what arguments appeal to the CEO? According to research by Forbes, about 70% of Fortune 500 CEO’s have a background in either Finance or Operations. So any argument to get rid of HR would likely come with a bent of another function could drive more corporate profits and/or run it at a reduced expense.

Breaking up the band

I doubt anyone would take HR as a full function, unless it was a Chief Admin type of role. But it is likely that different departments would start to be parceled out. Below is how this might play out.

HR Department

Goes To

Rationale

Payroll Finance Cleaner GL reconciliation
Benefits Finance
  1. Pensions and 401K make sense
  2. With H&W becoming one of the largest controllable expenses, high oversight will drive cost down
Compensation Finance What better way to increase finance forecast accuracies by having them manage the compensation plans
HRIS IT Reduce total cost of ownership, and provide better career advisement
Staffing Marketing Staffing is all about marketing. What is the brand, and cost for advertising, hire, etc? Marketing would try to reduce cost via more efficient hiring.
Corporate Ethics Internal Audit Have a in house set of resources familiar with investigation techniques
Training Operations Operations would drive curriculum that would have a direct impact on the business results
HR Business Partners No Where Most of the other functions (Finance, Marketing, IT) also have Business partners, so their roles would be rolled in)
Compliance Legal Let’s actually have the lawyers make the decisions instead of HR making it on behalf of Legal.

Dr. Phil’ism – how’s it working for you so far?

The Human Resource Policy Association (HRPA) did a survey of CEO’s and while they got feel good points, the study concluded:

A significant majority of the CEOs interviewed expressed how important it is for the senior HR executive to have a thorough understanding of the business P&L. As one CEO said, “The senior HR executive [needs to be] a business person first and an HR leader second. They need to decipher and deliver.”

The sad news is maybe HR officers have been given the chance, and now CEO’s are looking elsewhere. The Cornell Center for Advanced HR Studies (CAHRS) did a study in 2011 that found HR was the function that was least likely to promote an internal person to CHRO.  Additionally, companies are beginning to fill the top HR slot with different functional leaders. Here is what the Harvard Business Review wrote, “instead of turning to career HR practitioners, companies are increasingly filling the CHRO role with leaders from functions on the business side, such as operations, marketing, or corporate law.”

You’re only paranoid if they really aren’t after you!

I realize that you and I could come up with lots of reasons as to why HR should stay together, but all it takes is one good argument for the opposite, at the right time and with the right support – and it is over. In a future blog, I will share how to future proof HR from this potential. But in the meantime – what do you think about companies getting rid of HR?

Categories: Industry Trends
Author:  Franz Gilbert

HR practitioner. @FranzGilbert

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