Should you fire your HR department?

Who needs an unloved cost centre, many of whose functions can now be done by computers?


Photo: Andrew B. Myers

From red tape to pink slips to mandatory training, employees have many reasons to hate the human-resources department. And some bosses share their sentiments—among them Bruce Poon Tip, founder of Toronto-based sustainable-travel company G Adventures (formerly Gap Adventures). So much so that, earlier this year, he eliminated the function altogether. G, a global operator with more than 1,300 staffers, prides itself on its culture of innovation, which Poon Tip believes rigid HR processes hamper. “I wanted a company that celebrates winning, and I couldn’t get that out of HR,” he says. “HR takes away people’s freedoms, and is really just used to try to avoid errors.” He’s kept only two roles formerly handled by the department: his VP of talent recruits new employees, and the “Culture Club” organizes company events and promotes company values.

Poon Tip isn’t alone in looking for better ways to manage staffing. American startup guru Jason Fried has personally taken charge of many traditional HR tasks at his tech company, 37Signals, and has stood some of the field’s conventions on their heads. For example, he rotates leadership responsibilities among employees so as to avoid problems associated with “vertical ambition.”­

The HR profession is undergoing an identity crisis today, one that goes beyond culture-forward outfits. The late-’90s war for talent gave HR a lot of clout, and many companies beefed up their departments. But the momentum faltered in the new millennium, and now some executives are re-evaluating what the expensive, unloved “cost centre” really adds to their organizations. A recent study of 720 companies around the world found that HR departments struggle to demonstrate their contributions to the corporate bottom line. Meanwhile, their budgets have shrunk, forcing the staff to meet increasing demands for talent and efficiency with fewer resources.

Perhaps most important, technology is transforming the role of an HR professional. Tasks such as payroll, training and company data collection can now easily be automated and handled online. A recent survey by Towers Watson showed that a third of polled companies significantly increased spending on HR technologies in the past 12 months. Having actual humans handle human resources is more expensive and less efficient than handing it over to machines. That was a reality Air Canada acknowledged in early October when it announced an $80-million deal to outsource most of its HR needs to IBM. After all, there are valuable insights to be gleaned from the information HR departments gather, and sophisticated data management and analytics tools can do that better than traditional HR experts.

Of course, not every HR responsibility can be outsourced; someone still needs to handle such things as conflict resolution and behaviour management. But that someone may not need to be a specialized HR staffer. Ian Welsh, an HR consultant in Toronto, instead expects that many HR responsibilities will increasingly devolve to direct supervisors. That means any training and team-building that can’t be automated will fall to managers, who will have to increasingly demonstrate HR skills. “Since so much can be done online, there becomes more of a need for HR people who are overseers with troubleshooting roles,” Welsh says.

That method seems to be working for Poon Tip. “It’s still new territory for us, but so far [eliminating HR] has been very successful,” he says. “We look at our people differently.”