Inside the Modern HR Department: Roles, Structures, and Secrets of a High-Performing Team

The Ultimate Guide to HR Team Models: From Business Partners to Centers of Excellence

The composition of the HR team will vary by organization, but the following are the general roles and responsibilities:

·          Leaders have a strategic role. They are typically part of the organization's senior leadership team, and, ideally, they report directly to the chief executive officer (CEO) or chief operating officer (COO). This structure creates the opportunity for HR to perform its strategic role. HR leaders bring information about strengths, weaknesses, opportunities, and threats to the organization's strategy to other leaders and participate in the development of overall strategy. In addition, they develop and direct the strategy, priorities, and focus for their HR team. The leader of the HR function may have different titles, including chief HR officer (CHRO), HR director, or vice president of HR.

·          Managers are responsible for units within the HR function, such as employee relations, talent acquisition, and organizational development. HR managers plan, direct, and coordinate the activities for their unit and provide input to the leader for HR strategy.

·          Specialists (also known as functional experts) have expertise in specific areas such as compensation and benefits design, talent management, metrics, IT, occupational health and safety, organizational development, and workforce relations. Their role is to apply best practices in their discipline to advance the HR strategy.

·          Generalists (also known as HR practitioners) are familiar with all of HR's varied services. Generalists may have expertise in one or more specialty areas of HR but are generally proficient enough in each area to provide sound advice and direction to employees and managers. HR generalists work closely with their specialist coworkers to ensure that the information and programs they are providing to their employees are accurate and complete. Generalists may also be embedded within countries or business units.

·          HR business partners are more experienced generalists who are assigned to represent HR services directly to other business functions. HR business partners use a deeper understanding of the business-both the organization and the function-to find ways that HR can help functions achieve their goals. This requires many competencies, including Business Acumen, Consultation, Relationship Management, and Communication. These individuals can be key to demonstrating HR's value throughout the organization.

HR Function, Service, and Structural Models

The manner in which HR is structured depends on its organization and areas of responsibility. A critical factor is ensuring that the HR structure is aligned with the organization's strategic plan.

The advantages and disadvantages of the various alternatives for structuring the HR function are summarized in Exhibit.

               Advantages and Disadvantages of HR Structural Alternatives

 

 

Structure	Overview	Advantages/Disadvantages
Centralized	All HR personnel located within HR department. Delivers services to the entire organization.	Advantages: Provides more control and consistency across organization. Disadvantages: Can inhibit flexibility and responsiveness; can decrease effective communication.
Decentralized	HR staff within each function, business unit, or location carrying out required activities.	Advantages: Allows for more direct contact between HR and other functions and facilitates communication and responsiveness. Disadvantages: Lack of consistency among HR policies and standards.
Functional	Headquarters HR is staffed with specialists who craft policies. HR generalists, who may be located within divisions or other locales, implement these policies, adapt them as needed, and interact with employees.	Advantages: Facilitates consistency between headquarters policy and practices and implementation in business units. Disadvantages: Can isolate headquarters HR from business realities perceived by all staff and employees.
Dedicated	Allows organizations with different strategies in multiple units to apply HR expertise to each unit's specific strategic needs.	Advantages: Promotes strategic alignment between headquarters and units. Disadvantages: Isolation of dedicated HR units and loss of shared knowledge and experience; may lead to duplications and inefficiencies.
Shared services	Each business unit can supplement its resources by selecting what it needs from a menu of shared HR services (usually transactional) that the units agree to share.	Advantages: Offers expertise efficiently, reducing load of transactional activity in favor of value-creating activity. Disadvantages: Risks underuse of service centers when their existence is not widely known.
Center of excellence (COE)	Leverages strategic expertise to foster growth and continuous improvement.	Advantages: Takes advantage of digital communications to create networks of experts in the organization. Disadvantages: Similar to shared services, risks underuse when its existence is not widely known
Business partners	Generalists who usually report to managers outside of the HR structure but indirectly report to HR and work to consult and help link their business area to the proper areas of the HR department.	Advantages: Allows business partners to acquire a deeper understanding of the business and enables HR to better support organizational efforts. Disadvantages: Can be difficult to define roles and responsibilities for business partners, who may become a scapegoat from employees in both areas for issues that occur.
Matrix	HR staff report directly to HR senior management but also report to other departments through the senior management positions.	Advantages: Works well when pressures originate from multiple areas or when the work is complex (such as setting benefit policies equitably between employee groups in different locations). Disadvantages: Blurred reporting relationships, time constraints, and increased workload may result. Opportunity for conflict between senior management of HR and business areas.
Global resources	Refers to the ability to attain support and resources from around the world, often via outsourcing.	Advantages: Helps HR consider all areas when making decisions by avoiding the tendency to consider only local issues. Disadvantages: Can increase the opportunities for miscommunication or failure to recognize particular cultural norms if not done carefully.

 

Centralized/Decentralized HR

Centralized HR is characterized by having all HR personnel located within the HR department and from there delivering services to all parts of the organization. Headquarters (or corporate) makes all HR policy and strategy decisions and coordinates all HR activities and programs. The goal of the centralized structure is to ensure standardized HR policies and processes throughout the organization. Centralized HR also allows large organizations to create efficiencies in the delivery of HR services.

In decentralized HR, each part of the organization controls its own HR issues. Strategy and policy may still be made at headquarters, with HR staff within each function, business unit, or location carrying out the required activities.

For example, a local bank with a small number of branches may have a centralized HR structure, handling all HR issues for the bank departments and branches from one HR department at the bank's headquarters. A large heavy equipment manufacturer with multiple locations in different countries may have a decentralized HR structure. In this case, there would be a headquarters HR staff but also dedicated HR functions at each location. Decentralizing HR can allow HR to position itself closer to its internal business partners and create stronger relationships.

