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Should the Head of Human Resources Report to the CEO?

11 September 2009:

With many human resources departments still grappling with how to become more strategic, a recent study by the Institute for Corporate Productivity (i4cp) revealed several opportunities based on how HR is typically organized.

In the study, respondents were asked to specify how their HR organization was structured on a regional, functional and team level. Results varied by company size, understandably, but several gaps were identified between higher market performing organizations — those companies that have shown considerable revenue growth and increased market share over the last five years — and low-performing organizations. Some of these gaps are listed below (for organizations of 10,000 employees and more):

High market performers are more likely to have HR structured with a combination of centers of excellence, shared services and HR generalists (65 percent versus only 44 percent for low performers).
Global high performers tend to decentralize by country, whereas a vast majority of lower market performers decentralize by region or continent.
More than 78 percent of higher market performers have the head of HR reporting directly to the CEO, versus 67 percent of low performers.
Higher market performers rely much more heavily on multifunctional temporary team-based structures (43.5 percent) than low performers (28 percent).
HR sets up more cross-functional teams with other functions in higher-performing organizations (47.7 percent) than in low-performing ones (only 35 percent).

"HR structure certainly isn't the sole driver of higher market performance," noted Jay Jamrog, i4cp's senior VP of research, "but higher performers do, in fact, seem to have more sophisticated and fluid HR structures.