Why HR Should Report to the CEO
A Business Management Success Tip About the HR Reporting Structure
Imagine a senior staff committee meeting where the one person responsible for the company's most valuable and expensive asset was excluded. No one at the senior staff table has as their most significant job responsibility, the welfare and wellbeing of the organization's employees. You would find this situation utterly ridiculous, right?
Yet companies in which the head of Human Resources (HR) doesn't report to the CEO are doing just that—excluding the voice of the employees, the human resources, from the table.
People are the most important resource in your business. Unless you're a manufacturing-heavy organization with millions and millions of dollars invested in heavy equipment, you pay more for your employees than anything else. Why wouldn't you want the person tasked with recruiting, developing, and retaining employees on your executive team?
CEOs often state, but seldom totally believe that their people are their most important asset. One of your biggest challenges over the next twenty years will be attracting and retaining a superior workforce. Your HR staff members are your key players in recruiting and retaining staff. Your HR staff members should also lead your efforts in training and employee development, communication, career planning, and organization development.
They are the heart of helping you form a positive employee and customer-oriented workplace. With so much responsibility and so much potential impact on your business, HR should report to the CEO or President of your company. There is no better choice for the steward of your employees.
This enables the HR person to speak directly to the person who most closely molds your corporate culture, the President or CEO. This direct contact, without having to work through layers of other managers, who may or may not put forth the HR point of view, is important for your business success.
When HR Reports to Accounting
Especially when HR reports to accounting or administration, you are not creating a needed check and balance to your organization. People's needs vs. financial needs are a tough balancing act at best.
When both are represented by the head of the finance department, you ensure that you won't hear both points of view—only the conclusion of the finance head, which may or may not reflect the HR input.
Imagine a meeting where the head of finance says, “We're having budget difficulties. In order to meet our financial targets, let's do away with bonuses this year. The employees will understand that the current financials drove us to make this decision.” On paper, that solution may solve all budget problems and needs.
But, at this point, the head of HR should speak up and say, “Yes, on paper that works, but if we cut bonuses, we're likely to lose our best employees to our competitors. It will cost us a fortune to replace these people and our competitors will become stronger. I know this because the employee satisfaction surveys that we regularly collect rank bonuses high on the list when employees are asked, why do you stay with your current employer.”
While this may seem logical, many, many businesses overlook the long-term effects of their short-term solutions. An HR staff person at the senior table will help you avoid making bad decisions that affect employees adversely. The HR person will regularly emphasize the people aspects of your organization's strategic plan and business goals.
HR Has a Strategic Role
Strategically, your head HR person should participate in executive meetings and share decision making for the corporation. This enables the HR group to better understand and participate in managing the business. After all, knowing how to make people happier and more productive is the key to your business success.
With a thorough knowledge of the business and understanding the goals and vision of the senior team, better decisions and recommendations will come from HR. This means that it's absolutely critical that the head of HR (as well as her staff) understand the business and can speak the language of the executive team.
When you hire the head of HR, you need someone capable of executive thought. Your recruiting, retention, training, organization development, and culture are recommended and formed through a thorough understanding of your business needs by this individual.
Conversely, decisions about the business are made with a full understanding of their impact on people, the culture, and the work environment. You enable your HR staff to affect your strategic outcomes. And, this is a positive factor in your business success.
Your HR staff cannot make your company a better place if they don't understand what's going on in the business. If they don't understand the overall company goals, and this frequently happens when they get information second hand, your company won't be as successful as it could be. Give your HR pro the ability to affect your business decisions—you won't regret it and your business decision making will improve with their input.
Your people are critical to your success. Make sure the person dedicated to people reports directly to the CEO.