Centralized HR provides more control and consistency across the organization, but it can also inhibit flexibility and responsiveness and can decrease effective communication. Decentralized HR allows for more direct contact between HR and other functions and facilitates communication and responsiveness. The downside can be a lack of consistency among HR policies and standards. This is especially a challenge for global organizations that would like the economies and clarity of global HR policies and processes but are aware of the need to adapt to local cultures, laws, and business practices.

Some organizations have hybrid HR structures. For example, learning management may be determined by headquarters, with the content of the learning being determined at the functional, business unit, or location level.

Functional/Dedicated HR

Another alternative is between a functional or dedicated HR structure. In their book The HR Value Proposition, authors Dave Ulrich and Wayne Brockbank describe the two alternatives.

In a functional HR organization, headquarters HR is staffed with specialists who craft policies. HR generalists, who may be located within divisions or other locales, implement these policies, adapt them as needed, and interact with employees. This type of organization is often found in the least diversified, but not necessarily small organizations.

A dedicated HR structure allows organizations with different strategies in multiple units to apply HR expertise to each unit's specific strategic needs. This is in some ways a "corporatized" HR, with an HR function at headquarters and separate HR functions located (or "embedded") in separate business units. Corporate HR articulates basic HR values, develops tools to be used by the organizational-level HR functions, and creates programs aimed at enhancing global literacy and leadership skills. The business unit HR staff develops local policies and practices.

Shared Services

Ulrich and Brockbank identify another structural alternative known as the shared services HR model. This model is frequently used in organizations with multiple business units. Rather than having to develop its own expertise in every area, each unit can supplement its resources by selecting what it needs from a menu of shared services (usually transactional) that the units agree to share.

Centers with specific areas of expertise develop HR policies in those areas and then deliver this service to all units. In a globally integrated enterprise, the centers develop the services at an international or global level and can be located within the most appropriate unit or country. HR transactional work is thus shared by a network of centers allowing HR professionals to spend more time working on strategic or transformational activities that help to generate value.

Common processes folded into shared service centers include payroll, procurement, accounts payable/receivable, travel expenses, health benefits enrollment, and pension administration. The top four positive outcomes for organizations that have implemented the shared services concept are:

·          Reduced staff time spent on administrative tasks.

·          Reduced administrative costs.

·          Consolidation of redundant functions.

·          Better tracking of employee data.

Center of Excellence (COE)

Related, but not identical to the shared service center, is the center of excellence (COE). Shared service centers deliver savings and increased productivity by locating similar, more transactional processes in one location. COEs aim at leveraging strategic expertise in the organization to foster growth and continuous improvement. COEs can be located in a certain facility but can also be "virtual." They can take advantage of digital communications to create networks of experts who can reside anywhere in the organization. COEs in HR might focus development, compensation and benefits, and other areas of HR expertise.

Business Partners

Business partners are typically embedded in different areas of the business, reporting directly to managers within those areas and with "dotted line" reporting retained with HR. This allows business partners to better focus on specific business areas and tasks and to better understand and support those areas; it provides managers in the areas with a better understanding of the role and capabilities of the HR function. It also increases the visibility of HR throughout the organization.

Matrix Structures

Matrix structures allow for flexibility within the HR department and may result in specialized working relationships designed to meet the specific needs of the organization and its business areas. This is distinct from the business partners concept because it involves reporting to other business areas through the HR senior management positions instead of reporting directly to managers in the other business areas.

If department heads from the other business areas ask HR to do more than it is capable of or experienced in, conflict may result. HR employees may struggle to understand who they are responsible to due to blurred functional reporting lines and may experience an increased workload as a result of the arrangement. Clearly setting expectations with the HR employees with regard to expectations, responsibilities, priorities, and who to approach with questions may help avoid some of these issues.

Outsourcing

The use of third-party contractors is both a structural alternative and a tool HR can use to deploy its own assets with a more strategic focus. Third-party relationships take the following forms:

·          Outsourcing, in which a third-party vendor provides selected activities

·          Cosourcing, in which a third party provides dedicated services to HR, often locating contractors within HR's organization

HR activities that are not strategic but are resource-intensive or that require specialized expertise are candidates for outsourcing or cosourcing. A survey of human resource outsourcing (HRO) companies shows a wide range of outsourcing options, covering administrative activities, implementation of services, and consultation on specific issues and projects.

For example, HROs can administer or implement:

• ·          Contract management.
• ·          Payroll services.
• ·          Employee benefit programs.
• ·          Employee self-service centers.
• ·          Investigations.
• ·          Learning and development systems, including training and knowledge management.
• ·          Legal services.
• ·          Employee data retention and analytics.
• ·          Recruitment programs.

Outsourcing can provide cost savings for an organization, but there is a loss of managerial control. Co-sourcing can be more expensive than outsourcing, but there is more managerial control over the contractor.

 

HR must approach the decision to outsource or co-source strategically. For example, an organization may commit to increasing the depth of leadership talent at all locations. To ensure that the task is accomplished as quickly and as effectively as possible, the organization's HR function may choose to outsource a talent search to one or more consultants who specialize in this field and who have better access to informal networks of talent sources.

The third-party contractor's performance objectives must be aligned with the strategic goals of HR and the organization. The reliability, capacity, and expertise of potential contractors must be confirmed, as well as their ethical character, since HR retains responsibility for a third-party contractor's practices and ethical behavior. The agreement should define specific deliverables and criteria such as conformance with organization policies and service levels.