Is Human resource function a cost center?

3 Sep, 2019 / MVS Mani

This is a discussion that you hear during the appraisal month or when some one from HR questions the production or business unit. I would like to put forth my thought and argument other wise . 

The concept of Cost centers and Profit centers in erstwhile manufacturing companies had some relevance in practice basically because of the fact that they had more personal functions as their primary responsibility. They are the gate keepers for the Human Resources department to be kept in check . In New age service and technology companies they become the key function for growth. 

If you consider the finance department as a cost center and you don’t provide appropriate resources to them, it will lead to loss of business and shut down of operations. In new age companies, the CFO function is core to any business. In the same line of thought, for me the Human Resource function plays a vital role in an organisation. For the organisation to be relevant and the business to exist, HR plays a crucial role . In my previous Blog , I argued that the role of the HR function is responsible for its resource to function well all the time and in order to maximize its output.  

Let us compare the different functions in the human body. HR is like part of the brain function. It does not make sense for the body to exist without the brain fully functional. For new age businesses and organizations to grow, each function has its unique role. It is not right for the management to say that HR is a cost center.  Instead you can say that the HR function should know the customers. The primary purpose should be communicated to each and every function of the business. Many companies move personnel who have managed business to the Human resource function because of its importance.

These are my thoughts. I would like to know your views if they are different.

Leave Your Comments

One response to “Is Human resource function a cost center?”

  1. Sir,

    as you rightly said “HR function should know the customers” it is mandatory to add ‘HR function should ALSO know the customers’. To extend the statement, ALL FUNCTIONS OF AN ORGANIZATION SHOULD KNOW ITS CUSTOMERS.

    Getting to the root of the above statement, the biggest challenge or one of the widely prevailing ones is that the GOAL of an Organization faces one direction and each of the other functions face different directions. Its a mulit-wheeled vehicle with each its wheel in different directions. The Organization does not move in the direction that the driver wants to.

    I am not talking about the fancy or traditional GOAL statements of any Organization but the true short-term/long-term ones like – what kind of customers to acquire ? what is the revenue target ? what kind of QoS do we maintain ? how to render good customer experiences ? If different functions of the Organization are not ALIGNED towards such GOALS there starts the problem.

    HR certainly plays a vital role in this ALIGNMENT i am talking about.

    If to or not to see HR as a cost center depends on the attitude of the Management and ofcourse on what value proposition does HR carry.

    VP of an investment banking and financial services major was addicted to online gambling and misused his powers (refer today’s TOI) . What is HR’s role in this ? and what if it is seen only as a cost center ? How many more such cases could come up if HR is just a cost center?

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