SHRM-CP / SHRM-SCP Certification Exam: Organization - Structure of the HR Function

The HR expertise domain of Organization Knowledge counts toward 16 percent for both exams. This domain covers the essential HR knowledge needed for relating to the organization.

The following are the functional areas that fall within the Organization Knowledge domain:
- Functional area 6—Structure of the HR Function
- Functional area 7—Organizational Effectiveness & Development
- Functional area 8—Workforce Management
- Functional area 9—Employee and Labor Relations
- Functional area 10—Technology Management

HR professionals are expected to know how to perform the following Body of Competency and Knowledge (BoCK) statements for the Organization Knowledge domain:
- 01 Creating an effective HR function fully aligned to the organizational strategy
- 02 Enhancing the effectiveness of the organization at large
- 03 Ensuring that the organization’s talent pool has the skills and capabilities to achieve organizational goals
- 04 Promoting positive relationships with employees
- 05 Leveraging technology to improve HR functioning

Functional Area 6—Structure of the HR Function
Here is SHRM’s BoCK definition: “Structure of the HR Function encompasses the people, processes, theories, and activities involved in the delivery of HR-related services that create and drive organizational effectiveness.”1

All career levels of HR are expected to know and support the different types of HR service models and understand how HR services are integrated. The HR organization must be structured to meet the needs of the organization and its stakeholders. Gathering feedback, collecting data, and using the appropriate metrics to determine HR performance and satisfaction all enable HR professionals to evaluate HR’s effectiveness and identify areas needing improvement and change.

Key Concepts
- Approaches to HR operational integration (i.e., how HR structures work together)
- Approaches to HR function/service models (e.g., centralized versus decentralized)
- Approaches to HR structural models (e.g., Center of Excellence [COE], shared services)
- Elements of the HR function (e.g., recruiting, talent management, compensation, benefits)
- HR-function metrics (e.g., HR staff per full-time employee, customer satisfaction, key performance indicators, Balanced Scorecard)
- HR staff roles, responsibilities, and functions (e.g., generalists, specialists, HR business partners)
- Outsourcing of HR functions

These are the proficiency indicators that SHRM has identified as key concepts:



The Strategic Role of HR
The strategic role of HR professionals is to strengthen the relationship between the employees and the employer.

The Evolving Role of HR Professionals
The role of human resources has evolved over the years, probably more so than any other department function in an organization. In the old days, HR managers simply shuffled paper, keeping payroll records and benefit assignments straight. In the early twentieth century, HR as a specialized function began with a narrow focus of hiring and keeping records of employees, an operational and administrative function. Changes in HR have been stimulated by external changes, and a major change has been the need for HR professionals to participate in strategic planning and then implementation of those plans.

HR’s staff typically provided three types of support: advice, service, and control.
- Advice Advising line management on workforce matters including policies and laws, providing solutions and procedural steps, offering assistance and guidance on employee issues, diagnosing problems or gathering facts, and providing resources
- Service Maintaining records, hiring, training, answering, and clarifying information within a broad customer base, including management, employees, legal and regulatory agencies, applicants, retirees, families of employees, and vendors
- Control An authoritative role involved in consistency of policy application, evaluation of employee performance, corrective action, and designing or implementation of employee programs

While the focus continues to have a foundational basis in the day-to-day operational role (acquisition, development, resolving issues, and communications), along with administrative transactional activities (maintaining a human resource information system [HRIS]), the significance of HR’s contributions has become more apparent as a business strategist with a forward-thinking, long-term global focus that includes protecting the organization from potential risks. HR professionals have earned a seat at the executive round table, contributing to the organization’s direction with strategic solutions for talent management, creating organizational culture, formulating and developing strategies, and balancing the external and internal environments to help the organization achieve its goals. The title of chief human resource officer (CHRO) is common in today’s large organizations—a recognition that indicates HR has come a long way up the perceived value-added scale. In today’s global competitive business climate, the HR role must contribute in quantifiable business terms, outlining a return on investment (ROI) that ensures the effective and efficient use of its human capital.

This Table provides a brief historical perspective of the evolution of the human resource function.

Table: Evolution of Human Resources
 

HR as a Profession A job is something you can go to every day, perform the assigned duties, and go home without any further attachment. Human resource management used to fall into this category. Now, however, HR professionals are placed into a role that demands strategic thinking and strategic planning with an eye on overall organizational health and success. Early on, “personnel management” was a staff function. Later “human resource management” became a management function. In recent years, HR management has become a strategic function helping the organization achieve its strategic goals.
HR in the Twentieth Century Following the creation of a “personnel department” in the mid-twentieth century, people in that portion of the organization were expected to shift their focus toward a broader perspective of HR management. It became more than a personnel and payroll support function.
 

Administrative Services HR workers were assigned duties including the following:
- Personnel records management
- Benefits enrollment
- Attendance tracking
- Training recordkeeping
- Employee data management systems such as HRISs
- Employee award tracking
- Office party planning
Operational Services Direct support of the operational units in the employer organization became necessary. The following were added to the HR responsibilities:
- Labor relations expertise
- Recruiting and staffing
- Training preparation and management such as operations and management skills
- Policy development
- Employee handbook management
 

HR in the Twenty-First Century

s we transition into the new century, HR professionals find themselves involved more with strategic planning and implementation.
 

