In my career as an HR professional, I’ve had the privilege of reporting to both the chief executive officer (CEO) and chief finance officer (CFO), in addition to the executive vice president of human resources. The reason I say privilege is because I learned something from all the people I’ve reported to.
The Society for Human Resource Management (SHRM) recently released a report titled, “Does Having HR Report to Finance Influence Investments in HR?”(PDF) It’s an interesting read. Not just from the philosophical standpoint of where should HR report but it provides some data regarding:
- HR expense to FTE ratio
- Average HR to employee ratio
- Average salary as a percentage of operating expense
- Average cost per hire
After seeing the report, SHRM hosted a #NextChat on the topic. You can review the TweetChat conversation on the SHRM blog. My takeaway is that who human resources reports to could be a function of culture. And not because of the view of HR. (Well, maybe because of the view of HR.) But the decision is really based on the organization’s view of talent.
Are employee related decisions framed as conversations regarding assets or expenses?
An asset is a valuable thing or person. In this case, employees provide a competitive advantage to the business. I’m reminded of when I worked in the hotel industry. It’s a highly competitive industry with many of the same features: fancy beds, award-winning restaurants, relaxing spas, etc. It’s the employee who makes the difference.
An expense is the money spent by an organization to generate revenue. Typical expenses would include training, incentives, marketing, and equipment upgrades. Some organizations view these expenses as unnecessary; where others view them as essential to maintaining market share.
We’re not talking about treating employees as inanimate objects. It’s more of a philosophy about the role employees play in the organization’s success.
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I can see the answer to that question driving where HR reports and the role of HR in general. Now the goal isn’t to say how the organization views employees is bad or wrong and it needs to be changed. If your company culture works, then it works and that’s okay. On the other hand, if the company is experiencing some challenges, it could be beneficial to ask the question.
Do we consider employees to be assets or expenses? And is everyone on the senior management team on the same page regarding the answer?
Once everyone is on the same page, then who human resources should report to will fall into place. Along with the answers to many other questions about the candidate and employee experience.
Image taken by Sharlyn Lauby while wandering the Neon Museum in Las Vegas, NV0