How to structure the HR function
The I first thing I ever learnt in management theory was organisational structure, quite some time ago (literally- topic one of mgmt 101). Maybe it was the same for you, maybe it wasn’t so long ago. But maybe you didn’t, maybe you’ve forgotten it, maybe you’ve not thought about it, at least in the context of HRM. Maybe you’ve already thought about this, maybe you already know it.
No this isn’t just old theory regurgitated- I actually apply it to HR, and find the pros and cons of each way.
It all starts with structure
Nothing is more important in your job than who you report to. Equally, who you don’t report to. But it doesn’t stop there- structure dictates who are your colleagues, who’s in your team, and who’s not in your team (and potentially in opposition to). Who gets to make decisions gets to decide the priorities for those below. Who does what, who takes direct from whom, what is important at stems from structure.
Let’s take a quick case study: payroll. Sometimes payroll reports to HR, sometimes it reports to Finance. But that simple distinction- who’s their boss, and is it the same as your boss, demonstrates the point- we are tribal, and if they are in our tribe, this compels us to work together, to have loyalty and forebearance, that we would likely otherwise not have. I’m taking the punt that you would feel, and interact differently with payroll if they were (or weren’t) in your team.
Functional structure
Let’s start with the default structure, and the most common in HR- then we can get exotic. Functional structure is where work is organised by the purpose and function that the employees provide the organisation. Accounts payable, receivable, financial accounting, management accounting, etc.- are grouped together into a finance department, and the same for HR- recruitment, L&D, employment relations, training, change management, and so forth a gathered together into a HR department.
Where it can get interesting is whether some fringe functions are included or not, and these often vary, depending on either history or importance. Payroll can go either way- under Finance or HR whereas H&S is often under the HR umbrella where its significance in the organisation is relatively low; in high-risk workplaces H&S tends to be under operations, or is a separate department.
Pros and Cons
There are many advantages of a functional HR structure. Firstly it allows oversight and coordination by a single manager- who can direct and correct the work to maximum efficiency and to align to organisational objectives. Secondly in encourages cooperation across those performing similar work; recruitment hands new starters over to training and to payroll, H&S liaises with business partners over employee health issues.
The disadvantages are that HR can get quite insular, and out of touch with the operation they are trying to support. Functional HR departments tend to become quite process focused, echo-chambers of what is important to HR, losing touch with the organisation they are supposed to be supporting. You want to know how HR becomes just a compliance department, just saying no and out of touch with the business of the business? It starts with a functional structure.
Divisional Structure
Division structures are where work is grouped into a business unit, or division, with all work being performed with unit reporting to a single divisional manager. In addition to the core operations, it includes all support functions (H&S, HR, Finance, Procurement etc). Division structures tend to occur due to geography, or disparate business units. In multi-national companies, often all functions in one country report to one division or a regional division. Where one organisation runs distinct and unique business units, it can make sense to keep these operations self-contained. This can also be done to maintain its sell-ability: it handy for a business unit to be able to be sold off as a separate unit without requiring disentanglement.
Pros and Cons
Divisional structures are useful where cooperation within a division is more important than the efficiencies of a shared services approach. If you’re reporting to head office somewhere, but your involvement with them is minimal, your focus and responsibilities are better aligned to the local manager. But as alluded to in functional structure, who you report to draws your focus and aligns your interests to them, which results in variance of HR practices. If the organisation wants things done the same in each region, a divisional structure works against this.
Divisional structures really draw out the question of best practice vs best fit. Is there a ‘best way’ to things? or is it a case of ‘we do it differently here, because the situation is different’. There is no right answer to this, and I (and maybe you too- you’re smart) can think of examples of things done differently in your location because it makes sense to do things that way. Alternatively you can think of things that others might do that are just wrong, old fashioned, or just old habits that need updating.
Matrix structure
Divisional and functional structures are the two primary means by which work is organized to continue on indefinitely. Matrix structures evolved out of business’ needs for cross-functional teams, where the business requires a range of people and skillsets to come together (typically for projects), resulting in employees have both a functional reporting line, and the another reporting line to the project leader. Often for avoid confusion, one of these will be deemed a ‘dotted line’.
Pros and Cons
True matrix structures are rare, and typically only work for fixed term projects, and especially where the nature of the work is project based, and the work rolls from project to project. This type of work doesn’t typically involve HR, but it can.
Are you in a matrix structure yourself? Maybe, some circumstances require direct HR involvement- the acquisition and integration of another business into yours is a good example, where you are on the project of integrating the new workforce. Does having an ongoing dotted line mean you are in a matrix structure? Not really.
If your dotted line is the manager of a division that you support, that is just recognition of your internal customer. If your dotted line is a functional manager (i.e. HR) then that is just a mechanism to counteract the regional divergence we see in divisional structures.
Agile
So let’s talk about Agile, the current (or not, maybe I’m out of touch) flavour of the month that adherents promote as the great panacea to work inefficiency, often with disturbing fervor. With so many good ideas, they work where they are designed to work, but don’t where they are not.
Agile is system developed within highly competitively industries where innovation and speed to market was critical. In these environments, in companies that compete in this way, for employees who do work critical to the innovation process, it works. But in other environments, such stable industries, in companies that compete on cost, for employees not involved in getting new products to market, it's simply not very applicable a tool.
To put it simply (and simply a little) HR has no business in agile work, because HR plays no part in product innovation. HR plays a part in facilitating agile work, by aligning recruiting, training, and remunerating practices to this business need. It could be argued that HR plays a part in innovative design of an organisation’s structure, but I would question whether agile methods are suitable in this.
What often happens in our Jargon-based world, is that specific, scientifically well-founded ideas bleed out into vague generalities and become ‘buzz words’ used to signal one’s knowledge, but when used incorrectly betray a lack of knowledge. Mostly when people talk about working Agile, they just mean ‘please be flexible’.