Strategic Administrative Role

The functions handled in the twentieth century still exist, but they have morphed into a strategic support role. Personnel records management is now responsible for assessing employee benefit programs as they contribute to the financial success of the organization. This includes impact analysis on employee recruiting and retention and its effect on the profit and loss performance of the company. Employee award tracking has evolved into a strategic assessment of programs that will improve employee retention and engagement. Office party planning has gone away in many organizations. In its place is the strategic assessment and selection of employee support programs, such as free or low-cost food services, and specific employee motivation programs.
Strategic Operational Role Labor relations has grown over the years with the transitioning of union contract protections to laws that apply to most employers. Those protections such as wage and hour restrictions now are available to most employees in the country. The benefits offered by labor unions these days are less numerous than they used to be. Most of the old benefits are now legal protections at both the state and federal levels.
Policy development involves a wide swath of topics from employee benefit offerings to disciplinary processes. Those policies are being assessed based on their strategic impact on the organization and its mission. Once policies are developed, employee handbook content can be prepared that communicates those policies to the employee body. Even the designation employee is being altered by some organizations. Some of the terms now used include cast member, crew member, associate, and staff member.

Changes That Impact the HR Profession
The largest impact on the HR profession has come from state and federal legislative bodies creating new laws that contain employee protections that once were available only to union members within a bargaining unit.

David Ulrich presents his approach in terms of deliverables, or outcomes, for which HR should be responsible in new strategic roles: strategy execution, administrative efficiency, employee contribution, and capacity for change.2 In the course of delivering in these four areas, he describes four corresponding roles for HR to play within a business: a) as a strategic partner working to align HR and business strategy, b) as an administrative expert working to improve organizational processes and deliver basic HR services, c) as an employee champion, listening and responding to employees’ needs, and d) as a change agent managing change processes to increase the effectiveness of the organization. One of unique things about Ulrich’s approach is that it includes all of the ways that HR can deliver value to an organization, rather than shifting focus from one area to another.
Workforce/Workplace Changes According to a recent article in Work Design Magazine, “By 2027, global socioeconomic shifts will result in larger changes in worker type, available jobs, and ways of working. The rise of the middle class in emerging markets will have a large impact on the overall workforce. Currently, one-third of the global middle class is located in Asia Pacific. By 2030, this proportion will double, due in large part to expansions of the middle class in countries like China and India. This growth will result in changes in buying habits, ultimately driving economic growth. According to a Morgan Stanley estimate, by 2030 middle-class spending will almost double that of 2010.
“New patterns will emerge in occupations: jobs in service-oriented industries such as healthcare and hospitality sustain growth, but a significant portion of workers gravitate towards more flexible work arrangements and freelance jobs. There will be an influx of jobs enabled by emergent technologies.”
Globalization Globalization is not a fad. It is a movement that will only solidify the ways of doing business as the days go by. The impacts it will have on employer organizations will be profound. Employee groups in remotely operating locations with different laws and customs present challenges to professional HR managers. The role of diversity management will grow even bigger than it is today. Value added will be the operating expectation for every group, including HR. If something can’t be measured and shown to add value, the HR organization will be hard-pressed to convince the C suite that it should be done.
Ethics In the past, HR professionals had to wrestle with different employment laws in the different states where they had employees working. In the future, it will be necessary to wrestle with laws and customs in multiple countries. In some countries there is an expectation that money will be offered to those approving work projects. That is unacceptable to an HR professional’s ethics, so dilemmas will arise when the strategic repositioning of workforce groups becomes necessary. It is incumbent upon HR professionals to reconcile those differences so that the work can get done and the local expectations are satisfied without violating U.S. laws.
Organizational Growth or Retraction When the size of an employment organization increases or decreases, there are considerations for legal compliance and, equally important, for the satisfaction of employee morale requirements. When groups are small, there is a tendency for individuals to bond easily around the mission of the groups. As groups grow, that sense is diluted, and bonding can become more difficult. There can be issues related to who is promoted and who is not or who is given a desirable work assignment and who is passed over. Leadership from HR professionals takes on critical importance. How they communicate and help employees through difficult periods of time will determine how well the organization can meet its strategic objectives.
When organizations reduce their employee headcount, other problems occur that require HR interventions and leadership. Layoffs, downsizing programs, relocations, and constructive discharges can all result in employee dissatisfaction. How HR professionals handle these difficulties will determine how well the force reduction will reach its goals.
Movement of Decision-Making As new workforce locations are opened in remote countries or even remote locations within the United States, there is a risk that they will experience the “out of sight, out of mind” syndrome. Managing people from a distance involves permitting and even encouraging decision-making by people at those locations. Working out what decisions should be local and what should be held for headquarters becomes an operational requirement that HR can help with.
Extended Organizations When manufacturing, marketing, or administrative organizations find it necessary to create workforce placement in new, extended locations, HR can help facilitate those movements. Any expansion into an international environment will require some adjustments. It is not so much a need to hire people in the new location as it is a need for cultural adaptation. That is a two-way process. New employees in the remote location must learn about the corporate culture and how to behave within it. The corporation must also learn about the local culture and design ways so that culture can be embraced by the organization.
New Organizational Structures Expansion into international locations is not quite like expanding into additional U.S. locations. There are enough similarities from one U.S. location to another to make the transition easier than when international expansion is undertaken. New locations may mean a different organizational structure is required for the effective management of the remote location. The following are some organizational structures:
- Functional structure This type groups all workers within a function under the management of a chief executive for each function. Chief sales and marketing officer, chief administrative support officer, chief human resource officer, and chief financial officer are just examples.
- Divisional structure This aligns workers according to product, market, or region. An international expansion can sometimes result in an “Asian division” or a “Customer Product division.”
- Matrix structure This requires two reporting lines, one to the divisional manager and one to the functional manager.

