Last week a VP of HR asked me a simple question: “How should I organize the recruiting function? We’ve had it centralized and then decentralized and then centralized again, but neither way has really worked.” In larger companies this is a big concern, but even smaller companies have issues as they grow. As the newly public companies mature and as tiny companies become bigger ones, the issue of structural organization always comes up. As you plan your recruiting strategy for the coming year(s), you may want to think about who reports where and why. Here are a few thoughts from years of dealing with this issue. I hope they help guide your own thinking process. Before anything else, the recruiting function must be responsive to the hiring managers. They are the prime customers and should be the focus of all recruiting efforts whether in a corporate setting or in an agency setting. The recruiters may report elsewhere, but the hiring manager is “king” and “queen.” THE CENTRAL APPROACH: The benefits of centralized reporting are two: consistent procedures and processes and lack of duplication of effort (usually). The downside is often slower execution, confusion over who is “king” or “queen,” and inconsistency. Hiring managers tend to get upset over what they perceive as inefficient recruiting or over high-perceived costs. And, when this happens the recruiting function responds by spending precious time defending themselves and proving how good they are. All of this detracts from the central goal of finding and recruiting great people. While this is the most common organizing method, companies often swing between a central and a decentralized approach over and over, trying each approach for a while and then switching back. THE DECENTRALIZED APPROACH: On the other hand, a decentralized function is very responsive to the hiring managers because the recruiters report directly to them. The recruiters are focused and often well respected by the managers they work with. However, decentralized functions sometimes have little insight on how the company as a whole is doing in regard to minority hiring or efficient recruiting methods, and can’t leverage scale to achieve cost reductions. Budgets are so decentralized that it is tough to get agreement from everyone on purchasing important software or other tools to aid in the recruiting cycle. Recruiter skills upgrading is neglected and no one really knows if a particular recruiter is good or not. Metrics are not consolidated or even tracked, in many cases. Of all the methods, the decentralized approach has the most potential downside. So how else can a function be organized? Is there a better way? In a small company with a single division or product or in a medium sized company without complexity, I would recommend a centralized function with the recruiters being physically located close to the hiring managers. This promotes communication and builds rapport. The recruiters should also be focused on working with one or two managers or with a specific group of managers so they can get to know and understand the competencies required in that area. With dotted-line reporting to a central organization which recruits for the corporate positions and provides some economy of scale, this method works well. But, in large companies with complex structures or many product groups or divisions, I recommend a different approach. THE FEDERAL APPROACH: Long advocated by management theorists like Charles Handy and exemplified most clearly by our own United States, the federal approach to organizing works extremely well. In this approach, the various business units have their own recruiting functions and recruiters. These recruiters work directly for the product groups, but agree to allow a strong central recruiting function to exist and provide several services in common. This central group, analogous to the federal government of the US, develops an overall strategy for recruiting, writes procedures for everyone to follow, tracks legal compliance, educates and supports individual recruiters, and collects and reports metrics to the corporation’s management team. Of course, they do all of this in cooperation and with the help of the people in the businesses and this is how it differs from the decentralized approach. In the federal model, the groups come together and agree on what the central function should do because it makes sense. For example, it makes sense to have a single software package/system for recruiting. This can best be purchased and maintained centrally, but used in a decentralized manner. It makes sense to consolidate metrics, so the central group does this. But, whatever is done is by permission and with the consensus of the divisions. This is very different from other approaches. The beauty of this method is that the hiring managers remain in charge and have a great deal of control over the recruiting done in their function. But, the recruiters still get functional development and education, can vie for promotions and transfers internally, and the company gets the benefit of consistently applied procedures. A central budget also allows the purchase of common systems. While there is no perfect way to organize, the federal model works better than any other that I have seen. You can read more about this in the books written by Charles Handy. His best book on this subject is called “The Age of Unreason.”
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