Companies Without HR – Fact or Fiction

There is no doubt about the strategic importance of the HR function. The question remains. Should it be separate or woven as part of the business fabric? We look at both sides and present realities that exist in the corporate world today.

From Compliance to Culture

Typical HR functions can broadly be classified into compliance and culture. HR activities that contribute to compliance typically include employee records, statutory compliance, and benefits administration.

Cultural building activities are primarily in talent management and talent development. Specialist functions of recruitment and compensation support these 2 broader categories of compliance and culture.

As per Deloitte Global Shared Services Survey report in 2017, HR was the 2^nd most likely function after Finance to be performed via a shared service center. This clearly indicates the tendency of large organizations to separate the operational aspects for process efficiency and cost saving from strategic interventions.

The Robots

60% of organizations that operate a shared service center (SSC) today are evaluating the use of Robotic Process Automation (RPA) to handle routine, high-volume transactions. This would potentially reduce dependence on human workers for simple transactional activities.

Efforts are on to evaluate the use of more advanced cognitive technologies to either augment or replace the human judgment from decision making especially in transactional activities. Data standardization and consistent processes help build the same.

This 4th industrial revolution truly challenges the transactional roles and nature of human resources in most organizations. In the near future, we can expect industry-standard platforms to emerge which would ensure standardized compliance related processes are handled automatically without any human intervention.

But What About The Soft Stuff

This Wall Street Journal article in 2014, talks about examples of companies who have pushed HR related activities in the middle of the business. Such structures hold business leaders and managers accountable for all the soft stuff.

In this interview with Mr. Arun Nathani, Founder and CEO of Cybage Software, I realized that companies are increasingly looking to separate the operational from the strategic. By taking a system view and understanding that HR problems like attrition, retention, and others are real business problems. Such companies rely heavily on data-based decision making and look to hold HR accountable for operational aspects. The strategic nature of HR is the responsibility of the C-suite.

Recent examples like the Uber case further highlight that the soft stuff is the tough part and it needs to be managed with care by top executives in the company. In these areas, HR must play the role of a specialist and can ill afford to be a generalist.

Can They Really

In my personal experience companies of a certain size can choose to function without the strategic HR function. Senior executives in these setups understand and execute on these strategic imperatives.

No company can afford to ignore the transactional and compliance related aspects of HR. Such activities can either be outsourced or performed internally irrespective of the scale of operations.

I believe we already have enough evidence of this operational and strategic divide between HR career paths. Individuals with specific interests and skill sets should look to pursue these paths independently. There is strategic in the operational path and there is operational in the strategic path.

Can companies really function without HR?

Maybe. If the HR function is a separate entity ring-fenced with certain operational tasks.

Definitely Not. If HR is a set of actions needed to be performed to stay competitive and relevant in the business world.