Changing organizational structures can be as difficult and challenging as merging cultures. Witness the merger of Continental Airlines and United Airlines. In May 2010 the two organizations agreed to a $3 billion merger.4 In 2018 the combined organization had yet to fully blend its cultures. Union contract provisions for each group of employees were still separate and, in some cases, quite different from one another. Eight years in, and a new airline company has yet to emerge.
Increased Accountability The magazine Inside HR suggests, “Today, employees are collaborating in real time on projects across many time zones and geographies. People are working where they want and when they want—more than half of millennials say they want to work in a different country. Companies are moving towards organizational designs centered on project-based teams, matrixed structures and flat hierarchies.”5
The magazine goes on to add the following:
 

Possible future #1: expanded HR accountability
This potential future for HR includes increased accountability for workforce productivity, performance, collaboration, innovation and culture. In this future, new core HR competencies would emerge requiring strong technical, analytical and creative skills.
- HR would replace its one-size-fits-all policy focus with a focus on building flexible work environments which support myriad work styles, individual preferences, geographies and time zones.
- HR would replace its focus on ensuring people work the requisite hours with a focus on building technologies that actually facilitate productivity, such as collaborative workspaces and virtual team rooms.
- HR would replace its focus on facilitating an annual performance review with a focus on deploying systems that actually increase performance and engagement, rather than just measuring it.
- HR would replace its focus on developing training curriculum with a focus on enabling real-time, ‘24/7’ learning.
- HR would replace its focus on annual goal-setting with a focus on providing managers with a real-time way to monitor and quantify work.
 

Possible future #2: decreased HR accountability
The second potential future for HR includes diminished accountability and a narrowing of mission. In this future, there are a couple of different possible paths:
- HR will fail to step into the current accountability vacuum for productivity, performance, collaboration and innovation and would cede enterprise leadership to other areas of the business. In this scenario, the business would drive the changes needed to support emerging work models, and HR would focus primarily on the administrative aspects of HR.
- HR will significantly increase its technical and analytical acumen and provide the business with the tools and data to be more self-sufficient and do for itself many of the things that HR once did for the business (recruiting of talent, measurement of performance, training of staff).

Understanding the Organization
Understanding your organization is fundamental as an HR professional so that you can provide the necessary support required of HR activities to the organization. HR professionals need a thorough understanding of their organization’s structure, the internal environment, and the external environment and industry in which it operates. This type of understanding lends itself to helping the HR professional to fulfill the role of a true business partner that can help the operating management with identifying internal needs and the issues they face, along with setting HR goals to address the issues.

Having an understanding of the organization and its design allows you to do the following:
- Be fluent in the nomenclature of the business
- Increase your credibility and the HR function’s credibility
- Connect the dots in the strategic planning process
- Educate others in the organization about HR’s contributions and value
- Be proactive in affecting outcomes of the organization

The Core Business Functions
Every organization, regardless of size, has basic key business functions: marketing and sales, operations, information technology, and finance and accounting. Larger organizations will have even more, including customer service and relations, research and development, and quality assurance. Each has a connection and collaboration associated with the human resource function. HR professionals need to form partnerships within their organization’s key business functions to fully understand the key functional areas in an effort to support and become a strategic business partner. Understanding the core functions and business lines within the organization, including each area’s perspectives, challenges, and goals, will be of great use to an HR professional.
Finance and Accounting Similar to the sales and marketing functions, the finance and accounting functions go hand in hand yet are distinctively different. Finance has its focus on funding sources, such as bank loans and stock sales, along with budgeting for income generation and expenses. Accounting, on the other hand, is associated with the movement of the monies going in and out, such as payables and receivables processing, payroll, and taxes.

HR interfaces with finance and accounting by preparing and reviewing budgets.
 

