One of the key lessons which I learnt at University undergraduate level as part of my Joint Honours degree in Psychology and Sociology was that “people are the most important resources” in industry and that they are a source of competitive advantage in any organization. Although initially controversial, management literature shows that this notion has been debated since time immemorial and is now generally embraced by well informed leaders in the business community. Notwithstanding this recognition of the critical role of people in an organization it is interesting to note that the HR function in the past has been mostly administrative supporting the operations and front line functions in an organization. This continues to be the case with many organizations today not only locally but regionally and internationally.

Our experience, however, is that whether or not an organization views HR as an administrative or strategic partner, the positioning and operations of HR has an impact on sales, profits and general organizational performance. Consequently an effective HR strategy becomes as equally decisive as a Marketing Production or Distribution strategy. In today’s rapidly changing business environment, many factors have come on board to change the traditional HR role. These changes are exemplified by organizations becoming knowledge or technology based and as a result HR performance indicators have inevitably changed from man hours and manpower statistics to brain hours and brain power hours delivered. Organizations in the same vein have also shifted from production and quantity to productivity and quality. Such strategic considerations no doubt have a huge bearing on people management practices in organizations.

In the light of the changes in the environment and new role expectations, the question which is often asked is “Who should the Head of HR report to in order to effectively executive the new and evolving mandate of the function?” The issue is, as organizations embrace the new thinking on the role of people in organizational transformation how should HR be positioned to effectively deliver on its new and old roles? In the past decades organizations have been clearing debris, using downsizing, restructuring and re-engineering in order to improve efficiencies. It is common knowledge that for most organizations this hard work has not realized any meaningful gains despite the tremendous efforts.

Perhaps part of the answer to this challenge could be in the reporting relationship of the HR function. It is common practice in some organizations, notably Parastatals and Non-Governmental organizations that the HR function reports to the Finance Department. In the non-governmental organizations this reporting relationship is considered to be understandable for the reason that the NGO’s hold donor funds which need to be accounted for well and since checks and balances reside in finance it makes sense that HR which also performs an administrative function should be made part of Finance for the purpose of reporting. Similar logic is also applied mainly in the parastatal sectors and some private sector organizations that HR is an administrative function and should therefore report to Finance. Our experience suggests that this traditional assumption about the structural between finance and HR should be interrogated. Finance people and HR people are not all the same in as much as they may all deal with organizational costs and the need to contain them.

It has been observed in many organizations that where Finance and HR are seen as belonging to the same job family this suppresses the effectiveness of the transformational aspects of the HR role. Such functions like change management, productivity improvement, staff engagement and culture management often suffer. Under such an arrangement HR is quickly driven to focus on administrative issues with a particular focus on cost containment. In the process, developmental aspects of the HR function tend to suffer. The whole system often turns into a power struggle which in most cases results with the HR person being frustrated and calling it quits. Whilst it is absolutely critical that the HR person speaks the language of Finance in terms of cost management, it is also important that organizations realize that they need to effectively address people related programmes that ensure organizational effectiveness. The traditional stereotype in organizations is that Finance people like working quietly reconciling their figures and tend to be impatient about dealing with staff issues which are often time consuming and require patience and compassion. It is quite common in organizations that Finance and HR are often fighting about expenditure on staff matters with the former viewing such expenditure as wasteful whilst HR will often see such expenditure as an investment in human capital to promote staff engagement and innovation which in turn leads to productivity improvement.

Our own research has demonstrated that there is a significant correlation between the overall performance effectiveness of HR and who the function reports to. HR functions reporting direct to the Chief Executive Officer of the organization are generally rated as more effective than those reporting through the head of Finance. Whilst it is vitally important that HR should exercise the relevant checks and balances within a financial management framework, we believe that HR should be empowered to implement and manage its salaries and benefits programmes, staff development and retention budgets within the relevant budgetary framework.

In an ideal organizational structure, HR should report directly to the Chief Executive Officer thus enabling the function to speak directly to the person who moulds the corporate culture. This direct contact and positioning without having to work through another management layer (Finance) has a positive correlation with overall effectiveness on people management issues. Very often, if HR reports through Finance, the organization may be compromising the delicate balance between people’s needs versus financial needs which is often a tough balancing act. This argument is strengthened by the growing recognition in most organizations that “people are the most important resources in industry” and therefore the person dedicated to provide leadership on people issues should report directly to the Chief Executive Officer.

Emmanuel Jinda is the Managing Consultant of PROSERVE Consulting Group, a leading supplier of Professional Human Resources and Management services locally, regionally and internationally. He can be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it.tel: 263 773004143 or 263 4 772778