A reader was kind enough to undertake to set me straight as follows: "On the outsourcing point of view the key question for me is what is the return on the asset and people unfortunately are assets in a company. If I’m in banking my assets are money and financial minds tat create retrurns. If my business is commercial real estate then my assets are property, buildings and people who know a good deal from a bad one. If I’m an HR outsourcer then my assets are HR savvy people who others are willing to buy expertise from. If I’m a multinational pharma company or software company then I’m afraid I don’t see much return from an HR person.
It’s all about following the money."
I started to write a return comment and realized it needed to be longer and more people might want to see it…. Thanks for the comment Darren. I think you’ve succinctly captured one point of view. Where can I start to explain more clearly. You can always outsource "hard" HR basics – the transactional systems, record-keeping and benefits. But people absolutely are assets in every company – like the financial minds you mention. Those minds can get balled up in worrying about minor stuff on benefits or they can worry about when their next promotion is coming. While they’re worrying, they aren’t creating as good returns as they could. Often those worries don’t fit in boxes like, "what does the dental plan pay for this?" The real key is continual coaching approach from their direct leader, but who helps the leaders who aren’t naturally good at this?
People are unique in being assets you don’t own or control. Leaders can use them up by hiring for great potential, using them for a while till they feel they’re being used and toss them out as some bosses regularly do or you can have someone who helps develop and coaches bosses who in turn listen and respond to concerns. In a small business (as most are) if you hand pick business leaders and they have good listening skills, see the need and the CEO listen as well, you can get by without a designated HR person for a long time. But as you grow, merge, acquire others and have to expand your ranks, it becomes increasingly difficult to ensure enough people who give the continual time to listening that is needed as part of their job, as part of getting the work flowing smoothly and to give the thinking time to make good decisions about every person. And coordinating all this takes time.
In every company someone tends to fall into the role of listener and thinker for resolving HR "soft" issues. That person becomes the de facto HR person, the go to individual when someone has a problem or a manager has a problem with an employee. They may do other things, too, as I did even in a very large corporation, but they need some latitude to help set the tone for how people are treated and to counsel those who behave outside the program, to be a second set of ears and eyes for the CEO to marshal people on track continually to get the best return on those assets. As Colin Powell says in his first book, "every division needs it’s ‘chaplain’ [his description for someone who listens and helps resolve]." You can leave the role informal, but that tends to hide a very important lever in getting things moving and keeping them moving smoothly.
Quite often this person doesn’t carry the title HR and isn’t hired for that alone, but they are in a real sense running the HR program of the organization and it takes a real and usually substantial portion of their time. If you lose that person, your return on human assets tanks fairly quickly. Research shows great HR multiplies financial results by four or more times over the average company. I probably don’t need to say that anything that runs "great" like "great HR" is great because it is run by an effective leader. Who is leading HR in any company is a key question. It’s a daily culture-building influence that you cannot thrive without. Someone organizes that and it almost never can be the entrepreneurial leader who drives the business attack – the roles and the things you have to do and dedicate the majority of your time to are simply incompatible. So do you give the HR role to someone formally (full or part time) or just let it happen by itself, haphazardly? Contractors can’t do this for you unless they’re on site virtually full time and have the ear of the senior leadership continually.