Budgeting and Financial Analysis Budgeting is the process of estimating the amount of income and expenses that will occur within a given period of time. It is usually done on an annual basis, although budgets can be created for multiple years and for shorter periods of time such as months and quarters. The accuracy of budgeting can be improved when there is some historical data on which to rely. Generally speaking, budgets in the short term can be easier to construct and are usually more accurate than long-range budgets. The reason, simply, is because many unforeseen influences can enter the picture in the long range. Fewer unpredictable influences tend to happen in shorter periods of time.

This figure illustrates the basis of budgeting.

Figure  Budget chart

Whether in a for-profit enterprise, a governmental agency, a nonprofit, or a volunteer service organization, there is a need for money management. Budgeting and financial analysis are critical to any organization large enough to have employees. Understanding how to plan for earnings and expenses, managing the process, and ultimately conducting analyses of what happened after the fact are key to any individual’s success in a management role.

There are two key financial reports that any organization should be preparing and studying.

One measures the income and expenses over a defined period of time such as a year, a calendar/fiscal quarter, or a month. This is usually called a profit-and-loss statement, or P&L.

The second is a balance sheet that shows the assets (furniture, buildings, vehicles, cash, and accounts receivable) compared to the liabilities outstanding (accounts payable, taxes payable, credit card balances, and payroll payables). A balance sheet also shows the amount of equity owned by investors in the organization. Equity is the difference between income and liabilities in a for-profit organization. In a nonprofit organization it is called net assets.
 

NOTE This basic formula helps in understanding balance sheets: assets = liabilities + equity.

There are four basic approaches to budgeting.
- Zero-based is a method of budgeting in which all expenses must be justified for each new period. The process of zero-based budgeting starts from a zero base, and every function within an organization is analyzed for its needs and costs.
- Incremental is a budget prepared using a previous period’s budget or actual performance as a basis, with incremental amounts added for the new budget period. It encourages “spending up to the budget” to ensure a reasonable allocation in the next period. It leads to a “spend it or lose it” mentality.
- Formula budgeting is based on some predetermined formula.
- Activity-based as a method of budgeting is based on an activity framework, using cost driver data in the budget setting and variance feedback processes.

HR professionals at management levels will generally participate in the creation of the HR department’s budget to outline anticipated specific expenses, such as office supplies, equipment purchases, and software licenses, but also for other areas in the organization that have compensation and benefits associated with their budgets. Additionally, HR will provide projected budget expenses associated with plans that the organization’s strategic plan may pursue that year. An example would be a strategic plan objective that creates a new incentive bonus plan for customer service representatives. HR will project how those additional earnings will impact 401(k) matching contributions.
Marketing and Sales The marketing function has responsibilities for promoting, pricing, and locating/identifying the customer base. The sales function in an organization is normally the revenue generator. It is responsible for selling the organization’s service or product.
Operations Operations is considered the heartbeat of the organization. Operations will create the goods or services, acquire the resources, and make sure the customer receives those goods or services. This runs off of five concepts: capacity, scheduling, inventory, standards, and control.
Information Technology Information technology is the brain of today’s organizations. The systems, tools, and information required for all other key functions to do what they do are the responsibilities of IT. IT’s major focus is to support the integration of data from different systems and processes through an enterprise resource planning (ERP) system. This helps make an organization’s data more visible for decisions and in real time.
Research and Development Research and development (R&D) varies by type of company. It exists not just in the private sector but also in the public sector. The private sector may focus on new product design and the development/expansion of the organization’s mission to expand revenue. In the public sector, R&D would be in the form of research institutes and laboratories mostly focusing on theoretical research that promotes science and new technologies of a public interest. Some organizations will have their R&D function in individual business units so that initiatives are focused specifically on that genre. R&D spending and investment vary greatly by organization and industry. According to the 2013 Global Innovation 1000 Study by Booz & Company,6 R&D spending ranges from 2 percent of revenue in telecommunications to 27 percent in computing and electronics. Globally, R&D spending has increased steadily since 1998.

Organizational Design
The design of an organization determines how it does business. The size and scope of the organization, its functions, its culture, and how it communicates and makes decisions are all part of its design. There are lifecycles for all organizations that take them through phases of growth. Which phase an organization is in will define its structure and its goals. A startup will have a very different design than a more established mature organization, and the focus of HR will vary accordingly.

Organizational Structures
Aligning the way the parts of an organization relate to each other is considered the organizational structure. HR professionals need to be familiar with organizational structures so they can act as a guide for management in selecting and determining which structure would be best to gain the highest performance.
Structural Principles Three key principles guide organizational structure: decision-making authority, layers of hierarchy, and formalization.

