In an age of 9.2 million job openings, labor shortages across industries, and tight profit margins, HR outsourcing has become top of mind for many companies seeking to maximize value while navigating new labor legislation.
Recognizing When to Say ‘When’
Running an effective, well-rounded HR department can require a significant amount of money and full-time resources. Companies often conclude they cannot afford to fill all HR capacities and turn to HR outsourcing for all or part of their HR needs.
“Most companies we work with turn to outsourcing once they realize their needs have expanded and/or their staff is overwhelmed,” says Shaunna Jones, HR consultant for Pinion Advisory. “You will know it’s time when you’ve outgrown sharing the HR function across one or two staff members.”
HR outsourcing now ranges from benefits, hiring, training, complaints, and recruitment, to retention, terminations, and compliance.
“If you’re considering outsourcing, the first step is to identify inefficiencies in your HR department that can free up your valuable resources to focus on their area of expertise. An outsourcing firm will be able to skillfully manage the projects, functions, and complexities where needed,” Jones adds.
And it doesn’t matter what level of sophistication or size of your operation is, as the outsource functionality can be scaled according to your resource needs. The reality is that both small and large businesses are capturing big savings, ROI, and more efficient production when they turn HR functions over to outsourced experts.
How Two Businesses Used HR Outsourcing to Thrive
Case One: Take this case where an office manager for an organization with 45 employees was suddenly inundated with HR responsibilities outside of his scope and specialization during the COVID-19 pandemic. He had to pivot his HR business model quickly to adapt to rapid changes in the organizational structure, and outsourcing was the differentiator for keeping operations running smoothly.
Adding Specialization to Adapt Quickly to Organizational Change: The company’s office manager was previously responsible for accounting and HR. As is typically the case in small office environments, the manager didn’t have a background in HR but took on those responsibilities because he was the primary administrative person in the office. Meanwhile, the employee count grew, and so did the employee challenges. When the pandemic hit, the office manager was not only stretched beyond his role, he and the company’s leadership worried that they could be putting the company at risk due to a lack of knowledge and ability to keep up with employer regulations.
Outcome: Once they outsourced their HR department, the manager was able to focus his strengths and energy on his own accounting responsibilities, and more importantly, the leadership no longer worried about being at risk of breaking employer regulations and the potential fines that could follow.
Case Two: The next business case is an all-too-common scenario in HR departments everywhere. The company’s in-house HR manager was spending most of her time focused on managing the compliance challenges that come with her role. She spent most of her days managing employee benefit plans, ensuring employee paperwork was complete, and dealing with employee relations challenges and discipline issues. But upper management wanted more focus on employee retention and incentives. Outsourcing would be the differentiator that allowed this business to achieve all of its HR goals.
Utilizing Employee Core Competencies to Spend Time Where it Counts: Overall, the culture was good, but their turnover was higher than they wanted and they sensed that employees weren’t fully engaged. The HR manager and company leaders were confident their culture could be significantly improved with additional training programs, and by developing an employee appreciation program including alternative compensation initiatives, however, the HR manager didn’t have the capacity due to “fires” that kept coming up.
Outcome: After outsourcing the HR department, the manager could focus on her core competencies and could help grow the company with training and recognition initiatives that truly impacted the culture of the company – versus getting bogged down with necessary HR time sucks.
Pinion Advisory, a division of KCoe Isom, can develop a strategy and solution that works for your organization. Our HR specialists provide the resources, expertise, and solutions to make your business leaner, smarter, and more profitable. For more information, please reach out to a Pinion advisor.