Will HR soon be a thing of the past?

Deloitte argues that unless HR departments raise their game, they might not be around for very long.

Last Updated: 31 Aug 2010

Could the recession sound the death knell for HR departments, at least as we currently know them? A new report from advisory firm Deloitte reckons that unless they adapt to a new role in the coming years – advising business leaders on how to re-size their companies while at the same time improving productivity and retaining top talent – then they could become defunct, with their admin responsibilities outsourced and their other duties dissolved back into individual business units. In other words, as Sir Allen Sheppard might put it, it’s time to ‘add value or get out of the way for someone who will’...

According to Deloitte’s research, companies have spent a fortune on their HR function lately – around 80% have done some kind of restructuring in the last five years, which Deloitte reckons has seen up to 30% of HR staff get the boot. However, it doesn’t seem to have had the desired effect: just 1 in 25 describe their HR department as ‘world class’, while even more alarmingly, almost a third reckon it still needs ‘significant improvement’. ‘HR is a crossroads,’ the report claims. ‘[It] has increasingly failed to produce the results expected of it’.

Since the budgets influenced by the HR department – training, compensation and so on – are a lot more significant than their typical wage bill, all these companies may have been barking up the wrong tree with all this headcount-trimming. Because the overriding message from this report is that HR is spending its time on the wrong things – the time-consuming transactional stuff, as opposed to the value-adding strategy formulation and planning. Since most business are likely to spend the next few years re-shaping their workforces to deal with their new economic constraints, the latter is going to be the crucial part; all the admin can be outsourced somewhere cheaper.

The answer, says Deloitte, is for HR to transform in the way that Finance and IT have done – developing shared services and embracing technology to become more efficient, and establishing ‘strategic partnerships’ (whatever that means) that deliver better results for the business. You may not be entirely convinced by these particular examples, but the basic point is not unreasonable - HR departments need to be telling the CEO what he/ she can cut, and where he/ she should be spending. If they're just facilitating these processes after the decisions have been made, there’s arguably not much point having them in-house.

In today's bulletin:

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Recruiters get £40m OFT fine after whistleblowers expose cartel
Will HR soon be a thing of the past?
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