There are seven types of organizational structures.
- Departmental
- Chain of command
- Span of control
- Work specialization
- Formalized
- Centralized or decentralized
- Matrix
 

Departmental This is where tasks are divided into separate duties grouping people and jobs together. The purpose is so that work can be coordinated. It can be functional in nature, divisional, or matrix.
Chain of Command This is a structure where an employee typically reports to one manager in an up-down format, with a clear line of decisions and authority. Chain of command is becoming less recognized in organizations today because more and more organizations are pushing decision-making downward matrix lines, which causes the line of authority to look more lateral.
Span of Control This organizational structure refers to the number of individuals who report to a single supervisor. It’s hierarchically in nature through a chain of command. For example, there is an executive at the top, then managers, then supervisors, and then direct reports, much like a pyramid. In organizations where many workers are skilled and require little supervision, they may report to one supervisor; this would be considered a flat organization.
Work Specialization Work specialization was first associated with the assembly line. It is where tasks are divided into specific jobs and workers are considered skilled labor. It may offer a more efficient manner of productivity, yet on the other hand, it can lead to worker boredom. Today’s organizations using this organizational structure will typically rotate job functions on a regular basis, training the workers in skills that add variety to their tasks.
Centralized or Decentralized To centralize or decentralize, that seems to be the question and the cycle of several long-standing organizations. Centralizing pulls decision-making authority to a central level of management, such as headquarters. Decentralizing is pushing the authority level and decisions out to units, such as regional divisions.
Centralizing and decentralizing continuum is also applicable to HR departments. With decentralized structures, corporate headquarters will create policy and develop programs; rollout and application are then carried out by the HR staff in the regional divisions. When the organization is centralized, HR headquarters would make the policy and coordinate the rollout activities or administration functions.
Matrix Matrix structures create a dual chain of command, rather than a singular chain of command. A function, such as HR, would report to the local division executive at a facility, along with a direct reporting function to the head of HR in the headquarters office, which is typically located in another geographical area. As a result, the HR manager at the division location would have two managers, with neither manager having a superior role over the other in this reporting relationship. A huge disadvantage of this type of reporting relationship is the conflicting priorities of the division and the headquarters. The employee with two direct superiors is attempting to follow the direction of one, and the other is competing for their priority. It can be a bit of a tug-of-war.
RACI Matrix RACI is an acronym standing for responsible (R), accountable (A), consulted (C), and informed (I). The RACI matrix is used by organizations to better define the roles and responsibilities of each member in an organization.
- There should be only one person responsible (R) for a work assignment. Having more than one person responsible for the same task increases the probability that there will be duplication of work or that some portions of the work will not be performed.
- Accountable (A) means an individual is designated to oversee the completion of the assigned tasks.
- Consulted (C) means there are appropriate subject-matter experts when necessary. They will suggest any deviations from the standard procedures that may be necessary.
- Informed (I) are those who have an interest in the task being performed. It could be a manager who oversees the given task or someone who cannot begin the next task until this one is completed.
Structural Alternatives There are other alternatives to structuring an organization such as functional structure, product structure, geographic structure, and hybrid structure.
Functional Structure Departments are defined by the services they contribute to the organization in a functional structure. In this type of structure, all of the operations employees report to a single function. In the organizational chart shown in this Figure, each plant has the functions of finance, marketing, and so on, reporting to the plant manager, who in turns reports for those functions collectively to the division president.

Figure  Functional structure
 

Product Structure With an organization that has a product structure, the functional departments are grouped under major product divisions. As an example, an electronic company may have separate divisions for its printers, cameras, GPS units, and monitors. Each of these divisions will have their own marketing, finance, and sales functions.
Geographic Structure A geographic structure is similar to a product structure with the exception that the geographic regions, not products, define the organizational chart. Each region has its own complete set of functions such as finance, manufacturing, marketing, and so on. The organizational chart shown in this  Figure depicts a geographic structure.

Figure   Geographic structure
 

Hybrid Structures In a hybrid structure, all the elements of the functional, product, and geographic structures are combined. Because some locations in an organization are not equipped to handle all functional activities such as manufacturing, a hybrid structure is used. A hybrid is generally used when an enterprise is expanding into new geographical areas, such as first going global, and then it will move into a matrix structure.

Other Internal Environment Considerations
Beside understanding the functions within an organization, the HR professional needs to be keen to the important priorities and initiatives that are on the organization’s agenda. This might include a shift in customer service performance, a new product or service being developed, or a new focus on vendor relationships. Understanding and knowing the hottest initiatives keeps HR “in the know” to relate its function and services to the initiatives underway.

The External Environment
Equally important to the internal environment is knowing the external environment. PEST is an acronym to follow in learning about the key factors that affect the external environment of an organization.
- P = Political environment This political environment includes government regulations or any defined rules for that particular industry or business. It also involves studying tax policy, which includes exemptions (if any), employment laws, environment laws, and so on.
- E = Economic factors This includes gauging the economic environment by studying factors in the macro economy such as interest rates, economic growth, exchange rate, and inflation rate. These factors also help in assessing the demand, cost of the product, expansion, and growth.
- S = Social factors This forms the macro environment of the organization. It includes the study of demographics, as well as the target customers. These factors help in gauging the potential size of the market. It includes studying population growth, age distribution, career attitude, and so on.
- T = Technology Technology changes rapidly. It involves understanding factors that are related to technological advancements and the rate at which technology gets obsolete.

The HR Organization and Function
The function of HR is designed to serve the overall organization and its mission. The structure can take on different arrangements based on the size and needs of the organization. Let’s explore the processes, the HR team, the department structure, and ways to demonstrate and measure HR’s value.

