Should the HR department be scrapped?

There is an argument to say that human resources (HR) departments provide merely a series of administrative tasks which could, practically speaking, be provided by any managerial level department or external agency. As an expensive investment, should we simply be doing away with HR? Or would that be missing a trick in terms of how we manage people? Asks Gudrun Limbrick.

The human resources of an organisation are the people who make up the workforce of an organisation. They differ from the machinery, raw materials and premises of a company as they have minds of their own and they have rights. The HR department is there to look after these human resources specifically with their rights in mind. Like any department in a company — finances, asset management, marketing — the aim of an HR department is to look after the company’s interests rather than the interests of the asset or resource in question.

In practical terms, an HR department has responsibility for hiring and firing, developing a personnel strategy, ensuring the appropriate policies and procedures are in place related to the employment of staff and, critically, knowing where the company stands in legal terms in all matters relating to the employment of its workforce.

In terms of the employees’ perspective, it is hard to imagine that the lack of an HR department would impact negatively. Contrary to some misconceptions, the HR personnel are not there for the benefit of employees or there to be on the side of the employee in disputes with the company. HR departments, just like any other departments, are there to further the aims and profitability of the company. To go even further, some advisors say that employees should not tell HR departments (or, indeed, any other part of the employing company) any information about themselves than is absolutely necessary. HR can potentially use any piece of information about employees (for example, “my mother is aged and frail” may suggest absenteeism due to caring needs in the future) to assess our value or worth as an employee in the future.

For these reasons, it is useful that there are many sources of advice and support for employees independent of an employer. Trade unions have a diminishing standing in terms of the number of members but remain an important source of information and practical support for employees who have some form of dispute with their employer or wider industry. Acas and Citizens Advice are the next to go to sources of support but the internet as a whole is an incredibly significant resource for employees. There is no need for an employee to go to their own employer for support when there are so many free sources elsewhere which can provide independent advice.

Looking at the employer’s perspective in small companies, the HR functions generally have to be carried out by a range of individuals rather than a dedicated department simply because it’s the only economically viable option. Managers take on the role of hiring and firing, maintaining appropriate policies and practices, and communicating with staff. Line managers have a critical role to play in this taking on the whole function of relaying staff issues to the company and relaying the company message or ethos to the employee. An effective line manager is important to staff morale and productivity. This sharing of HR functions can, of course, eat into time required for other areas of work but appears to be effectively managed in companies with a small number of staff. The higher the turnover of staff, of course, the more expensive this becomes in terms of both time and money. Small companies are already outsourcing as a matter of course — payroll, legal issues, recruitment can all be taken over by specialists who can fill the gaps in terms of the people’s hours needed and the expertise necessary, or both.

In larger companies, it is more usual to have dedicated HR departments who take on whole elements of HR management and support other personnel in other elements of it. These departments are equipped in particular areas such as people management skills, recruitment skills, pay and pensions issues, communication expertise and all the legal and good practice issues around employment. As such, they are a significant asset to a company with a large workforce. The question is, could all of this expertise be taken from other, external sources, leaving more money to go into other areas of the business? This would be following the model of smaller companies which are arguably more streamlined. In the same way as payroll functions and recruitment functions so could all the other functions of the HR department it is argued.

The argument seems straightforward and is compelling, rather than spend money on recruiting and developing, and keeping internal expertise for a fully functioning HR department, buy it in from the many available specialists. In this way, it only has to be bought in as and when it is needed. The vast majority of HR tasks are, after all, specialist to the task (such as employment law, recruitment and payroll) rather than specialist to the company or the wider industry. And, while HR tasks need huge input initially (in setting up policies, strategies and processes), they do not need the same level of input in subsequent months and years.

Those in favour of HR departments argue that people skills are incredibly difficult and that large companies (and perhaps small ones too) need a professional dedicated team in place at all times to deal with people’s issues. Otherwise, companies run the risk of small problems being unchecked and escalating out of control. There is also the compelling argument that companies need HR departments which have the ability and time to get to know the workforce — recruitment trends, forthcoming challenges, shifts in employee expectations, changes in mood and need to be able to put this into the context of their own customers, and market. HR departments also need to be there to support line managers in their people management role. This is a tricky area of work, it is argued, for which people often do not have specialist training or experience and may need a sounding board or even just a shoulder to cry on occasionally.

The way forward would appear to be outsourcing many of the more ubiquitous functions — with issues such as legal advice, recruitment, employee satisfaction reviews, line manager training and so forth being carried out by appropriate specialists. However, there are important functions carried out by HR departments which have been lumped together with general HR work but which actually standalone as adding value to the company. These are largely based around knowledge — analysing trends in recruitment, turnover and productivity in the company and the wider industry or locality and feeding this expertise into the company at board level so that there can be understanding of the implications of these trends on future plans for the company, and also that changes in future plans can be viewed in terms of the implications for personnel issues.

We are in a time of huge changes in human resource with zero-hours working and homeworking, for example, and changes in employment rights. The place for internal HR expertise is at strategic level.