Is it time to split the HR?

In a recent article named “It’s Time to Split HR” in Harvard Business Review by Ram Charan, he firmly argues to eliminate the position of Chief Human Resource Officer (CHRO) and splits HR into two strands called:

• HR-A (Administration) to manage compensation and benefits, routine administration functions
• HR-LO (Leadership and Organization) for improving people capabilities
  

This proposal is based on his wide experiences and sharp observations that CHROs:

• can’t relate HR to real-world business issues
• don’t know how key business decisions are made
  

Therefore, the organization structure he has suggested is reflected in Model A (as shown in figure below). But the model I would suggest is, wherein “Traditional CHRO” is replaced by “LE-CHRO” (as shown  as Model B in the figure)

Here, LO team would be anchored with high potential professionals who have quality experience in any of the line functions like sales, manufacturing,  project management etc., Let us call these experienced line functional experts who move into LO as LEHR (Line Experienced HR) professionals. 

New CHRO would also have to be a senior LEHR leader with strong people development skills. This means that the existing “Traditional head of HR” has to be moved out.

Let us analyze how Model B would be more advantageous compared to Model A:

• One of the important features of model B is to have a LE CHRO unlike model A. How is he going to help?:
  
  A leader in the form of LE CHRO is absolutely essential to implement and run this radically new "split HR" model that too when we are introducing a new team in the form of "LO" to perform very important people processes (Down the paragrahps, we will see some of their important KPIs). Without a solid leader, any new model would for sure will fail.
  
  In the absense of a LE CHRO (and CEO directly handling HR-LO, as suggested by Ram Charan) load on the CEO’s bandwidth would be unnecessarily enormous and that would put the new model in jeopardy.
  
• By retaining HR-A under the new LE CHRO (instead of transferring them under CFO), all HR functions are being harnessed under the LE CHRO for better coordination which would  facilitate better decision making especially in areas like compensation where business experience of LO would be of immense help in particular, since HR-A has a big disconnect with business. By this way, advantages of “splitting HR” are preserved as well.
  
• This model would also avoid CFO getting overloaded with a completely new function to handle.
  
• Assignment Model: And very importantly, to keep LEHR LO as LEHR LO forever, they should take up assignments in line functions intermittently or continously and spend their 30 to 50 percent of time on these assignments since they would keep them in regular touch with rigor of business and provide opportunities to cross pollinate the ideas across functions/divisions. Otherwise they would be running a big risk of getting rusted over time and risk losing respect of line functions.

After a specified time-frame LO team members may go back to line functions so as to enable other line managers to get LO opportunity and in the process the rotation would widen their cross functional skills resulting in strengthening organization’s leadership pipeline.

Now let us see what challenges this model would have to overcome when a corporate entity tries to adopt this model:

• Since this is a major change in people strategy, the CEO and the new LE CHRO have to personally drive this change with full commitment, may be with the help of external change management experts.
  
• To attract good leaders to these new roles, the CEO and the LE CHRO must clearly define the objectives, KPIs, career roadmap for LO and the type of interventions these new roles would play. Otherwise why would bright executives from promising functions like sales and service delivery would take up positions in LO?
  
• KPIs for LO could be like this:
  
  1. Design and deploy ‘x’ number of new leadership development  best practices for young leaders (It could be like a “Shadow Board” created by a big IT services company in India few years ago, wherein one of the main purposes was to expose the selected set of young leaders who were part of this Shadow Board, to important challenges faced by the board of directors. The members of “Shadow Board” were being changed once in two years).
     
  2. Identify and coach ‘x’ number of leaders to cope up with changing market conditions (This KPI is relevant in a situation for example, when a domestic company is facing competition from MNCs for the first time)
     
  3. What new practices/governance model LO should introduce to keep non-sales and marketing teams of an enterprise, in touch with the market and competition realities so that they realign their ways of working for the overall success of the enterprise (For example, non sales functions should visit and experience the market realities at least once in a year).
     
  4. Establish a full fledged model to identify and groom young stars for senior positions.
     
  5. Implement a tightly knitted mentoring program for identified leaders.
     
• 4. Selection of LO and new LE CHRO should be done very carefully since these new roles demand star people process experts to develope leaders across functions similar to what coaches do in sports arena. Being in LO, they may not have the authority which they had enjoyed earlier in line functions but still they should be capable enough to influence and develop leaders to make succession planning an important objective of the leaders.
  
• 5. It is a good idea for organizations, who would like to implement this model for the first time, to be open to visit and learn people development processes from companies like GE, Hindustan Unilever etc., (at least wherever they are not in the same industry) since this first hand learning would fasten the understanding of already proven people development processes/methods and further embolden their belief in the importance of developing leaders perpetually.
  
• Inspiration for adopting the best practices across industries can be drawn from Jack Welch’s example of  making several GE leaders to attend the “Friday Sessions”of WalMart during Sam Walton’s time to understand their best ways of working.
  
• 6. LO should pay special attention to change management to see that LO’s (being the new team) interventions are being well received by other arms of the organization gradually.
  

Overall, model B would be better placed in achieving the objective of HR in contributing to the success of the organizations significantly.