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Critical Analysis

Its Time to Split HR


- Ram Charan

Its Time to Split HR

In July 2014, author Ram Charan published an article in HBR where he proposed a theory
which he believes is radical but grounded in practicality to split HR into two strands and
eliminating the position of CHRO.
He proposes two totally different units one that handles administration which he says
would be primarily compensation and benefits. It would consist of HR practitioners and
would report to the CFO. He named it as HR-A (for administration).The other named HR-LO
(for leadership and organization) would handle leadership and organization, report to the
CEO, and be staffed by rotating high potential operational leaders.
Logical flow in argument
The author Ram Charan starts the article by stating what are the expectations of CEOs from
their CHROs and the skill sets that they expect them to possess such as linking people, find
and rectify the weakness in an organisation. The author points out that in most cases the
CHROs are process oriented and have expertise in benefits, compensation and labour
relations. The author finds a common similarity of those CHROs who possess both the
qualities i.e. they have a line operations experience and supports the argument by using
examples. Based on this the author came to conclusion that those who were line managers
and had experience in operations will be able to do the role better. So the author proposed to
eliminate the post of CHRO and spilt HR into 2 they are HR-A which takes care of the
process such as compensation and benefits. HR-LO which takes care of the leadership and
operations. The leadership and operations helps to build their capabilities of the people and
report it to the CFO. HR-LO would be led by high potentials from finance or operations
whose expertise and skills give the people an opportunity to attain top layers of the
organisation. Therefore it is seen as developmental step.

Theoretical inconsistencies
The author has rightly pointed out the increasing demands at the workplace which calls for
more integrated role by the HR professionals. But we disagree with the idea of splitting the
HR into two strands. Rather we believe that retooling the HR with the required capabilities
and skills is the way forward. Trends have changed in the business world over the last decade
and this has posed changes for the organizations to keep pace with the changes. Some of the
challenges are:
Globalization 2.0: Western firms will find opportunity in the rapid urbanization and growing
middle class of emerging marketsbut with new and significant competition in these local

workforces, partnerships, joint ventures, and collaboration will become more critical to these
firms success.
Environmental crisis: A scarcity of natural resources like water, food, and rare earth
minerals will challenge companies supply chains and product development operations. More
sustainable operations will be critical, both for environmental and commercial reasons.
Individualization: Customers and employees now expect systems to flexibly meet their
needs, and they often switch between brands and employers that dont adapt to meet this
newer reality.
The digital era: With social media and other tools, customers and employees can endorse
and help build a brand. Since the opposite is also true, businesses must become more
responsive, more accountable, and more engaged. Further, as digital data grows, companies
must address questions of privacy and ethical behaviour with employee and consumer
information.
Demographic changes: Increased life expectancy means people can work longer, and the
addition of smart young talent to the employment market is testing organizational policies
and approaches. Together with a more diverse workforce and increased employee mobility,
organizational structure and management will need to adapt.
Technological convergence: Cloud computing, personal devices, nanotechnology, and
biotechnology are increasing new commercial opportunities, but theyre also requiring
organizations to collaboratesometimes with competitorson research and development.
These challenges call for more holistic and embedded capabilities for the HR department and
merely segregating the department into two sub departments would be dysfunctional
according to our view.
Practice based inconsistencies

Task/Role Ambiguity
The role of the HR department is not specified clearly in the article. It is not specifically
given whether diverse activities like talent acquisition, employee relations, reward
allocation, etc. fall under the supervision of human resource department. It should have
been defined more clearly and specifically.

Effect of prejudices and biases


It is likely that executives from a particular department will favour or give advantage to
his own men. This would finally lead to in-group bias, thus adversely affective the
decision making process.

Scope of the article

This particular approach is irrelevant for organizations which have a high proliferation of
contractually hired employees
The authors idea may be applied to a small firm as the risk associated is relatively less.
However splitting up the department would pose problems since the number of HR
employees is limited
It can easily be applied to mid-sized organizations. This is mainly because the HR
department of these organizations is more focussed and dynamic. Also the number of
employees working in HR department is higher. Moreover the top management would be
able to exercise greater control over the daily operations of the company by co-ordinating
the HR department(directly or indirectly) keeping its objectives consistent with that of the
organization
The HR department of large organizations has already attained a particular structure by
evolving over time. This brings in rigidity in their approach and as a result they do not
support modifying the structure or functioning of the HR department. Splitting it up is not
advisable since it may adversely affect the organization by declining its stability and thus
hampering operating profits.