I once called a prospect and asked for an appointment. He replied,
"My CFO is a CPA, so we're fine." Another prospect responded,
"we outsource our HR to our payroll company." Both of those
responses instantly told me that these mid-sized companies have half of an HR
department, but don't know it.
The HR function to these business owners consists of risk management
(compliance) activities and administrative (payroll and benefits) activities.
And since that's what HR is to them, they are confident they have HR
covered.
CPAs are generally good at risk management, so I'm confident that
the first prospect's CPA has made certain that the company is compliant with
basic employment laws and regulations. Finance folks are also normally good at
developing efficient administrative work flows, so I'm also sure that this
company's employees get paid accurately and on-time and their benefits are
administered efficiently. In my experience, as companies grow from the
bookkeeper stage to the controller stage to the CFO stage, they get better and
better at this half of the HR pie - the "cost" side.
I refer to the compliance/administrative side of HR as
the "cost side" because there is no return-on-investment from
compliance activities unless you make assumptions about the fines or lawsuits
you "might" have experienced. Compliance is comparable to insurance -
there are risks if you don't have it, but no real benefit from having
it until you need it. No one chooses to do business with a company because
it has a great Employee Handbook!
Likewise, any ROI from process improvements comes from
efficiency gains. Outsourcing portions of HR to payroll providers can be a
legitimate way to generate some process improvement and compliance
peace-of-mind. But administrative process improvements in support functions,
like accounting or HR, don't typically help a company win in
its competitive space.
The real ROI from an HR department comes from strategic initiatives. Strategic
HR includes:
- identifying who are the right people for the jobs in your
organization.
- ensuring jobs are designed well.
- measuring and improving employee engagement which impacts
productivity and reduces unnecessary turnover.
- developing supervisors and managers before you need them.
- managing performance in a way that actually improves performance.
- getting people in the right roles.
- having an organizational structure that aligns with your strategic
objectives.
- training and development programs that support stated strategic
objectives.
CPAs, finance professionals and HR processes companies are
generally not as prepared to influence organizations in these areas as an
experienced HR professional is. The realities of growing a company require the
addition of a capable finance leader earlier in the growth curve than a capable
HR leader. However, the earlier a company commits to having a "whole"
HR department, the healthier its culture will be.