HR Processes
Grouped in the following categories, these are the HR processes:
- Participating in the implementation and creation of the organization’s strategy. Those processes could be
- Performance management
- Job design
- Organizational design
- Communications
- Knowledge management
- HRIS selection, implementation, and integration
- Strategic planning
- Hiring
- Creating and following strategy to source, recruit, hire, develop, manage, and retain talent
- Creating staffing plans
- Attracting qualified talent
- Selecting the best talent
- Offering interviewing assistance to management
- Onboarding and assimilating new hires into the organization
- Developing and delivering programs for training, total rewards, employee engagement, communications, and so on
- Collecting data and analyzing it for specific organizational needs
- Capturing and tracking data to be analyzed
- Identifying trends in the workforce and the external environment that affect the organization
- Identifying best practices and processes that would be helpful to the organization and its strategy
- Daily HR operations
- The processing of data, information, recordkeeping, and requests, typically using an HRIS and applicant tracking system
- Responding to employee and internal or outside requests

The HR Team
Here again, the HR team will vary depending on the organization’s size and needs, yet the following are typical for roles and responsibilities of an HR team:
- HR leaders These can be the most senior of the HR group, and many will be part of the executive team, such as the chief human resource officer (CHRO) reporting directly to the CEO or president. They have a seat at the “round table” where the role lends itself to correlating organizational challenges and strategies to the HR function.
- Managers This role is normally responsible for sections or units with the HR team such as the compensation manager, the talent recruitment manager, and the training manager. They have a direct responsibility in coordinating and managing the activities of their specific function and the people who are within it.
- Specialists This role on the HR team is usually singularly focused with a specific knowledge and ability, such as the benefits specialist, the affirmative action specialist, and the HRIS specialist. They maintain and apply best practices in their specialty.
- Generalists Also called HR practitioners, these are the jacks-of-all-trades. They may have a role and responsibility that includes expertise in more than one area. In today’s large organizations, generalists are assigned a unit such as a department and become known as the business partner for that unit, guiding the management of that unit with all aspects of HR and serving as a liaison to the HR specialists and management.

HR Structural Alternatives
Organizations will structure HR based on the areas of responsibility they are assigning to the HR function. An important factor is ensuring that the HR structure is aligned with the organization’s strategic plan. This may begin to be sounding like a broken record, yet it can’t be emphasized enough that creating and sustaining HR’s alignment with the organization’s strategies is highly important. For example, if one of the organization’s strategy’s is an initiative and goal to be the employer of choice for its technical engineers in its industry, then it is necessary to ensure that the structure of HR includes the formation of attraction, rewards, retention, and development functions to address those needs for the engineering department.
NOTE When aligning HR with the structure, the types of structure also include centralized versus decentralized, as discussed earlier in this guide.

Shared Services
The shared services model is another structural alternative identified by Ulrich and Brockbank.7 This model is used in organizations with multiple business units, or divisions, as most are referred to as. Each division doesn’t need to have its own expertise in every area, such as compensation and benefits. They select what they need from a menu of shared services that are typically transactional that the divisions agree will be shared (e.g., affirmative action compliance, compensation administration).
The most common functions assigned for consolidation are health care, retirement, and compensation. Organizations that have implemented the shared services model have identified four favorable outcomes.
- Reduced administrative time by staff on tasks
- A reduction in administrative costs
- A consolidation of redundant functions
- Better tracking of employee data
NOTE  The greatest resistance from implementing a shared services concept generally comes from multinational organizations.
 

Centers of Excellence

A Center of Excellence is a team, a shared facility, or an entity that provides leadership, best practices, research, support, or training for a focus area. This focus might be a technology (e.g., Oracle), a skill (e.g., negotiation), or a broad area of research (e.g., cancer treatment). A COE, sometimes called a center of expertise, is an independent unit that provides services to internal customers within the organization. It is generally funded by fees that other functions using the COE have allotted from their budgeting. COEs may be located anywhere, wherever the internal customers can access the function, for example, an in-house training university.
Third-Party Contractors Outsourcing and co-sourcing are examples of structural alternatives used by the HR function. Outsourcing is where a third-party vendor provides selected activities, such as administration of benefits. Co-sourcing is when a third party provides dedicated services to HR, which may include having contractors within the HR’s organization. An example would be a temporary employment agency on-site hiring and onboarding seasonal labor.

Measuring and Demonstrating HR Value
Organizations have to measure and demonstrate the value they are delivering to their stakeholders—so too does HR to its stakeholders within the organization. Measuring results serves to reinforce HR’s role in showing its effectiveness to management. It can also strengthen HR’s relationship within the organization by indicating the impact of its services. This affords it the position to seek investment when it comes to budget allocation. Measurement also indicates where things need to be improved. ROI is essential for HR to further the investment requests for its strategic plan serving the organization.

Performance Measures
Key performance indicators are used to measure HR value. A KPI’s gauge progresses toward goals and standards of performance that have been agreed to. An example is the number of new hires who have progressed through specific onboarding training such as sexual harassment, ergonomics, and diversity practices.
 

