The overall success of an organization often depends on the quality of its human resources. Recruiting, retaining and managing quality human resources often comes down to how well the HR department functions. The smooth function of an HR department depends on its structure.
Therefore, the structure of an HR department is perhaps the most critical attribute to the overall success of an organization. This means that setting up a functional structure is something which must be given serious thought.
Now, setting up a formal structure for an HR department isn’t that difficult. After all, there are many standard structures which have existed for decades. There even templates which you can use to set up a basic structure in a matter of hours.
What is difficult is creating a structure which can enable an organization to achieve its goals, while maximizing the resources both within and outside the company. Creating such a structure requires rethinking some established conventions about how organizations function.
Begin With The Organization’s Vision
Before even thinking of a structure, there are two important questions which need to be answered. They are:
What is the mission of the organization? And, what role will the HR department play towards achieving this mission?
Ultimately, HR is supposed to help an organization to achieve its goals. This means that due to the divergent nature of organizational goals, even within the same industry, HR departments can be very distinct. This is because the goal of the organization will determine who gets assigned to what.
For instance, let’s assume that there are two restaurants located on the same street, serving similar clients. One restaurant is competing basing on the sumptuousness of the dishes. The other restaurant is competing basing on the friendliness of its staff. The HR departments of the two restaurants will have a different focus, and different sets of priorities.
Identify The Key HR Functions
Having identified the organizations mission (or goals), the next question is: What are the key functions of the HR department in light of its contribution towards organizational goals? The standard HR functions are the following:
- training and development
- compensation and benefits administration
- health and safety
- employee and labor relations
- discipline and conflict resolution
Of course, not every organization will require all the above functions. For instance, a marketing agency with 15-person staff may not necessarily require the “employee and labor relations” function. Similarly, a graphics design firm with premises in a modern office building may not have much use for the “health and safety” function.
Having identified the different HR functions, we can now turn our attention to the structure. After all, the structure is supposed to organize activities aimed at fulfilling the different functions. Before looking at the inventive structures, it is good to begin with the common structure.
The Conventional Structure
Under the conventional HR structure, each of the functions would fall under a different section within the HR department. Each section would have a head (e.g. you’d have a recruitment manager, training manager, etc). The different section heads would report to the Human Resources Manager.
Depending on the size of the organization, the HR Manager might report to the VP Human Resources. The section heads might also have other subsections beneath them e.g. the compensation and benefits functions may be separated.
This approach certainly creates a clear structure, with well defined roles. Most HR departments are actually structured this way. And it works (often excellently). However, it isn’t the only structure. There a few other approaches.
The Delegation Structure
Rather than concentrate all functions within the HR department, some functions can be delegated to other departments. For instance, training and development can be moved to specific departments i.e. the marketing department trains its members, the production department does the same, etc. Similarly, the discipline and conflict resolution function can be delegated as well.
This structure can still maintain a fairly hierarchical structure i.e. there are certain things which the other departments will still refer to the HR. For instance, the training and development of departmental managers can still be handled by the HR department. Similarly, serious disciplinary issues which require adverse actions are referred to the HR department.
However, this approach can also begin to create a horizontal structure. For instance, rather than refer every difficult disciplinary case to the HR, departmental heads can consult with one another. Similarly, they can compare notes and share best practices on employee training and development.
Ultimately, a delegation structure can have two advantages. First of all, it frees up the HR to deal with more critical and highly technical functions (e.g. ensuring compliance with laws like FCRA). Secondly, it empowers departments to take responsibility of some issues which concern their staff. This can actually be a good thing since departments are sometimes resentful about what they consider “excessive interference” by the HR.
The Automation/Outsourcing Structure
With the increasing popularity of Human Resource Information Systems (HRIS), some HR functions can be automated. For instance, compensation and benefits administration can be automated. Training and development can also be automated (by using Learning Management Systems).
Automation can introduce new structures. This is because most HRIS can perform different HR roles. For example, a HRIS can be used for both recruitment tracking and benefits administration. This potentially combines two distinct sections into one. Also, given the nature of HRIS, they are most likely to be managed by the IT department. This brings into play new reporting relationships and hierarchies.
The same case applies when certain human resource functions are outsourced. Outsourcing occurs when the HR department feels ill-equipped to carry out certain functions. These functions are then contracted to certain individuals or companies.
Outsourcing creates horizontal reporting structures. This is because outside contractors don’t share the same status as employees. For instance, a recruitment manager will report to the HR manager from the position of a subordinate. However, a consultant contracted to carry out recruitment on behalf of the company will report to the HR manager, but not as a subordinate.
The Absent Structure
This may sound quite outlandish, but some organizations have thrown out the HR department altogether. For some reason, they haven’t deemed a formal structure necessary for the achievement of their goals. They have simply split up all HR functions within the different organizational departments.
Operating without an HR structure has produced mixed results. One cleaning company with 900 employees is doing remarkably well without an HR department. Another company got slapped with a fine of $19 million for a sex discrimination incident which any competent HR would have spotted out (the company has since hired an executive-level HR and set up a department structure). This Wall Street Journal article examines the organizations which kicked out the HR department. Click here to read more.
In a nutshell, the structure of an HR department is critical to the smooth running of the various HR functions. This ultimately influences the overall performance of an organization. Fortunately, there numerous inventive ways to structure HR department. A few of them have been mentioned above. Therefore, whatever the ultimate goal of your organization, you can find the perfect HR department structure to help you achieve it.