Reinventing the HR Organization

The organization of HR in India was not always so complex or confusing. It was born in a simple factory household. Its maternal parentage (which it didn’t always own with pride) came from a long line of bookkeepers and 'munshis' who needed employee records to make payments and record attendance. As the children became increasingly unruly, a maternal uncle with legal training, kept them in check and dealt with the gang-leaders with whom they kept company. The father’s line, which didn’t have much time for its offspring, was production and engineering. They imparted the technical skills that the youngsters needed to work in the family business. Thus, in less convoluted terms, Industrial Relations (with Establishment, i.e. record-keeping, folded in) and Technical Training were the two parents of factory HR. Without necessarily drawing a parallel with the way we were treated, by the time I joined the function at Telco (now Tata Motors) Poona (now Pune) in the ’70s, HR could say, like Topsy, "I spect I grow’d. Don’t think nobody never made me." ¹ There was no pre-thought design behind the structure that evolved. In addition to HR’s two parental pillars, our fast-growing operations in Telco demanded a centrally shared recruitment service and a dedicated cell for inducting and developing the burgeoning number of engineers and other professionals (who didn’t have unions to represent their needs). We even had a prototypical business partnering presence for our vast Engineering Research Centre. As an aside, it was 'personned' by the redoubtable Anil Sachdev, who went on to create the fertile SOIL for many more young minds to grow.  

Specializations continued to be added to HR haphazardly, as needs arose over decades and geographies, resulting in the tree trunk structure that we have today which, if sliced through, reveals all the rings of the years, seasons and styles it has weathered. This is not to say there has been no effort at systematization and streamlining. Almost three decades ago, my brilliant teacher, Dave Ulrich, expounded an appealing model that fit all the then extant pieces into four super-roles. Some of these left worthy progeny (e.g. Strategic Partners parented Business Partners) while others (e.g. Employee Champions) never went forth and multiplied. While Ulrich’s framework helped HR departments all over the world to conceptualize and group activities, it did not change the nature of the building blocks encompassed by the super-roles. Functional Experts, for instance, remained rooted in updated versions of the process specializations in which they originated. As a result, even today, most HR structures ignore three basic changes that have destroyed the assumptions of our Topsy-turvy growth. Most of the specializations, that traditionally had to be honed and periodically tweaked in-house, are now better handled through standardization, automation and outsourcing (to vendors with scale and in lower cost locations). By outsourcing "…organizations hope to achieve significant cost savings, greater efficiency, increased value creation, and better leverage of capital investments in HR systems; create career opportunities for HR employees; and enable HR to focus on more strategic activities." ² In hanging on to those specialized structures past their sell-by dates, however sophisticated-sounding the Centre Of Excellence & Shared-service (COEDS) boxes in which we pack them, we are deprived of the innovation, quality and cost benefits new ways of organizing HR can bring. This column seeks to address this lacuna. If the specific recommendations fall short of readers’ expectations, I hope they will at least prompt them to make their own voyages of structural discovery and reinvention.

Jay Galbraith’s work on organization design is considered definitive by many (myself included). While his work is focused on the corporation as a whole, it is a useful starting point for analyzing HR structures in large corporates. 

According to Galbraith: "An organization can be structured in five primary ways:

In addition, there are overlay structures (teams, matrix) that complement these primary forms." ³

Despite the guidance it supposedly provides others, HR itself remains essentially rooted in the functional form. Sub-functions, such as Recruitment, Training and Comp & Ben (sometimes combined in COEDS cabinets), take the place of corporate level functions, like Manufacturing and Sales, in the Galbraith model. "While functional and product organizations have internal advantages, they don’t necessarily provide an easy interface to the customer. What is a simple and rational structure for managers is cumbersome and complex for clients… Organization structures based on customer, market, or industry segments make it easy for the buyer to do business with the organization. For service businesses that must intimately know the preferences of their clients in order to stay competitive, organizing by market segment makes sense." ⁴ Concomitant with the growing demand for understanding the (internal) customer’s needs intimately, comes the hollowing out of the internal specialization that justified the adoption of the functional / product form. The trigger provided by automation, to which we referred in the previous section, is itself about take a quantum leap through the growing applications of AI. Similarly, the outsourcing of traditional processes, also referenced earlier, has become far more sophisticated, tailorable and cost-effective in recent years. This has been aided by internal users getting over their fastidious insistence on home-cooked deliveries. "Line managers are [now] basically agnostic to where these services are performed as long as they are accurate and user-friendly." ⁵

Admittedly, the Business Partnering concept, to which many corporates have given at least lip service, has the potential of growing HR into a front-back hybrid. "The front-back hybrid structure combines elements of both the product and customer structures in order to provide the benefits of both. It allows for product excellence at the back end while increasing customer satisfaction at the front end." ⁶ The reason business partnering doesn’t deliver the full potential of the front-back hybrid structure in HR is primarily due to the resource starvation of the Business Partner relative to the rest of HR. If s/he cannot create tailored solutions that raise customer delight, the role becomes simply one more overhead layer between customer and provider. In this scenario, it is not surprising that HR Business Partners focus on honing business knowledge instead of concentrating on learning that grows their HR expertise. ⁷

Put differently, HR has outgrown Topsy’s hand-me-downs. To face the future, it has to transform itself:

Having reviewed the factors that make reinvention imperative, let’s turn to the design of the structure itself.

The HR structure of large business organizations in the future will need to consist of five kinds of teams. The size and complexity of the business will determine the number of people in each team. Its geographic spread and business verticals may demand a reflective nesting of the teams. However, their core purposes will remain the same. The descriptors for the teams are relatively brief since their central justifications have been elaborated in previous columns (or ones that remain to be written).

Names may be gloried, corners may be trimmed, sizes and importances may change, but it is my belief that the most effective HR organizations of the future will follow this blueprint.

Transitioning to the first really ground-up design of an HR organization will not be easy. Three building blocks will need to be managed particularly carefully.

1. Design: As pointed out already, the foregoing is just a blue-print. Each firm will need to flesh it out depending on its:

The extent to which the HR team and its line clients participate in the design process, the easier will be the transition and the likelier the new structure will deliver on its promise.

2. Phasing: Individual companies may have some overriding considerations but, otherwise, the desired sequence of activating teams (and de-activating the interfering or superfluous portions of the previous structure) is the one followed in the previous section. As such, HR Teams should be the first off the mark, possibly with COEDS resources (see below) wearing two hats till their own activities are reconstituted. Next would be the IAS Teams and so on. 

3. Sourcing: Once again, there are no hard and fast rules but it is suggested that the following sources be considered (left to right) for each team-type before turning to others:

 

Many of the ideas contained inn this blueprint had been tossing around in my head and even surfaced piecemeal in earlier columns. It was only when a bright young HR professional posed a question about how HR organizations ought to look like in future that I tried pulling the jig-saw puzzle together. I was fortunate that most of the pieces fit.