Dear Ram Charan – its not about Structure but about True Belief

Management guru Ram Charan in the latest issue of HBR http://hbr.org/2014/07/its-time-to-split-hr/ar/1 proposes that the “Its time to split HR”. His basic argument being`

“When I talk with CEOs across the globe who are disappointed in their HR people. They would like to be able to use their chief human resource officers (CHROs) the way they use their CFOs—as sounding boards and trusted partners—and rely on their skills in linking people and numbers to diagnose weaknesses and strengths in the organization, find the right fit between employees and jobs, and advise on the talent implications of the company’s strategy.”

 He then goes on to propose the following

“My proposal is to eliminate the position of CHRO and split HR into two strands. One—we might call it HR-A (for administration)—would primarily manage compensation and benefits. It would report to the CFO, who would have to see compensation as a talent magnet, not just a major cost. The other, HR-LO (for leadership and organization), would focus on improving the people capabilities of the business and would report to the CEO”.

In my 25 years in the profession and having been an entrepreneur, an internal L-O ( as he describes it) person and an external consultant, I can’t help but bring a few ground realities to light

1.    We have to build Human Capital Mindset : HR is at the table but may not have the seat closest to the CEO because ultimately the investors and the stock market want to see quarter by quarter profitability and ROI.  How many HR metrics get talked about in an investor meeting? At the most you may see a Best Places to Work survey, which feels good. So until we are clear about the metrics investors value from a Human Capital perspective, we will always not be as crucial as the CFO.

2.    The CEO needs to undersatand the true value of L-O: While I wholeheartedly agree and L-O should report to the CEO because of its strategic nature (and in any case the founders of Organisation Development in the 1960’s always proposed that, but since at the time there was no stategy function – they only found HR as the place to park it) I have been in situations where the CEO wanted change and helped drive it too. It was all very fine until it came to working with dysfunctions within his top team.  That’s when we faced the most push back and ultimately as internal consultants had to relent. And the work became change for change sake.

3.    Re think Finance: Putting anything under Finance will just defeat the purpose made here in point one.  Finance typically comes from a mindset that people are cost. Which is why when the going gets tough the first thing to cut is spending on people development. If Finance has to become the “resourcing” function, then – “people are an asset” needs to become the true mantra

In summary, HR struggles because at the board level we are often not concrete about what we want from HR except rhythm of the business and feel good surveys. Lets put that on the table and go from there.

Thoughts?