Balanced Scorecards A Balanced Scorecard is a performance metric used to identify and improve various internal functions and their resulting outcomes. It is used to measure and provide feedback. HR measurement using a Balanced Scorecard method would be focused on specific functions or initiatives—as an example, recruiting—reducing length of time to fill a position. The performance metrics would include financial, processes, customers, and learning and growth.

To be effective, a Balanced Scorecard must include the following:
- Accountability and measurable results
- Measures, metrics, and targets that are understandable and supported by data
- Measures that have actionable items associated with them that can be measured
- Meaningful measures that focus on results
- Carefully planned, focused on end results, and executed

HR Audits An HR audit is a systematic and comprehensive evaluation of HR’s policies, procedures, and practices that protect the organization, create best practices, and identify areas needing improvement. Audits also identify gaps in performance and outcomes and are usually identified in priority order to be corrected. There are different types of audits, such as those caused by legal embattlements with a lawsuit or regulatory compliance and those that are done to achieve a level of world-class acknowledgment such as being recognized for a best practice.
 

Metrics There are many different metrics to select from, and the formulas can vary. It’s important to use a consistent formula when benchmarking HR practices.

Here are the typical metrics used for measuring the HR value:
- Absence rate
- Applicant yield
- Cost per hire
- Human capital ROI
- Human capital value added
- Key talent retention
- Promotion pattern
- Success ratio
- Training ROI
- Transfer/relocation
- Turnover costs
- Turnover rate
- Vacancy costs


HR’s Role in Organizational Strategy
The role of HR as a function within the strategic plan of the organization has transformed from the traditional administrative and operations roles into becoming more strategic in nature, helping the organization plan how it will achieve its goals and objectives with regard to talent management.


HR and the Strategic Process
HR brings significant expertise, knowledge, and perspective to the organization’s strategic planning process when it has a place at the table during a planning retreat. What is discussed, decided, and shared in these types of planning meetings helps the senior management team have a full 360-view of the workforce and talent implications of plans and allows HR to ensure its goals and plans are aligned with the overall plans of where the organization is going.

HR’s Role
HR plays an important role in the strategic process. It contributes perspective and ensures that all HR implications are considered, such as laws and regulations, community, union contracts, and so on. It plays a role in influencing and voicing an opinion for leadership and stakeholders at large. And it uses its strengths and technology to be applied and aligned with the direction set.
The administrative activities of HR are directly aligned with all aspects of the organization’s strategy. Tasks that HR performs may be high in strategic value, such as orientation of new hires, or low in value, such as activities that third-party vendors can provide (e.g., benefits administration). The core functions are what need consideration as to how they stack up to the value that HR lends to the organization’s strategy and goals.
 

Leveraging HR’s Strengths

The value of HR in an organization, specifically with the strategic planning process, is that HR knows the entire organization. This includes the functionality of the organization. This is because of the involvement it has in managing the talent, training, recruiting, risk management, policy administration, and so on. HR can be the ringmaster in helping coordinate and integrate the stakeholders listed here:
- Employees HR needs to know the nuances of each geographical area in the organization and what laws or cultural issues are impacting each area.
- Suppliers HR’s knowledge of the suppliers and challenges they may pose such as ethical behavior is of great value within the strategic process.
- Communities With HR’s role in CSR and interacting with the communities of the organization that it operates in, this allows HR to identify potential conflicts or agreements with its communities associated with new strategic plans on the table.
- Government Yes, there is “big brother” to contend with, and outside of the industry regulatory matters, the matters concerning workforce would be an arena that HR would have an antennae up in.
- Labor groups For those organizations with labor unions, HR has its finger on the pulse of the affected labor unions when a strategy is considered that may affect a workforce union group.
 

Contributing the HR Perspective

HR professionals can contribute an important perspective during the strategic planning process. Although the main focus is to execute the organization’s strategy, they have a ton of expertise and perspective they can add in the planning stages. For example, HR can add value when the organization is formulating a strategy to expand into a new geographical area by pointing out their perspective and knowledge about the issues with local laws for employment in that area.
 

Negotiating and Influencing

Negotiation is when two or more parties work together to reach an agreement in a matter or with an issue. The HR professional needs to know and work the process, which has six phases to it.
- Preparation Identify the needs and wants that would be concessions.
- Relationship building Personal character is involved here, and within the strategic planning process, this means having the trust of the others at the planning table.
- Information exchange A thorough understanding of both sides of the issue is necessary.
- Persuasion This means seeking what are the mutually beneficial options rather than going for the win-lose positioning. When HR professionals have a broader understanding of the other’s interests, they can seek solutions that satisfy both sides of the issue.
- Concessions There can be small concessions that count. They find the “wants” that are not essential and decide whether giving them helps the negotiation process.
- Agreement When both sides have agreed, confirm it in writing. With formal negotiations such as union contracts, legal investigations, etc., these agreements must be in the form of a written document. Within the parameters of strategic planning, think of confirmation memos.
Influencing is an ability that goes hand in hand with credibility. Much more than just having knowledge and expertise, the HR professional needs to have credibility, which is part of building the personal relationship with trust mentioned earlier. HR professionals need to use their influence to provide the added value for the formulation of strategy to add what they know and their opinion of how the strategy can happen or what it’s challenges might be.
 

