Human Resources (HR) is at a crossroads. Business leaders and HR professionals understand that disengaged and unhappy workers have a negative impact on productivity and profitability, yet not all modern HR strategies are addressing these concerns. In fact, a 2017 Gallup poll found business units in the top quartile of engagement realize 17% higher productivity, 20% higher sales and 21% higher profitability compared to those in the bottom quartile of the consulting company’s database.
While statistics like these are motivating some companies to pivot towards a people-centric HR approach focused on job satisfaction and long-term organizational health, others are outsourcing HR functions and investing in streamlined solutions that bypass people-based challenges and overlook the value of strong HR-employee relationships. This blog outlines the popular HR strategies that many businesses are implementing, and the valuable company assets these strategies leave behind.
Outsourcing is a Flawed Human Resources Solution
Many small-mid-sized companies are outsourcing Human Resources (HR) functions to a Professional Employer Organization (PEO). A PEO is equipped to take on much of the basic day-to-day functions of a traditional HR department.
Typically, these tasks include:
- Processing payroll and distributing paychecks
- Providing a timeclock system for employees
- Maintaining compliance for employee laws and regulations in their particular state
- Health benefits administration
- Employee perks and benefits management
- Creating employee handbooks and policies
- Handling administrative functions for the client
- Helping interview candidates, and process new hire paperwork
- Handling employee terminations
- Providing guidance for tricky situations, and serving as a resource for the legal implications for HR-related decisions
While PEOs are a popular, modern HR solution, there is something important missing from their services. The actual people-based challenges that Human Resources professionals should be able to solve are not addressed. Instead, a PEO simply offers solutions around these challenges. Unfortunately, this falls back on the company. With disengaged employees being your biggest corporate compliance risk, a PEO is a flawed stand-alone solution for HR needs and better used as a component for HR optimization.
Human Capital Management Firms Almost Do It All
Human Capital Management (HCM) firms create tools and software applications to streamline employee programs. Human asset information management technologies are evolving, and streamlining is a safe bet for cutting down on time and expenses; but this solution does very little to focus on the actual employee experience, employee performance, job satisfaction, leadership challenges, poor management or any other “people-based” challenges. The bottom line is Human Capital Management firms, similar to the aforementioned Professional Employer Organizations (PEO), solve everything except the people-based challenges.
What is Actually Happening to HR?
Employee relations is changing, while traditional HR methods are falling flat. Apathy and inaction are causing overworked and underappreciated employees to seek out new job opportunities, as motivation and productivity dwindle. While some modern HR strategies, like the hiring of a Chief People Officer (CPO), combat these concerns with an empathetic, people-first HR approach, Human Capital Management (HCM) firms and Professional Employer Organizations (PEO), simply bypass these people-based challenges.
This causes confusion and lack of vision, while the associated disengagement and turnover drastically impact the organization’s bottom line. As you can see, the companies that are outsourcing HR functions are overlooking the most valuable assets of the organization: the people. As people get left behind, they won’t trust HR, company culture is damaged, expenses increase and Human Resources professionals feel trapped in the middle.
Human Resources (HR) is changing, and so is the way we treat our human capital. Smart business leaders and executives are investing in people-based solutions such as Chief People Officers (CPO) to build strong HR-employee relationships and increase job satisfaction. With this approach, the softer, less measurable elements of the job are blended with more measurable and bottom-line implications of all investments in people.This also makes Professional Employer Organizations (PEO) and Human Capital Management (HCM) firms a valuable tool to optimize HR functions when used in conjunction with people-based solutions. The result? The investment in a people-based HR approach leads to increased productivity and profitability.