h u m a n r e s o u r c e s

The Evolution of
Human Resources
Directors
Responsibilities
By Russell Pomeranz
T
he current economic downturn and
subsequent intense organizational
financial scrutiny has brought the role of
the human resources (HR) director front
and center. To protect the bottom line, chief
executive officers (CEO), chief financial
officers (CFO), and program staff realize
that mission fulfillment and metric real-
ization is contingent upon making sure
the right administrative, program, and
development human resources are in place
and will remain in place for both the
short and long term.
While CFOs own the financial bottom
line and reporting, development directors
own the fund-raising function, and chief
program officers own the efficient and
effective delivery of programs, HR direc-
tors own the organizational and salary
structure. The recent economic upheaval
has opened up the opportunity for HR
directors to solidify their role as a strate-
gic partner in the organizational financial
decision-making process, as they are tasked
with increased responsibility and account-
ability for the bottom line. CEOs and CFOs
must look to the HR director as a strate-
gic lead in closing short- and long-term
revenue and contribution budget gaps.
Evaluating the Tipping Point
In todays financial environment, the
HR function must identifysometimes
creativelystructural options for the orga-
nization, including salaries and benefits,
and must understand the crucial tipping
point of the options impact on the mis-
sion and staff when reducing expenses.
While most nonprofits are relatively lean
in terms of their other-than-personnel costs
(OTP), between 50% and 70% of expens-
es are personnel, staff, and benefits. The
HR director is charged with identifying any
number of across-the-board expense-reduc-
tion options, such as cutting pensions,
increasing employee contributions to med-
ical insurance, limiting merit increases, and
suspending cost-of-living allowance
(COLA) increases.
If a significant revenue gap needs to
be closed, it may result in devastating
cuts to staff and benefits. Productive staff
will leave, less productive staff will remain,
and new productive staff will be hard to
find. This will happen in administration,
program, development, and leadership posi-
tions. The result could be that program tar-
gets wont be reached for performance-
based grants, resulting in loss of revenue,
and cost reimbursement grants may have
unfilled positions, impacting indirect cost
recoveries. If the HR director cant articu-
late and honestly assess the impact of
salary and benefit adjustments, then the
quality of staff and programs may dimin-
ish the organizations reputation and sig-
nificantly alter the business strategy, as rev-
enues become harder to find.
The trade-off between organizationwide
pain (horizontal cuts) or dramatic pro-
gram pain limited to a few programs and
a few staff (vertical cuts) is the difficult
decision many nonprofits are currently fac-
ing. It is here that HR directors can pro-
vide critical advice and map out the
short- and long-term ramifications of all
choices with consideration of what the
organization does, why it does it, and what
is most important to the mission. To com-
prehend these ramifications, HR directors
should understand program economics, that
is, the net income of specific programs or
grants, to make the decisions needed and
connect them to the mission. For example,
if a program is losing money or is not core
to the organizations mission, staffing and
benefit cuts should be made vertically. The
choice becomes more difficult if a core pro-
gram is losing money.
Since HR directors are ultimately
responsible for the organizational structure,
they should also be the experts on running
each department efficiently and effectively
with fewer staff. Given their global organi-
zational perspective and compliance exper-
tise, they should understand how departments
or projects can collaborate or share staff
and how an efficient administrative staff can
save time and liberate program staff to focus
JULY 2009 / THE CPA JOURNAL 12
on their critical programmatic functions.
From a revenue standpoint, an HR director
should help determine which staff
besides the development team and CEO
should be trained to grow current programs
and seek new revenue sources. An HR direc-
tor needs to understand and evaluate how
adding to or investing in organizational
development capacity can increase contri-
butions over time.