Due Diligence

Due diligence refers to digging in and looking at all factors surrounding a matter. In strategic planning, it may involve reaching the local employment laws in the example of an organization wanting to expand into a new geographical area. Due diligence would also involve learning the landscape of the potential applicant pool for the new area and a 360-degree look at being an employer in that area. 

We have discussed due diligence with mergers and acquisitions, which is the same process that would apply during the due diligence phase in strategic planning.

Aligning the HR Function and the Strategic Plan of the Organization
HR’s administrative and operational activities are directly aligned with the organizational strategy and objectives. It is important for HR professionals to understand the business and industry they support and to know all of the business function’s own strategic plans.
 

HR Strategic Alignment HR serves the entire organization and the needs of each business unit. Thus, having HR participate at each unit’s planning session would be helpful, just as it is when HR sits as a participant to the senior team’s strategic planning meeting. The same level of expertise, influence, and perspective is necessary at all levels of planning. When part of the organization’s strategy involves entering a new market, HR’s recruitment plans and sources will require a specific direction to be able to fulfill the workforce needs of the new markets. The goals of HR in, say, talent acquisition, may be focused on the nature of the talent required for the new market and how to manage the advertising that might go along with it. Forecasting the human resource needs is an important and essential role of HR in strategy.
Ensures That HR Fulfills Its Basic Mission HR’s basic mission is to help the organization achieve its vision with a highly engaged and talented workforce. That is the same with all other business units. Yet in regard to HR’s mission, it will cross into all business functions because there are employees in each of those functions. Bringing HR into the fold as a true business partner for each of those units in order to help them accomplish their goals and plans that support the organization is the bottom line of the mission of HR. HR must understand how all business units perform their work and their own priorities, values, and business plans in order to design their processes to fit in.
Learn About Your Organization’s History Learning and talking “story” is an important function of HR, not just in attracting potential talent and onboarding them but in keeping the foundational values, desired culture, and history alive for the organization. HR professionals are generally the first impression in the talent arena and can be in the community too. Knowing the “story” of where the organization has been, how it began, and where it intends to go is necessary for keeping it alive and communicating it to all “who enter the double doors.” Add to that the “story” of the industry and how the organization fits in, as well as the communities it exists in. Building this knowledge will help HR professionals make useful recommendations during the planning process.
 

Use Facts and Objective Data as Support

As a participant in the planning process, you’ll need to have tangible evidence to back up your opinions and recommendations. An HR professional needs to be fluent in measuring strategic outcomes that they anticipate in order to be influential, have credibility, and build solid business cases for their recommendations.
 

Contribute to Measuring Strategic Success

Common measures used are as follows:
- Productivity
- Employee attitudes
- Employee capability and capacity
- Human capital investment
- Leadership and management
- Total rewards
- Compliance and safety
- Employee relations
- Job recruitment
- Job creation
- Workforce retention
- Workforce profile

Developing the HR Strategy
HR needs to develop a strategy that is aligned with the capabilities needed to implement the organization’s overall strategy. Becker, Huselid, and Beatty wrote in The Differentiated Workforcecommit to diverting a greater share of its resources from developing the entire workforce to developing strategic talent. It needs to “assess the big picture” and get out of the weeds.
 

The HR Strategic Process

For the HR strategic process, the steps are similar yet more specific.
1. Assess the big picture. Get an understanding of the organizational context and the previous strategic plans. Identify what goals will involve HR processes and support.
2. Do SWOT analysis, which will review the matters affecting the people side of the business. PEST analysis will also be used in this stage. 
3. HR’s own mission and vision statements need to be either created at this phase or reviewed. They need to reflect and fit into the organization’s overall strategies.
4. Conduct detailed HR analysis, which would include a thorough review of the current systems and processes in place. The goal in this phase is to identify gaps that may exist with current systems/processes and the future system needs. Focus is generally in the total rewards, talent acquisition, performance management, and training/development functions. Here again a SWOT analysis and PEST analysis could be utilized. Addressing these gaps to align with the organizational direction is the crux of the HR strategy.
5. Determine what are the critical people issues. During this phase, the future talent needs and existing workforce will be compared, and again, the gaps are considered and addressed with a strategic plan of action. An example is when a plant is going to bring in new automated equipment. How does that affect the current workforce? Will there be a need for retraining to operate the new equipment? Will there be a need to reallocate workers to a different job or downsize?
6. Develop HR’s own goals, metrics, consequences, and solutions. At this phase, the specific actions HR will take and how they will be measured occur. Audits and balanced scorecards tools may be utilized.
7. Developing an implementation and evaluation plan is the last step. Here HR will provide clear direction on the resources, risks, timing, and support that each of their goals and initiatives will require. A project Gantt chart may be used as additional support for budget requests.