Welcome back to the C Suite, staff. It’s your favorite exec, BowTiedCEO. I have been getting a lot of questions lately about the roles of HR so I thought I would breakdown all facets of what they actually do, who they help, and how valuable they are.
The HR Functions
Let’s start by discussing all the roles HR plays and what they actually do in simple terms.
HR Generalists (Business Partners) These are the people who are the first line of defense to all HR matters related to employees. They are your representative of HR to help assist the department you work in. They are also there to advise on any HR related matters. They will have to lean on the other areas of HR, depending on what is being asked of them, but the most common HR scenarios they should know.
Talent Acquisition (Recruiting) A group who is often outsourced or the first to see layoffs, sources candidates to fill jobs. they are the middle man between hiring managers and candidates. They assist both parties during the selection and hiring processes.
Compensation and Benefits Probably the second most necessary HR function behind Legal and Compliance, this group handles everything regarding salaries, benefits coordination and retirement contributions.
Employee Relations All companies have a different setup for this group. They tend to manage shared employee communication channels that answer employee questions. They can either answer things that the business partners cannot or have to manage who the main HR contact is.
Training and Development This is my least favorite of all the HR functions. This is the group that makes you do mandatory trainings on line every year. The same training that never changes, BUT you need to do it over and over.
Legal and Compliance If I was going to put a ranking on the most important of HR functions, it would be these guys. They keep the company and people managers out of jail.
Employee Safety (for physical employees) Safety is a very niche part of HR, that is only a part of companies with a large physical workforce (i.e. nurses, factory workers, etc). They help maintain OSHA standards and compliance and also assist with any workers comp claims.
Payroll (this could also be in finance) This one is pretty simple. They pay the staff. One of the more critical functions. Have you ever seen staff who don’t get paid? This one is also kind of a bonus because it could also wrap up to corporate finance.
Where is the value?
HR tends to get a negative reputation for getting in the way of employees. Well, that’s because they do! I can’t tell you how many times HR does things that really aren’t needed. Many of these functions could be consolidated or absorbed by other areas like Payroll going to Finance or Training and Development going to Legal and Compliance.
So where is their value to the company? Their value mainly lies by keeping the company out of legal issues and has very little value to the actual employees. The main value that employees get are not everyday occurrences, rather they are only after certain things happen or at certain times of the year. Here are a few areas where employees get actual benefits from HR, assuming HR is savvy about what they need to know.
Benefit election open enrollment
Terminations and severance
Manager playbook for employee discipline
Manager guide for FMLA, ADA, etc
All of the other benefits and functions serve the COMPANY ONLY. Even a few of the employee specific benefits above are really to help serve the company. As an example, while your employee is on FMLA, you cannot initiate contact with them. They need to initiate it AND you can only say so much. If you do, they can sue you AND the company. See how that works?
You would think that HR business partners would be able to do that, especially since THAT IS THEIR MAIN JOB. However in my experience, I have met very few of them who can actually assist employees and leaders make meaningful decisions. They always seem to have to ask someone in the other HR functions how things work. At some point, you have to ask, “Shouldn’t you know this stuff?” or “Why are you employed?”
As an example, I once had an employee go out on maternity leave. Most of that was taken using FMLA. I had to coordinate with my HR business partner all of the things I could do and not do. Now, I may have gotten unlucky with a poor HR rep, but the things they were instructing me to do or not do, seemed off. Luckily I knew someone in HR compliance and asked them if what my rep was telling me was correct. It wasn’t. Competency is key for HR business partners.
Talent Acquisition, or internal recruiting, can be valuable IF you do no networking. Quite simply, I can fill any job with a candidate before I even post the job. If you network well you can do this. If not, you are stuck with internal recruiting half assing it. I wouldn’t be so negative about TA if I had no other means of sourcing candidates, but I can essentially do it myself, or hire an external recruiter and they will A) find me better candidates and B) I only have to pay them once. TA, I have to pay an annual salary and benefits to.
