The debate over whether it is better to have a centralized Human Resources system or a decentralized one is eternal. Centralized has its benefits in scalability, consistency and standardized metrics, whereas decentralized has the edge in customization, speed and adaptability. Brandon Hall Group research has shown a consistent back-and-forth of dominant ideologies, with no sign that one or the other will ever go away permanently.
Which of the following best describes your HR service delivery model?
Without the centralized administration of HR, changes to regulatory or internal business practices could be applied haphazardly and inconsistently across local offices. Yet, having a centralized system also means that local customs, preferences, schedules and culture are often ignored, which hampers the ability of organizations to grow and support employees globally.
Decentralized departments have more localized control and services can be targeted to their specific needs, and policies and procedures can have greater flexibility depending on what is needed within that department. There’s also an efficiency advantage because many department heads oversee their own HR services, which divides the work among several employees.
However, decentralization also produces an inconsistent experience for employees across the organization, which means it is nearly impossible to maintain a homogenous culture.
Centralization can significantly lower costs since a small group supports many employees, but that also means they won’t have the input and reinforced feedback from multiple locations or departments to create solutions needed specifically for those areas.
For an organization to decide whether to adopt a centralized or decentralized approach, it must first consider its specific business needs. Key questions HR organizations should address include:
• What is the overall level of HR maturity at your organization and how will that impact any sweeping changes?
• What does your organization see as the main function of HR and how does HR view your employees (as internal customers, as production units, etc.)?
• Who should be accountable for making the final decision on how HR should be structured?
• What level of resources, in terms of time and money, are available for HR support at your organization and how will that affect HR service and delivery?
• How will you measure the relevant outcomes of your HR model and what red flags should you be on the lookout for?
Brandon Hall Group POV
Centralized, decentralized and hybrid models each have strengths and weaknesses, and there is no way to make that determination by size or industry. It depends upon your organization’s culture and goals.
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