Ch. 14
Structure of the HR Function
BASK definition: the people, processes and activities involved in delivering HR-related services that create and drive organizational effectiveness.
BASK key concepts: HR service models (centralized, decentralized, global resources); HR structural models (center of excellence, shared services, business partners, matrix); elements of the HR function; HR staff roles; outsourcing; HR-function metrics.
HR service models
| Model | Description | Pros | Cons |
|---|---|---|---|
| Centralized | One corporate HR department sets policy and delivers services for the whole organization | Consistency, efficiency, economies of scale, control | Slower, less responsive to local needs, can feel distant |
| Decentralized | HR staff sit in each business unit or location and tailor practices locally | Responsive, close to the business, quick communication | Inconsistent policies, duplicated effort, higher cost, compliance risk |
| Hybrid | Central policy and expertise combined with local delivery | Balances consistency and responsiveness | Requires clear roles to avoid confusion |
Your course's five structures:
- Centralized: One corporate HR department sets policy.
- Decentralized: HR staff sit in each business unit.
- Functional: Corporate specialists write the policies, and generalists in the business units carry them out.
- Dedicated: A full corporate HR team plus HR embedded in business units, which can create local practices fitting each unit's strategy.
- Shared services: A central team handles high-volume transactional work.
HR structural models: Ulrich's "three-legged stool"
Most large organizations organize HR around three parts, a design associated with Dave Ulrich:
| Component | Role |
|---|---|
| HR business partners (HRBPs) | Senior HR professionals aligned to business units. The BASK defines the HRBP as an HR professional who advises leaders on developing and carrying out a human capital strategy aligned with the organization's mission, vision and goals. HRBPs are internal consultants. |
| Centers of excellence (COEs) | Teams of specialists in areas such as compensation, talent management, learning, analytics or employee relations. They design programs and best practices. |
| Shared services | A central team, often with self-service portals and call centers, that handles high-volume transactional work: payroll, benefits administration, HR data, employment verification and tickets. It cuts costs and improves consistency and data accuracy. |
Matrix HR structure: HR staff report both to central HR (functionally) and to business-unit leaders (operationally).
Ulrich's four HR roles (from his 1997 model):
- Strategic partner: Aligning HR with the business.
- Change agent: Leading transformation.
- Administrative expert: Running efficient processes.
- Employee champion: Representing employee concerns and building commitment.
HR roles and responsibilities
| Role | Typical responsibilities |
|---|---|
| HR leadership (CHRO, VP of HR, HR director) | Part of the senior leadership team. Sets the people strategy. |
| HR business partner | Strategic advisor to business leaders. Translates business needs into HR solutions. |
| HR manager | Plans and directs an HR function or team |
| HR specialist | Deep expertise in one area: compensation, benefits, talent acquisition, learning, employee relations, HRIS |
| HR generalist | Broad knowledge across many HR areas. Handles day-to-day HR for a group of employees. |
| HR coordinator / assistant | Administrative and transactional support |
Elements of the HR function (BASK): recruiting, talent management, compensation, benefits, employee relations, learning, HR technology, compliance and so on.
Outsourcing HR functions
Outsourcing means contracting with a third-party vendor for selected services instead of doing them in-house. The BASK lists recruiting, benefits administration, payroll, legal, contract management and investigations.
| Option | Description |
|---|---|
| Professional employer organization (PEO) | Co-employment: the PEO becomes the employer of record for payroll, taxes, benefits and workers' compensation, while the client company directs the daily work. Popular with small businesses because they get access to large-group benefits. |
| Administrative services organization (ASO) | Provides HR administration (payroll, benefits administration) without co-employment. The client stays the employer of record. |
| Business process outsourcing (BPO) | Outsourcing an entire process, such as recruiting process outsourcing (RPO) |
| Staffing agencies | Provide temporary workers. The agency is the employer, but the client may be a joint employer for some legal purposes. |
Outsourcing decision steps:
- Analyze what to outsource: transactional, non-core work, or work needing scarce expertise.
- Do a cost-benefit analysis.
- Issue a request for proposal (RFP) and evaluate vendors.
- Do due diligence: references, financial stability, data security, compliance.
- Negotiate a contract with service level agreements (SLAs) and performance metrics.
- Manage the transition and communicate with employees.
- Monitor vendor performance.
★ You can outsource the work, but not the legal responsibility. The employer remains accountable for compliance.
HR-function metrics (BASK)
| Metric | Formula / meaning |
|---|---|
| HR-to-employee ratio (HR staff per FTE) | HR FTEs ÷ total FTEs × 100. A common benchmark is roughly 1–1.5 HR staff per 100 employees, but it varies widely with organization size. |
| HR expense per FTE | Total HR expenses ÷ total FTEs |
| Customer (client) satisfaction | Survey results about HR services |
| KPIs | Measures tied to HR's strategic goals, such as time to fill, retention of top performers and training completion |
| Balanced scorecard (HR scorecard) | HR metrics organized into the financial, customer, internal process and learning & growth perspectives |
| Revenue per employee | Revenue ÷ FTEs. A broad productivity measure. |
| Human capital ROI (Jac Fitz-enz) | [Revenue − (Operating expenses − Employee costs)] ÷ Employee costs. Measures the profit returned for each dollar invested in employee pay and benefits. |
| Human capital value added | [Revenue − (Operating expenses − Employee costs)] ÷ FTEs |
Finished reading?