ORGANIZING THE HR UNIT

HR management as an organizational function traditionally was viewed as a staff function. Staff functions provide advisory, control, or support services to the line functions. Line functions are those portions of the organization directly concerned with operations resulting in products or services. Line authority gives people the right to make decisions regarding their part of the workflow; however, traditional staff authority only gives people the right to advise the line managers who will make the decisions.

Two different organizational arrangements that include an HR department are common. In one structure the HR function reports directly to the CEO, which is likely to result in greater status and access to the strategy-making process in organizations. Another structure that is still frequently found has the head of the HR unit reporting to the Vice President of Finance/Administration. This structure often leads to HR being focused more on operational and administrative issues.

Within the HR unit, it is common to structure jobs around the major HR activities.

Figure shows a typical HR department organization for a firm with no workers represented by unions.

Sample HR Unit Structure 

A wide variety of jobs can be performed in HR departments. As a firm grows large enough to need someone to focus primarily on HR activities, the role of the HR generalist emerges—that is, a person who has responsibility for performing a variety of HR activities. Further growth leads to adding HR specialists who have in-depth knowledge and expertise in a limited area. Intensive knowledge of an activity such as benefits, testing, training, or affirmative action compliance typifies the work of HR specialists.

HR MANAGEMENT COSTS
As an organization grows, so does the need for a separate HR department, especially in today’s climate of increasing emphasis on human resources. As might be expected, the number of HR-unit employees needed to serve 800 employees is not significantly different from the number needed to serve 2,800 employees. The same activities simply must be provided for more people. Consequently, the cost per employee of having an HR department is greater in organizations with fewer than 250 employees, as Figure shows.

Costs of the HR Function 

Two HR management trends are evident today in a growing number of organizations.
One is the decentralization of HR activities and the other is outsourcing of HR activities.

DECENTRALIZING HR ACTIVITIES
How HR activities are coordinated and structured varies considerably from organization to organization. Many organizations have centralized HR departments, whereas these departments are decentralized throughout other organizations.

Centralization and decentralization are the end points on a continuum. Organizations are seldom totally centralized or decentralized. The degree to which authority to make HR decisions is concentrated or dispersed determines the amount of decentralization that exists. With centralization, HR decision-making authority/ responsibility is concentrated upward in the organization; whereas with decentralization HR decision-making authority/responsibility is distributed downward throughout the organization. How large an HR staff is or should be, or the extent of centralized or decentralized HR decision-making in organizations, is determined by many factors: culture of the organization, management style of the executives, geographic location, industry patterns, extent of unionization, and others.

What is occurring in some organizations is that HR activities are being aligned more with the specific business needs of individual operating entities and subsidiaries.

The result is the shrinking of the staff in a centralized HR department for an entire organization. For instance, a financial services company has six different subsidiaries. Each subsidiary has its own HR director and HR staff; and compensation, training, and employment are all handled by the HR professionals in each of the strategic business units. The only centralized HR activities are benefits design and administration, human resource information systems design and administration, and equal employment compliance reporting and monitoring. In this way the HR central and administrative functions can be centralized for efficiency, while also allowing each business unit to develop and tailor its HR practices to its own needs.

Even smaller organizations are decentralizing HR activities. In one hospital with about 800 employees, four HR representatives are designated for different sections of the hospital. These individuals are the primary contact for all HR needs of managers and employees in the various hospital departments. The only centralized HR functions are those mentioned earlier. The Vice President of Human Resources serves primarily as a strategist with the CEO and other senior-level managers. As a result of this shift, the hospital has had to train the HR professionals who specialized in an HR function such as employment to become HR generalists. In this way the HR “partnership” with operating managers has become stronger.

OUTSOURCING HR ACTIVITIES
In a growing number of organizations, various HR activities are being outsourced to outside providers and consultants. The HR Perspective discusses research done on HR outsourcing.

Outsourcing some HR activities can be beneficial for organizations for several reasons. First, the contractor is likely to maintain more current systems and processes, so that the employer does not have to keep buying new items, such as computer software, programs, and hardware. Also, many contractors have special expertise that is unavailable to HR managers in smaller organizations, whose time and experience both may be limited. A major benefit is to reduce HR payroll costs and shift activities to the outsourcing contractor. This shift means that the HR department has fewer people and more flexibility in changing its structure and operations as organizational changes require.

But outsourcing HR activities has some disadvantages also. First, the success of outsourcing rests in the competence of the outside vendor. Having a contract that identifies what will be done and what continuing support will be provided is crucial. Obviously, selecting an outsider who fails to provide good services or results reflects negatively on the HR staff in the organization. Second, some concerns exist about “losing control” by utilizing outsourcing. When data are available from and services are provided by an outsider, the HR staff may feel less important and more anxious because they do not have as much access and control. This concern can be partially addressed by clearly identifying the outsourcing relationship. In addition, sometimes outsourcing may cost more than providing some HR activities in-house, particularly if the contract is not clear on a variety of factors. In summary, there definitely are risks associated with outsourcing, but there are distinct advantages as well. Detailed analyses should be done by HR managers before outsourcing occurs, followed by periodic evaluations .