Future of HR

Charan, Ram. (2014). It's time to split HR. Harvard Business Review. According to Charan (2014) in his article "It's time to split HR" from the Harvard Business Review, the department of human resources, as it currently exists at most companies, must be disbanded. HR continues to disappoint CEOs because of the failure of HR to link people and numbers or to act as partners with other chief executives. The new HR must give meaningful input to generate value for the organization by using people more effectively.

Charan critiques HR personnel as "process-oriented generalists" with little understanding of how a company functions in the real business world or how to use personnel to meet performance goals (Charan 2014). HR backgrounds are also incommensurate with those who are in other leadership position, more "line based" in nature (Charan 2014). Successful CHROs, he argues, are those who have unconventional backgrounds and experience outside of HR.

Charan's perspective is thus starkly different from those who believe that HR and the other components of a company must learn to bridge their differences and acknowledge the value-generating aspect of investing in people. Charan believes that HR needs to become more like finance, IT, and other components of the organization, otherwise its existence will be in jeopardy and it will always be in conflict with the ultimate aim of a corporation, which is to make a profit.

For Charan, this culture clash suggests that a radical solution is needed, namely to divide HR into two sections: One, HR -- A would fulfill solely administrative purposes, much like the personnel department of yesteryear which HR has largely replaced. The second, HR-LO, however, "would be led by high potentials from operations or finance whose business expertise and people skills give them a strong chance of attaining the top two layers of the organization" and would be focused on leveraging talent alone (Charan 2014).

HR-LO department would take on many of the roles which Charan clearly wants HR to do but believes is currently incapable of in its present form: "Leading HR-LO would build their experience in judging and developing people, assessing the company's inner workings, and linking its social system to its financial performance" (Charan 2014). Individuals from the business side of the company would fulfill this HR function, not traditional HR people.

HR would be a value-generating component of the company from a business standpoint and would be shorn of what Charan sees as its 'soft skills' emphasis today. Not surprisingly, Charan's point-of-view is controversial. Ulrich (2014) in his response entitled "Do not split HR -- at least not Ram Charan's way" counters that focusing on organizational capabilities alone is not enough to ensure that the people selected by HR are serving the organization well.

Of course, there are poor performers in HR but that is true of every department and singling out the worst of HR could just as easily be done to condemn other professions. "It ignores what I call the 20-60-20 rule. In HR (or finance or IT), 20% of the professionals are exceptional, adding value that helps organizations move forward, 20% of HR folks are locked into a fixed mindset and lack either competence or commitment to deliver real value, and 60% are in the middle" (Ulrich 2014).

As with all departments, Ulrich argues that improving the mediocre middle is what is critical to the organization's future success, not splitting HR in two. Ulrich points out that Charan himself noted that there are extraordinary exceptions to what he considers the 'rule' of HR performance mediocrity.

The 60% which is not made up of top performers, Ulrich believes, are not inherently poor employees but rather are "limited by senior leaders who don't appreciate the value they offer" and need to know how to function better when faced with challenges such as a lack of support from the leadership or unfavorable market conditions (Ulrich 2014).

He agrees with Charan that HR must be leveraged in a better fashion to capitalize upon talent but disagrees with Charan's solution, as well as the idea that HR staff are inherently less competent than other departments in the organization. A good HR department is unique in its ability to leverage talent and capabilities and this demands an 'outside-in' perspective, in other words that HR must stand outside the other departments and understand how human beings work, not simply focus on the organization's productivity numbers alone.

Employees can offer critical value for a company by making it more desirable to patronize.