The Need for a Human Resources Department: Breaking Down the Argument

The argument against maintaining a human resources (HR) department in any organization has its roots in the evolution of organizational dynamics. While traditional HR structures have been pivotal in ensuring compliance, talent management, and policy enforcement, some advocate for a shift towards a more decentralized approach. This approach empowers managers to take on HR functions within their teams, fostering a culture of accountability and ownership. By redistributing responsibilities, companies can enhance agility, innovation, and the strength of employee-manager relationships.

The Case Against Centralized HR

One of the concerns with a centralized HR department is that these departments can sometimes hinder the agility and speed at which organizations can adapt. In a decentralized model, managers are empowered to handle HR responsibilities more directly, allowing for more flexible and targeted interventions. This approach can lead to stronger relationships between employees and their direct supervisors, as well as quicker response times to issues that arise.

Scalability and Financial Considerations

Not all companies are large enough to support a full HR department. For smaller businesses, the costs associated with maintaining a dedicated HR team can be prohibitive. Many small companies opt for alternative solutions such as:

Having one employee handle payroll and related duties as part of their regular responsibilities. Contracting payroll experts to manage all HR-related issues. Retaining an HR firm for serious or specific problems.

For businesses with fewer than 5 employees, it may not be necessary to have an HR department. However, once you reach a certain size, typically around 50 employees, having a dedicated HR professional becomes financially necessary. This is because managing HR responsibilities can be complex and time-consuming, and it’s important to ensure that these tasks are handled appropriately to avoid legal issues and maintain a positive work environment.

Large Companies and HR Practices

Even large companies may decide against having a traditional HR department. One notable example is a national US retailer where the owner decided against a formal HR department. Instead, each group of managers (over 50 people) designated a ‘trainer’ or group of ‘trainers’ to handle HR functions. This approach allowed these ‘trainers’ to develop common policies and procedures, ensuring consistency across the organization. However, this decentralized approach can risk creating internal conflicts, as the ‘trainers’ might not be trained in the best HR practices.

Conclusion: The Inevitability of HR

While decentralized approaches have their merits, the reality is that once an organization reaches a reasonable size, an HR function becomes inevitable. At around 200 employees, you will likely have a group dedicated to HR work, coordinating policies and procedures. By the time an organization reaches this size, the responsibilities previously handled by a centralized HR department become too complex to be managed effectively by a single manager or team. Thus, it’s crucial to either nurture internal HR capabilities or retain external HR expertise to ensure compliance, effective talent management, and positive work relationships.