The case for advising businesses to abolish corporate HR departments

HR departments exist primarily to protect the organization from lawsuits and regulatory exposure, not to develop talent or improve culture. Every policy, form, and mandatory training session is built around minimizing liability. The result is a function that talks about ‘putting people first,’ while its actual incentive structure rewards risk-aversion and paper trails over judgment and trust.

It is effectively a tax on speed and a magnet for process for its own sake. HR tends to accrete rules, approval chains, and standardized procedures that make sense for a company of 50,000 but strangle a company of 50. Hiring a candidate, giving someone a raise, or letting a manager fire an obviously bad performer all get routed through multi-step processes designed to prevent worst-case scenarios rather than enable good ones. Every additional layer of sign-off is a delay tax paid by everyone to insure against a small number of bad actors.

It removes accountability from the people who should own it. When HR handles hiring, firing, and performance management, managers can outsource the hardest and most important parts of their job. A manager who can blame HR for a slow hiring process or a botched termination never has to develop the skill of actually managing people. If you push those responsibilities back onto line managers, you achieve better managers, because now they own the consequences directly.

Employees don't trust HR, and pretending otherwise is dishonest. Survey after survey shows employees see HR as an arm of management, not an advocate for workers, especially in conflicts. Framing HR as a safe space for grievances while its actual function is protecting the company, creates a system built on a fiction. Removing the department is more honest because employees then know upfront that disputes go straight to management or external counsel, rather than through a department pretending to be neutral.

Many HR functions are better performed by specialists or software. Payroll, benefits administration and compliance can be handled by outside firms or software with more expertise and less overhead than an internal department. Recruiting can be done by hiring managers with support from external recruiters. Culture and management development are, arguably, line-management responsibilities anyway. Once you strip out what can be outsourced or automated, what's left of HR as a stand-alone internal function is thin.

There are case examples that show businesses can work without it. Companies like Netflix in its early ‘freedom and responsibility’ culture era, and various small-to-midsize firms that have deliberately run lean without a formal HR function, are evidence that a smart, trust-based culture with strong managers can substitute for a bureaucratic HR apparatus, at least until a company reaches a certain scale.

Critics of this position might argue that HR functions such as harassment investigations, wage and hour compliance, and disability accommodations exist because unmanaged versions of these problems produce real harm and real legal exposure, and that letting managers handle it might let discrimination and abuse go unchecked, since managers should not be marking their own homework. But most companies who abolish HR do better by redistributing its functions elsewhere, and removing the concentrated power source that acts as a brake on development and progress.

Madsen Pirie