Not too long ago, the Human Resource (“HR”) function was a clerical position that focused on helping the management team set appointments to interview prospect employees looking for work. Or they kept track of hours worked for a company. But those days are gone. HR impacts your business in ways that it once had no influence over. In fact, the HR role has evolved to include advancements in management, technology, and legal issues.
How HR Impacts Your Business
After having served as CEO and CFO for a couple different companies, I learned first hand that those two executive roles are really about managing people. Sure, we have our budgets, board meetings, bankers and analysts to deal with day-in and day-out. But what took up a significant part of my time in different companies was managing people.
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Science of Managing People
There are two sciences involved in managing people:
Psychology = the science of mind and behavior; the mental or behavioral characteristics of an individual or group
Sociology = the science of society, social institutions, and social relationships; specifically: the systematic study of the development, structure, interaction, and collective behavior of organized groups of human beings
We are clearly dealing with people in our management roles. As if that was not complicated enough, then add the legal system to that. This includes complex laws like the Affordable Health Care Act (“Obama Care”). Also consider things like American Disability Act (“ADA”), HIPPA, U.S. DOL, Medicare, EEOC… And if you have a 401K or a pension plan, then you are regulated by a host of other laws and regulations.
Get the feeling yet? This is not a simple environment that can be administered by just an admin. The science of managing people requires a HR professional.
Today’s HR Function
Today, the HR function is a significant area of your business that needs a professional looking over it whether you outsource the HR function or if you are big enough to hire someone in house. Do not minimize this role in your business. HR professionals today have a variety of certifications and credentials and a good understanding of labor laws.
How the HR Professional Works With Management
Whether you are a small company of 20 employees or of 2,000 employees, your HR professional should be close to the executive team. In a typical company, this position may report to the CFO or even the CEO. Executives: keep your HR professional close to you. Have at least a weekly standing meeting to discuss HR issues with that person. Have your HR partner develop and keep dashboards with key information that you want to see relate to your labor force. With the complexity of the HR regulations and labor laws, we need a cooler prevailing head to be at our side as management.
The larger your organization is and the more employees you have, this is ever more important. In addition, larger organization have more moving parts, and that includes HR. As an executive, having your pulse on the moral and culture of your organization is critical.
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Managing Employee Turnover
In good times, we are building, hiring, growing, and asking more of your employees. You need to have your employees following you as the leader. In bad times, there is uncertainty, You are letting people go. You may also be asking more of your employees. But you need to find the balance between not promising to much and asking employees to deliver. That is where a solid HR person will be worth their weight in gold. If you are a stable company that isn’t growing or shrinking, then you want to keep a stable workforce.
I recently saw a statistic that the cost in the U.S. of employee turnover is on average $65,000 per employee. Think about the loss of an employee and what it involves… Disrupted departments, time and cost of recruiting/training, learning curve for the new person. It really adds up. I have seen clients with high turnover, and they are simply bleeding cash. What is odd, is that I can’t believe that there are executives that simply live with the high turnover and do not address the issue.
Growing companies really need to keep HR at the top of the list. To be a successful growing company, you need to offer competitive benefits, develop policies, employee files and have a steady pipeline of additional resources when needed. There needs to be a lot of training so that employees follow company policies and labor laws. Believe it or not, State and Federal labor laws change frequently. As a result, your operations people must stay trained up to know what to do or not to do.
Quick Case Study
I was in a situation with close to 1,500 employees. The company entered into a financially distressed situation. We had to lay off half of the workforce while keeping the moral up for those staying behind. We restructured the operations of the business and shut down a whole division. Without a strong HR team, I am not sure we could have pulled it off. A reduction in force of that size involves special notices to cities, counties, and states. It involves severance benefits, angry people, sad people, and transitions of workload.
You can’t afford not to have an HR professional at your side, especially during drastic workforce changes.
The cost of violating the laws, regulations, or getting involved in a lawsuit around HR matters can be devastating to a company. Not only is there a financial cost, but there is a branding and reputation cost as well. I once saw a large multinational company cancel a contract with a smaller supplier of supplies because the smaller supplier had pretty serious HR violations and was involved in litigation. The benefit of having the right HR partner at your side will far outweigh the cost. Your HR professional or financial leadership should be the wingman to the CFO. It’s time to step up into this trusted advisor role! Access our How to be a Wingman guide here.
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