3 Options of HR Management

You have 3 basic options in regards to who can handle your HR function:

1. Do it yourself

Assume 100% of the responsibilities for HR activities yourself or hire internal staff to manage these functions for you. The upside is you have 100% control, because you get to do it all! The downside? