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One of the most challenging areas of business is Human Capital. There is hiring, firing, managing, motivating, disciplining, growth development, compensation, benefits, insurance, taxes… and the list goes on.
To further complicate matters, in November 2017, the unemployment rate in Denver was 2.8% and dropping. That means, in a nutshell, that pretty much anyone who wants a job has a job. In a labor market like this, recruiting and retaining people is hard; so, in short, you have got to always be hiring. And you might consider outsourcing some or all your HR functions.
Outsourcing your HR often just makes sense. To run a successful business, you need to be focusing 80% of your time on what you do best (as do all of the others in your organization). HR typically isn’t an area where most business owners thrive (and many simply loathe it!)
Your people are your greatest asset and therefore your greatest liability. Below are some points to consider regarding outsourcing some or all of your HR functions:
Time. Your time is invaluable. Where should you be spending your time that will benefit your company the most? That 80%. Is it in a strategic role like raising capital, creating and executing your strategic plan, working with key clients, innovating or working on your exit/succession plan? Or is your time best spent focused on the time-consuming minutia of the various HR details?
Compliance. Speaking of the minutia of details, let’s talk about compliance. Employment laws are changing regularly, and frequently in favor of the employee, so maintaining compliancy needs to be a top priority within your organization. HR compliancy issues include but are not limited to payroll taxes, workman’s compensation insurance, keeping your employee manual up to date, the ins and outs of your 401k or other retirement plan, your health plan (I won’t even go down that path), verifying I9 status on new hires and properly documenting any performance issues (so that when it comes time to terminate you aren’t at risk for legal action). Yes, it is a lot.
The entire area of compliance is meaty and complex. Business owners often overlook some of the details which exposes them to substantial risk down the line.
Money. Mistakes in managing your human capital all lead to one thing: the potential to cost you substantially. Not to mention possible implications to your brand. Your time is money, a lot of money (don’t forget to include the soft dollars that can’t be accounted for as you think about that). Errors in compliance can be extremely expensive, regardless of whether you take the hit in taxes, penalties, legal action, etc. And don’t forget to factor in the emotional expense and angst that goes along with it.
Recruiting. If you are a rapidly growing organization or in need of a key hire, you should seriously consider outsourcing your recruiting. A good recruiting firm can help with the job descriptions, the marketing/positioning of the job and will conduct the search and initial round of vetting before you even speak with the candidate. This saves you time and money; and will put you in front of higher level candidates.
There are a number of ways you can outsource your human capital function. First, decide what is best for your organization based on your size and needs. Options include:
- Professional Employer Organization (PEO)
- Payroll only organizations (some offer other benefits)
- “On Demand” HR services where you can get your HR questions answered when you want and how you want (portals, chat, phone, etc.)
- Employment lawyers often provide other services such as performance management, training, etc.
According to a recent TAB Pulse Survey on Time Management, the average small business owner worked around 50 hours per week, but only 32 percent of that time was spent working on the business (vs. in the business). Just think, if you spend 80% of your time doing what you do best, then you would be spending 40 hours per week working on your business, not in it.
Considering investing outsourcing some or all your human capital management so that you get to that 80%. If executed correctly, you should see the return on investment many times over. And remember two things: First, as your organization grows our HR needs will grow and change. And second, delegation does not equal abdication. You or someone in your organization still need to ensure things go right, but you will have an extension of your HR team taking care of the details.
Let us know how you are taking care of your human resources function.
By Blair Koch
