As a business forms, every function is taken for granted as a necessary and serious contributor – except Human Resources. No one questions that there are roles for finance, operations, and sales. Finance will expand with Payables and Receivables, Operations with Shipping and Handling, and Sales with Marketing and Customer Service. But, Human Resources is Personnel, an administrative function – a necessary evil, at that.
Depending on the foresight of leadership, the HR function will remain under the radar in a perpetual struggle for recognition. Despite all the MBA school idealism and the human capital euphemisms, HR still remains somewhat on the back burner. If it does not contribute strategically, it is partly HR’s own fault and partly the myopia of the senior leadership.
The Smallest Businesses
Because there is virtually no task other than clerical in the smallest businesses (less than 25 employees), HR is a records function. In its first phases, a small business can manage its clerical tasks internally or externally. Quickbooks, SimpleHR, OrangeHRM, and People-Trak HR all administer records and run payroll. They will likely keep your small staff in FLSA and FICA compliance. But, they do nothing for so-called “human assets.”
However, this could be the first opportunity to form a strategy for the future. For example, some software apps are more static than others. Choose one that has potential for expansion in numbers and quality. Business growth may be steady but slow; still, you may want to introduce the potential for performance and training tracking, management planning and talent management.
Bigger Small Businesses
Simple software applications are not enough once HR issues start adding up. Software does not discipline, praise, or motivate. If administrative functions have been outsourced to software or vendor, the owner/manager must still manage the more human issues.
So, somewhere around 150 to 250 employees, a business will hire a Personnel or HR Manager. This “manager” role is prophylactic; the job is to keep the wolf from the owner’s door. It is not a policy making position, and, at its best, it satisfies itself by running a tight ship. This begins as a one-person office and grows with low-level employees.
Once over 250 employees, any business will be pulled in several directions. The volume of the clerical work, the administrative burden of staffing, and the level of employee stresses, all increase exponentially. But, because HR does not produce, handle, or ship anything, it is deemed as non-productive. And, all overhead is subject to cost reduction.
That perception of HR will continue unless HR can change it. Among its options are to frame strategies with a clear return on investment. It must mine the avenues it has control over:
- aggressively negotiating the cost of benefits
- structuring compensation consistent with strategic futures
- partnering with peer managers to realize their respective goals
- providing data and human capital futures before they are requested
These skills are not easily outsourced and develop an HR Manager’s personal maturity and professional respect.
At 500 plus employees, the corporation needs current, authoritative, and accountable input. This is where an HR Director earns his/her stripes. The Director status ideally reports directly to the CEO, so HR has an attentive ear on issues of talent management, hostile workplace, and compensation issues.
If the CEO respects the role of HR Director or VP, increasingly complex administrative tasks are managed down the line or in HRIS. The HR officer is adviser, counselor, and arbiter. HRIS lets the HR Director offer solutions not problems, strategies not limits, confidence not concerns.
As companies go national and global, HR is a whole other animal. Basic personnel needs are handled in place or on location. Benefits and related costs are well into the millions. And, a certain level of human costs – turnover, litigation, and so on – has to be forecast.
Once division responsibilities become divisible by function, the most sustaining strategy makes human assets important again if the HR Director is equipped to forecast and add future values. With HRIS information available in real time to the officers in the C-suite, the HR Director can integrate data to support the allocation, development, and management of talent to support strategic goals across the corporation.
Human assets gain value as a function of HR leadership. If it leads, the assets will develop. If it does not lead, the leadership and the assets remain functional.