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Should HR Report to the CEO?

Should HR Report to the CEO?

September 16, 2009

The answer is: yes, if you want to be like other high-performing companies.

With many human resource departments still grappling with how to become more strategic, a recent study by 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% versus only 44% for low performers).

*Global high performers tend to decentralize by country, whereas a vast majority of lower market performers decentralize by region/continent.

*More than 78% of higher market performers have the head of HR reporting directly to the CEO, versus 67% of low performers.

*Higher market performers rely much more heavily on multifunctional temporary team-based structures (43.5%) than low performers (28%).

*HR sets up more cross-functional teams in higher-performing organizations (47.7%) than in low-performing ones (only 35 ).

More respondents from high-performing organizations (55.6
) said that their HR budget represents 3%-5% of their organization’s operating budget, whereas HR departments in low performers tend to receive a smaller percentage.

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