Companies Say No to Having an HR Department Sometimes the only thing worse than having an HR department is not having one. When LRN Corp, which helps companies develop ethics and compliance programs, restructured a few years ago, the 250-employee business abolished most job titles and department names. It also did away with its human-resources department, which had dealt with recruiting and compensation issues, among other things. “We wanted to force the people issues into the middle of the business,” said David Greenberg, Los Angeles-based LRN’s executive vice president. Companies seeking flat management structures and more accountability for employees are frequently taking aim at human resources. Executives say the traditional HR department-which claims dominion over everything from hiring and firing to maintaining workplace diversity-stifles innovation and bogs down businesses with inefficient policies and processes. At the same time, a booming HR software industry has made it easier than ever to automate or outsource personnel-related functions such as payrol and benefits administration. Some workers say they feel the absence of an in-house HR staff acutely, especially when it comes to bread-and-butter HR responsibilities such as mediating employee disputes and resolving pay problems LRN and other companies that are going it alone say they are working out the glitches as they go. Buppert Landscape Inc., an 11-year-old landscaping company with 900 employees, has never had a traditional HR department. Instead, managers must balance renewing contracts and ensuring that a client’s grass is cut to the proper height with hunting down talent at college recruiting sessions and teaching employees about the company’s 401(k) pla CEO Craig Bupeest said the decentralized structure fosters autonomy and accountability among leaders across the company, which is based in Laytopsvile, Md., and covers markets from Philadelphia to Atlanta. He estimates that its managers spend 5% of their time on matters related to human resources. “I just have a hard time understanding how somebody in an office two or four states away can do a better job of solving an employee problem than someone who has a vested interest in the employee, Mr. Buppet said. In 2012, U.S. employers had a median of 1.54 HR professionals for every 100 employees, up slightly from a low of 1.24 in the recession year of 2009, according to the Society for Human Resource Management. They earn a median annualized wage of about $51,000, government statistics show. Startups usually launch without personnel teams, but SHRM advises that companies bring on a human- resources staffer once they reach 15 employees, the point at which personnel issues become complex enough to require specialized skills. Whenever you consider eliminating portions of HR you have to think of the financial risk, the strategi said Steve Miranda, the managing director of Cornell University’s Center for Advanced Human Resource Studies and a former HR executive at Lucent Technologies, now part of Alcatel-Lucent Managers often lack specialized knowledge that is crucial for keeping a company competitive and on the right side of the law, he said. If they don’t understand the latest rules under the Family and Medical Leave Act, for example, they can open their company up to lawsuits; if they don’t know where to find qualified engineers, they can end up behind in the battle for talent Outback Steakhouse, a unit of Blogmin Brands Inc., had no HR department before 2008 but created one not long after the Equal Employment Opportunity Commission sued the restaurant chain for sex discrimination. In 2009, Outback paid $19 million to settle the case and agreed to add an executive-level HR position. terpersonal issues must be handled differently when HR isn’t around to mediate. Klick Health, a Toronto-based marketing agency focused on health care, has forgone a human-resources departmen
