Centralized Vs. Decentralized HR


Human Resources is the department in a company that hires employees and deals with issues related to the administration of the company’s personnel. Typical duties of human resources departments include payroll employee benefits, conflict resolution and recruiting. According to experts, in most companies the human resources department is an integral part of the organization.

The Goals of Centralization

A centralized human resources department streamlines all the functions of the department within a complex system. The essential aspect of this style of human resources management is the centralized location of all the individuals within the human resources department. According to Wendell French, author of “Human Resources Management,” the physical proximity of centralized human resources personnel not only improves communication, but also helps ensure that everyone works toward the same company goals.

The Goals of Decentralization

Companies with multiple locations or stores typically have decentralized human resources departments. With decentralized human resources each location controls its own individual personnel issues such as payroll. According to French, the primary goal of decentralized human resources departments is to give autonomy to different locations, allowing them to adapt to the specific business climate of the individual site. However, the actual result of this form of human resources management is often disorganization, failure to follow unified standards or the ineffective application of those standards.

The Role of Globalization

Trends in globalization have brought with them new opportunities to decentralize any department in a company including human resources. Whether making use of cheaper labor or different skill sets, many companies have started to outsource HR functions to workers in other countries. This usually happens when a company offers human resources services to many businesses. In this case, the company that outsources HR functions simply contracts out the responsibilities of the HR department. Depending on the specific situation, this can either centralize or decentralize the HR department.

The Role of IT

With developments in information technology, the area of human resources has seen an increase in automation. Increasingly, companies will employ technology to post job advertisements on various Internet portals. Additionally, improvements in information technology have allowed human resources departments to use automated email and phone systems. These IT improvements support the centralized theory of human resources management and allow companies to cut costs through the automation of a centralized HR department.

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