Some small- and mid-sized companies have half of a Human Resources (HR) department, but they don’t know it! In some organizations, the Certified Public Accountant (CPA) handles the HR duties. They might be outsourcing their HR functions to a payroll company. To these companies, the HR function consists of risk management activities (compliance) and administrative activities (payroll and benefits). And since that’s what HR is to them, they are confident they have HR covered.

CPAs are generally good at handling risk management, so these companies should be compliant with basic employment laws and regulations. Finance folks are also normally good at developing efficient administrative processes, so payroll and benefits are administered efficiently. As companies grow from a bookkeeper to a controller and then a Chief Financial Officer, they get better at managing the ‘cost’ side of the HR.

We refer to the compliance/administrative side of HR as the ‘cost side’ because there is no return on investment (ROI) 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 the following activities.

  • Ensuring jobs are designed well.
  • Identifying the right people for the jobs in your organization.
  • Developing supervisors and managers before you need them.
  • Managing performance in a way that actually improves performance.
  • Having an organizational structure that aligns with your strategic objectives.
  • Measuring and improving employee engagement that impacts productivity and reduces unnecessary turnover.

CPAs, finance professionals and payroll companies are generally not prepared to influence organizations in these areas. However, an experienced HR professional can provide expert advice. One effective strategy that many small- and mid-sized companies utilize is outsourced HR leadership, which is scalable and cost efficient.

The Davidson Group offers a variety of factional HR services. Call 336-294-5053 to get more details about the benefits of a part-time HR expert.