One More Reason to Outsource Your HR Services

One More Reason to Outsource Your HR Services

Even small, start-ups of 15 employees or less, see the benefit of human resources. However, few companies maximize the department to its full potential. They take the basic functions of HR and make them mutually exclusive when all elements should be employed equally, and Ram Charan has a proposal for how to make this work.

In the Harvard Business Review, thought leader, Ram Charan proposed a radical new approach for Human Resources: split the department. Companies already focus on one aspect or another of HR, and truthfully, HR officers are tasked with too much, so the proposal is to split up the duties between two separate positions: a position that works internally, and one that works in administration. In Human Resources, there’s several important functions, but the problem is HR reps are appointed to leans one side of the total spectrum, what Charan proposes solves this dilemma.

The Problem with HR

When educated people discuss HR, they know the basic functions it entails. Human Resources takes care of payroll, workers’ compensation, and developing internal talent. They’re supposed to report back to the CEO’s with problems, untapped assets, and discuss the future based off the current workforce. All this sounds well and good, but there’s a crucial piece missing. While developing internal talent is no small feat, it can dilute their other invaluable function which is strategizing for the future.

In order to strategize for the future however, HR officers need to know what that future looks like. They need to be kept up to speed on company goals and values, otherwise they’re assessing employees’ strengths and weaknesses with nothing to measure it against. To give a less nebulous metaphor, imagine a hypothetical Henry Ford with a human resources rep.

If the human resources officer wasn’t clued in on the development of the automobile, they would be scrutinizing horse breeders instead of engineers. After all, Ford famously said, “if I asked my customer what they wanted, they would have asked for a faster horse.” This is the problem with HR currently. All too often, the human resources representative isn’t an active participant in CEO and high-level meetings. They’re used almost exclusively as a means to check in on and measure their floor. However, they should be included in business meetings so they have the company’s goals in mind as they continue to perform their job.

As it is, and Ram Charan so eloquently articulates in the Harvard Business Review, there’s a problem with HR in the business world where CEO’s think of their human resources officers as ground-floor employees, when they should be involved with the higher hierarchy planning.

These business executives treat HR as the people who handle motivational speaking, internal talent development, workers’ compensation, and payroll. In short, they’re under-utilizing HR. HR officers should function as navigators, sounding boards to business executives who can help make important decisions and steer the company in the right direction. They need to be able to see where their untapped talent lies and pinpoint what the company needs.

Unfortunately, because HR is often put on a lower hierarchy, they’re not looped in to the business goals and needs. Without knowing business goals, the HR officer is restricted from long-term strategic planning. This last element is crucial to HR since it enables them to see what talent needs to be developed. Otherwise they’re moderating talent on their own judgments and not the company’s. As a result, when profits are down and HR is asked why, nine times out of ten, they won’t know simply because, from an objective perspective, everyone is doing their job, but it may not be the job that’s needed.

Ram Charan’s Solution

Charan’s idea is to split the human resources department into two separate fields: HR-A for Human Resources Administration and HR-LO for Human Resources Leadership and Organization. What this would do is divvy up the duties for efficiency. The administration officers would report to the CFO and take care of all monetary and legal matters. This includes workers’ comp, employee benefits, 401ks, raises, incentives, etc. Meanwhile, the HR-LO would report to the CEO and focus on talent development as it directly relates to the company’s profits and goals.

This way, you have two people working within the same department to perform the two objectives necessary to HR. Essentially, one officer focuses on keeping the business running (on a plateau, if you will) while the other officer focuses on improving the business (crating peaks and upwards trend line). The division of duties will improve the company’s profits and productivity significantly.

There’s a common theme in HR, “two heads are better than one,” and it’s true in HR’s case, but also in developing talent. It’s HR’s job to find the truly gifted employees and find a path that will have them working with other talented employees. This magnifies the talent which can only make the company more valuable, and the employees all the more likely to stay given the environment.

Another Reason to Outsource HR

Human resources is one department that absolutely benefits from outsourcing and especially in this model. Many executives assume an in-house HR officer will know the business and therefore find talent accordingly, but this isn’t always true. With an outsourced HR team however, they need to meet with the CEO to better understand the business, their goals, and needs. It’s self-evident that they need to explain to outsiders what their company does and what HR’s role is.

Outsourcing your HR services means you can naturally get this level of communication since they cannot simply pretend to understand your business, they need it explained. Whether your company is large or small, consider outsourcing your human resources department so you can grow your talent effectively and increase productivity.

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