The Strategic Human Resources Executive

Dear CEO — wake up!

The role and relevance of the corporate human resources department is again up for debate. Recent developments bringing this issue to the headlines include the resignation of GM’s senior vice president of global human resources, which was arguably fallout from GM’s major recall. Plus The Wall Street Journal recently described the growing consideration by some companies to completely eliminate the HR department. That frustration comes about because HR departments often have unclear missions, inadequate leadership, and a lack of focus on important responsibilities.

Although I have, throughout my corporate career, been a critic of HR departments which reported to me, I believe they have limited yet important roles to play. Let’s take a look at the classic role of the HR department — now largely discredited — and a new model that is more streamlined and relevant. 

First and importantly, let’s put the responsibility for HR where it belongs, with the CEO. The boss prepares the organization, determines who does what, and decides how much authority team members have. When HR fails, it’s largely because the CEO is not paying attention or doesn’t value the department.

The old model is bureaucratic. The head HR executive often reports to the CEO, and his or her responsibilities generally consist of supervising subsidiary departments: employee evaluations, job descriptions, titles, salary criteria, training and development, government reporting, benefits, pension evaluations, and perhaps counseling and labor relations. This was my experience at Xerox, NL Industries and CIGNA. 

In this modern era, most of this work — largely routine — can be outsourced to competent companies that specialize in HR work efficiently and cost effectively. Some duties can be delegated to line management. Much head-count can be saved.

So what should the HR function look like? What should it do? How can it be relevant?

Jamie Dimon, head of JP Morgan Chase, knew what he wanted in an HR department. In his book Last Man Standing author Duff McDonald writes, “Dimon also sent the head of human resources, John Farrell, packing after the two failed to see eye to eye. In a lot of large companies, human resources tends to take on a life of its own, introducing new programs and acting if it were a business in and of itself. Not so in Jamie Dimon’s world, where HR is about helping people get what they need, period.”

This is a positive view with which I agree, but mine is broader.

The most important role for an HR executive to fill is that of counselor to the CEO and senior management. In that role the executive can advise on hiring people who are best qualified to meet company strategies. With knowledge of employee evaluations, especially those of senior and high-potential people, the HR executive and a small team of high-level subordinates can also recommend who should move up, be developed, moved sideways, or let go. HR can provide confidential counseling to executives on people issues. After all, companies are made up of their men and women, and understanding their potential (or lack of it) is critical to success. With the right person in the job, the HR executive becomes invaluable.

Where does one find such a key person? My view is that the job should be rotated every few years among up-and-coming line executives. They know the company best, including its products, pricing, sales, and people. Staff people tend to be bureaucratic and build organizations that don’t mirror the company strategy. HR employees understandably tend to be loyal to their chief, and often are less interested in the employees they should support. They seek promotions based on organizational loyalty rather than loyalty to the company strategy. When HR organizations perform the minor administrative chores so many do, they hire minor administrative people who have no scope for growth, no knowledge of company strategy, and often get in the way of progress. Bureaucracy of the worst type.

Getting back to the responsibility of the CEO: She must ensure that the HR executive is privy to company strategy, sits in senior staff operating meetings, and has access to all senior executives. Programs HR develops must mirror company strategy. Only programs and training or development initiatives that support company goals should be approved.

None of this is rocket science. The CEO can make over the HR department. Find a capable department head and install a small subordinate team. Outsource everything else. Metrics are easily established for the senior HR executive and the small team. Reward those who do well, and replace those who don’t. They should be evaluated similarly to line executives who live and die by their results.