The New Role of People Ops Leaders: Should HR Report To Finance or Operations?

November 19, 2021・6 mins read
The New Role of People Ops Leaders: Should HR Report To Finance or Operations?

Organizational structure helps business work toward its goals. With duties and responsibilities clearly defined, the company as a whole moves forward seamlessly. Without an organizational structure, there can be duplication of work; tasks go unassigned and ultimately no one is sure who’s responsible for what. You may have started your small business as chief cook and bottle washer, but growth has created complex, specialized roles within the company. Where and to whom these professionals report can be as critical to organizational success as the talent they provide. When everyone is in on the same planning and information, they’re all moving toward a common goal. When information is communicated through channels, rather than directly, it can be misinterpreted or omitted. To achieve one clear mission, the input of many is necessary.

Where HR has been

In the past, the Human Resources department fell under 2 main categories: finance or operations. In many cases, business leaders considered HR a payroll and cost center. It generated no revenue, consumed resources, and made sure everyone got their check on time. In this scenario, HR fell under the direction of the Chief Financial Officer. In some cases, they worked together to develop staffing budgets and forecasting. Often, HR was given a dollar amount and expected to make do with what was offered. Other organizations considered HR an operational department. They knew they couldn’t bring product or service to market without staff, but considered talent operational assets, like machinery and tools. Here, reporting to the Chief Operations Officer, HR’s role was to provide the equipment (in the form of warm bodies) to do the job. In the distant past, the role of HR was largely legal compliance. In some organizations, payroll spun off on its own (reporting to the CFO), leaving HR talent to manage the legal requirements and mandates required by federal, state, and local authorities. Many of these professionals reported to the legal department.

Where People Ops leaders should be today

These days we understand the role of HR is more than compliance and payroll — they’re partners in growth. No company can run without talent, no matter how tech heavy they are. Someone has to oversee what’s being done and create a vision for what will be done in the future. In many organizations, talent is the most costly line-item in the budget. It can also be the budget item that drives innovation and profitability. For business to leverage HR to the fullest, it needs a seat at the table — the board room table — reporting to the CEO. When organizations plan for the future, for growth, for the ability to manage through lean times, it impacts personnel and is important. When business models shift, when market conditions compress or expand, talent is integral to the process. Leaving HR out of the loop, making them secondary, or even keeping them out of the decision process means more than repeating ideas and instructions. It can mean leaving out necessary information and input that could make the change or process run more smoothly or effectively. There are virtually no actions a business takes that doesn’t involve HR. Plans to expand market share could mean a larger sales force. Goals to develop new products will require additional talent. Plans to leverage technology will require hardware, software and boots on the ground. Plans to automate may require retraining, repositioning, or downsizing. If people are impacted, the team that manages their acquisition, growth, and development must be part of the decision-making process — from planning to execution.

The shareholders HR supports

HR supports every function of an organization. The Chief Financial Officer will have a variety of managers in their group, from general accounting to budgeting and forecasting professionals. The Chief Operations Officer manages administrative and production operations, with vice presidents, managers, and line supervisors under their authority. Sales and marketing professionals report to the Chief Marketing Officer; IT professionals to the Chief Technical Officer. HR supports all these areas with acquisition, management, training, and retention strategies including benefits administration. Their role is as integral to the operation of the business as any. Excluding them from any part of the organization’s planning processes is at best an oversight — at worst a potentially costly mistake.

Reporting status matters

When HR reports to another Chief, their status in the organization is solidified as secondary. When HR reports directly to the CEO, not only does the group’s status elevate, the message is clear to employees all the way down the ladder. Talent is valued: the team that acquires and trains our talent is respected and credible.

So does the bottom line

HR creates, delivers, and administers policies that can ensure a happy, engaged workforce, or one that’s actively disengaged. With the high cost of recruitment, training, and retention, these metrics are critical to success. By having a seat at the table, HR can discuss, candidly, the policies and practices that are inspiring employees and potential new hires — and those that are turning them away.

A workplace culture of value

When the finance department has a seat at the boardroom table, it illustrates the company is serious about managing assets and holdings. When operations is a part of the C-suite, the company underscores how critical production is to success. For information tech, when they report to the CEO, their role as an integral component of business is clarified. For HR, a seat at the table underscores a culture that not only values human capital, but how critically important it is for them to have a voice at the corporate level.

HR leaders have proven their worth

In the wake of the global pandemic HR has not only proven its value, but exceeded expectations. These were and continue to be the professionals there to support shifting business models from in person to remote. These are the teams who agonized over layoffs and furloughs. HR professionals are the trainers, working to develop the existing workforce — either with on-the-fly training for remote work, or long-term planning for growth and succession. These are the recruiters striving to restore headcount and productivity in ways never before considered. When times are good, HR is helping maintain; when times are challenging, HR leads the way. Many companies have come to recognize it’s time to put HR in the C-suite. From the most basic CHRO title to Chief of People Operations or Chief Happiness Officer, HR belongs in the boardroom reporting to the CEO.

This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.

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