Logical flow:

Ram Charan through his interaction with various CEOs across the globe believes that most CHROs
do not serve an active role in an organization. They are process-oriented generalists who have
expertise in personnel benefits, compensation, and labor relations. They are focused on internal
matters such as engagement, empowerment, and managing cultural issues. They dont know how
key decisions are made, and they have great difficulty analyzing why peopleor whole parts of the
organizationarent meeting the businesss performance goals.
Those few CHROs he thought played an active role were mostly line managers and hence, comes to
a conclusion to eliminate the position of CHRO altogether and split HR into two strands1. HR-A (for administration)would primarily manage compensation and benefits. It would
report to the CFO, who would have to see compensation as a talent magnet, not just a major
cost.It would report to CFO.
2. HR-LO (for leadership and organization), would focus on improving the people capabilities
of the business and would report to the CEO.It be lead by high potentials from operations and
finance because their business expertise and people skills bring them a strong chance of
attaining the top two layers of the organization.They would link the oragnizations social
system to its financial performance and draw others from business into the HR-LO
pipeline.After a while they can move to either horizontal or higher level line management
jobs.
Theoretical inconsistencies:
1.

Ram Charan recommends splitting HR function. But this would not be that efficient.

2.
Ideally HR activities are expected be more aligned with the business strategy and goals.
Currently, as mentioned in the article, HR are dealing with old-fashioned software, teams that
receive very little professional development, and constant blame from everyone in the
company. Hence they are rebutted as process oriented who lacks a view and strategy to help
business function.
3.
Most HR people are filled with good ideas and strong expertise, but just dont always feel
comfortable pushing back on management. So the problem is not that people are processoriented generalists but rather that they do not always feel empowered (or skilled enough) to
push back and really take on a role as consultants.
4.
In addition, many companies do have a lot of duplicated, uncoordinated HR activity and
that needs to be rationalized. Any company, which is sufficiently large, would have its own
independent recruiters, HR managers, and HR generalists, but not always they talk to each other
which bring down the efficiency of their unit functioning.
Practice based inconsistencies:
1.
HR itself is not that big an expense (typically 1-3% of payroll) and while its tempting to
spend time on efficiency, its far better to focus on optimizing talent. The way it is suggested to
split HR into two might possibly result in more expense rather than bringing it down. Also
splitting would seriously affect the HR functionality of finding talents with cultural and strategic
fit with the organization, as they would tend to be more inclined towards limited responsibilities
and will get only limited understanding while bringing in new talents. It would be like

outsourcing the recruitment and administration/compensation function and would not satisfy the
strategic needs of the organisation.
2.
Traditionally HR has set itself up as an organization focused on service-delivery, with a
focus on optimizing service, reducing cost and headcount, staying efficient. Our research shows
that this mentality has to change.
3.
Ram Charan advises putting the compensation function under the CFO, separated from
HR. This does not seems to be very good idea. The way people are paid, what theyre paid,
how they are evaluated (performance management), what incentives we use, and how we decide
who moves into what role next are all among the most business-critical issues in employees
lives. They are not administrative at all. Just like everything else in HR, they have
administrative constraints but we have to think about them strategically and as part of the
entire talent culture of the organization.
Scope:
1. Possible only for Large organizations : In a small organization it is an added cost to keep
two separate HR functions to manage relatively few employees. The HR employees
available in the organizations can be trained enough to link business strategy with HR
functions.
2. In this article, Ram Charan proposes to infuse line managers HR-LO roles. But line leaders
in CHRO positions work when 1) these individuals are exceptional leaders, 2) they know
what they dont know and put strong HR domain experts on their team and heed their
counsel, and 3) they know how to design the HR function to get the results
3. The separation of HR function into HR-A and HR-LO is not applicable for Start-ups since
the founding team is usually involved in recruitment and strategic roles. Hence there is no
dedicated HR-LO required.
4. In firms where employees are continuously rotated the HR department would be heavily
involved in routine training of these part-time employees. In this case, the HR department
cannot contribute to the strategic and leadership assistance to the top management. Here, it
would be advisable to have a dedicated HR-A and HR-LO departments.
Recommendations:
1. Do not split HR but Retool HR:
The primary contention of Ramcharan is that most HR are not capable enough to perform
strategic HR functions. Hence the need is not to take away powers from them but
retool/upgrade their competencies by education in HR analytics practices like ERP. This
would help them in perform their work in a more technical, reliable, easy and efficient
methods. A comprehensive Balance Scorecard can help measure HR performance and link
HR systems to Business strategy.HR needs to be educated in these aspects.
2. Split HR but use a different model:
The structure would comprise of 3 groups under the umberella HR division. The 3 roles
would be comprising of the embedded HR generalists who work with business leaders
on talent, leadership, and capabilities; centres of expertise that offer analytics and insights
into HR knowledge domains; and service centres that do the administrative work of HR.
This is just like how other core divisions like finance and accounting or marketing and sales
work together.

References:
1. http://kateskesler.com/response-ram-charan-hbr-article-its-time-split-hr-up/
2. https://hbr.org/2014/07/do-not-split-hr-at-least-not-ram-charans-way/
3. http://www.forbes.com/sites/joshbersin/2014/08/01/why-does-hr-get-so-much-grief/