Cultivating Bottom-Line Orientation
The metamorphosis of the HR director
to bottom-line visionary will not happen
overnight. Most CEOs have not always
called on HR directors to think strategical-
ly, nor have they been aware of how their
recommendations and a proactive role can
significantly affect organizational change and
bottom lines. Additionally, the transforma-
tion requires a shift in thinking from the
CEO, COO, and CFO. The HR director is
too often viewed as a people person who
might favor individual staff sensitivities over
insensitive bottom-line calculations. For
this reason, many HR directors may not be
given a seat at the table when organizations
make strategic bottom-line decisions. But
times have changed, and now more than ever
the HR director is needed as a key player
in maintaining a strategic balance between
the bottom line and organizational morale
and capacity. Senior executives can cultivate
and solidify the HR directors ascendancy to
the inner circle by requiring the following
characteristics of their HR leadership:
Understand the organizations finan-
cial big picture and integrate it into the
HR decision-making process. HR direc-
tors must be able to determine whether and
how to cut back or to invest and grow,
based on the organizations financial
position and goals. HR directors should
understand temporarily restricted net assets
and how the staffing structure is allocated
to grants and contracts. For example, an
organization that is sitting on millions of
dollars in reserves but has high staff
turnover rates due to lack of salary increas-
es needs the perspective of an effective HR
director to consider different budgetary
allocations and their impact on the
bottom line.
Communicate assertively and with pur-
pose. An HR directors voice needs to be
heard. He must speak up if he thinks the
organization has gone too far or hasnt
gone far enough in its decision making. He
should make every effort to acquire a seat
at senior staff meetings and communicate
that he is an agent of change and an impor-
tant contributor to financial and program-
matic goals. Explaining to the right con-
stituencies what the HR department is
doing provides a level of transparency that
can pay off tremendously with the entire
staff, if done correctly.
Think strategically and creatively. An HR
director has the perspective to model what
different organizational and departmental
salary and benefit structures might mean in
terms of productivity, staff retention, and cost
efficiencies. HR directors should have a clear
understanding of each departments goals
and should think through how they may
internallyand perhaps externallycol-
laborate, merge, or share.
Take responsibility for drawing a fine
line between the passionate assessment of
how staff is feeling and the dispassionate
assessment of how that translates into
action. The bottom-line-oriented HR direc-
tor will be straightforward with the senior
staff about the reality of the organizational
mood and the impact of the choices man-
agement makes. HR directors have to find
ways to understand company morale and the
impact of collective emotions on collective
and individual actions. They should also have
a vision of what they want the corporate cul-
ture of the organization to be and whether
it is compatible with the organizations finan-
cial resources and mission.
The Impact of Repositioning
Motivated HR directors with an agen-
da and a seat at the senior management
table present several ramifications for
their organizations and the nonprofit HR
profession. The responsibilities are then
greater, as is the pressure from new inter-
nal and external constituencies. The result
should mean more exposure to the
boardincluding the impetus to set up
a personnel or human resources board
committeeincreased interaction with
the CFO and finance committee, and
increased interaction with financial and
programmatic decision makers. HR direc-
tors with MBA or MPA backgrounds are
now more desirable. Ultimately, the role
of the COOor Chief Financial and
Administrative Officer (CFAO), as is the
latest trendwho oversees finance, HR,
IT, and other support and administrative
functions, might be the next step for the
HR director. HR director salaries will
increase, as supply and demand dictate,
though it should be pretty clear that the
financial impact of a good HR director
will quickly and easily offset such
increases.
For-profit HR directors may also begin
to make the transition to the nonprofit
sector and increase the pool of talent avail-
able. This transition will only make sense
if a nonprofit organizations needs are such
that it can take full advantage of the for-
profit HR directors experience, willing-
ness, and ability to adapt to the changing
but still distinctivenonprofit culture and
structure.
The current economic climate has forced
organizations to put all their cards on the
table and consider all options. The HR
director has emerged as a powerful force
in a nonprofits organizational response
not only to ensure organizational survival,
but also to define an optimal organizational
structure for mission fulfillment and growth
as the economic climate improves. Some
may be concerned that to emphasize the
bottom line in the world of HR directors
may result in a less personal, mission-min-
imal approach to the business. But because
HR professionals with an eye on the bot-
tom line also have an eye on the most effi-
cient and effective way to deliver the pro-
grams to achieve the mission, they under-
stand that staff satisfaction and limited
turnover are critical to maximizing
administrative, managerial, and program
human resources capacity. The increasing
focus on human resources issues as non-
profits adjust to new financial realities
and societal needs will ultimately reward
the strongest, most effective organizations
and will guarantee that HR directors con-
tinue to ascend the nonprofit managerial
hierarchy for years to come.
Russell Pomeranz is the manager of finan-
cial advisory services at Fiscal Management
Associates, LLC, New York, N.Y.
JULY 2009 / THE CPA JOURNAL 13