Decentralizing human resources management means delegating HR responsibilities to local business units as opposed to concentrating them with specialists in a central location. In a retail chain, for example, local store managers would oversee things such as hiring and firing, training and orientation, compensation, payroll and motivational strategies with employees.
Decentralizing HR simplifies the process of responding to local market conditions. If a local business unit has to hire new staff, a decentralized process enables it to do so more quickly. Local leaders can hire and start their own staff, as opposed to relying on higher-level managers and HR involvement. Giving local employees raises when they increase performance is also more efficient if local managers are in charge of the action.
Decentralized HR empowers local managers and employees to self-operate, while fulfilling their roles in the company's strategic objectives. Typically, local business and store managers prefer the autonomy of making their own HR decisions and motivating staff using their own leadership styles. Instilling trust through decentralization motivates local managers and also helps create a general sense of local business ownership among the staff at the store. This boosts morale and retention.
In a centralized setup, people with human resources-related degrees and training manage HR processes. With a decentralized setup, you have managers with fewer qualifications to develop hiring, firing and discipline procedures that are fair and insulate the company from discrimination or wrongful termination lawsuits. Incorporating HR as a strategic element in achieving company objectives is also more difficult if managers throughout the organization make their own decisions.
A main reason companies use centralized processes is to maintain consistency for the company and brand. If HR is decentralized, you have more potential for differences in the way managers interpret and implement guidelines from headquarters. Different levels of pay, training and motivational techniques can lead to varying degrees of employee satisfaction. Subsequently, customers may see variation in the level of service they get from one store to the next, which diminishes brand consistency.