The difference between internal and external recruiting is this: Internal recruits just go fishing. The cast a line and wait for anything. This takes time and can be draining on operations. External recruiting fishes like a bear grabbing multiple fish out of a river. They go get the best recruits they can find. The difference is staggering.
Compensation and Benefits is one of the only important functions HR actually does. Why? Their work has a direct impact to the P&L. All of the people that get hired have to get valued with an opening offer. Comp has to estimate the worth of each candidate AND they also have to make sure they are within their pay band or not overvalued against someone else.
Benefits is just as important. They set the rates for the employee premiums, adjust the benefit plan options, and evaluate any benefit changes that will help recruit better talent.
Here is a general listing of what this group does:
New hire salary valuation
Pay band restructuring
Workforce equity evaluation - this is when your workforce gets pay adjustment increases to match what your market value should be if you are under paid. Happens in small to medium sized businesses more.
Compensation structure design
Benefit plan design - includes setting premiums, setting covered services (if self insured), insurance administrator negotiations etc.
Union contract negotiations
Employee Relations is another pointless group of paper pushers. Their one task is to launch the annual employee surveys for employee engagement ratings that are “anonymous” and use those to help managers become better at managing.
First, those surveys are not anonymous. Anyone can see them. If you work in an HR driven organization, then unfortunately for managers, the surveys are seen as leverage to get rid of you. That isn’t to say some managers are not terrible, but one person out of staff of four who doesn’t get along with their boss has a 25% impact on those scores. Many times that threshold for a “bad” manager rating is 10%. One person should not make this outcome.
Second, nobody likes these surveys and employee relations barely engages the employees. Even the few who do, nothing comes from it. Total waste of resources.
Training and Development only have value when the training needs to be given from a compliance or legal perspective. The best example here is getting continued professional education credits to maintain a license (i.e. CPA, nurse, etc). Most people who are not forced to get training, don’t want to be trained and the trainings given are the bare minimum. Free Excel courses taught by an old man in a clown costume aren’t going to move the needle with employees.
Legal and Compliance is a group that is needed. Why? Nobody wants to pay a fine or go to jail, plain and simple. I gave the scenario above about FMLA, but there are more labor laws that companies need to adhere too. Some basic employee actions need to be consulted upon to make sure you don’t face legal action, like:
Termination of a protected class
State specific layoff compliance and reporting
Uncertified or uncredentialled employees
Union negotiations and compliance
Employment compliance is also very industry specific. You need to know the basics AND anything specific to your business. In some industries it is also highly regulated. In healthcare, the amount of compliance you have to do to onboard a physician is ridiculous compared to onboarding a secretary. If you work for an international company, the laws change for every country. Hell, some change by smaller jurisdiction in the same country. This is where the true value lies within HR.
Employee Safety to me, is basically a branch of Legal and compliance, but mainly for companies that have a high population of blue collar workers. OSHA violations and high workers comp claims should can be avoided. Nobody wants to be fined for those, or worse, sued.
Lastly, Payroll is essential and it should not be in HR. It belongs in Finance. As soon as an HR person oversees Payroll they immediately shit all over it because, “I am not good with numbers”. Give me a break. You’re just a moron.
The Solution
Many times, I see companies with bloated HR departments, either because “that’s the way it’s always been”, or because other companies have it and a consultant reinforced it.
I just rattled of many areas of HR that are unnecessary. The fact they get paid to do what they do, is insane.
Any business owner or executive needs to evaluate what they will spend their money on that will have the highest ROI for their business. Many HR functions are not worth it or can be outsourced. Based on what I have described, for most organizations the critical functions that you need at a bare minimum are:
Legal and Compliance
Compensation and Benefits
Employee Safety (if Compliance can’t handle)
What can be outsourced, especially for smaller organizations?
Payroll
Recruiting
Training and Development
What don’t you need at all?
HR Business Partners
Employee Engagement
Depending on the stage of your business or company, you can start to evaluate whether or not hiring these services in house, outsourcing, and removing them are beneficial. Hopefully this will help you vet them wisely.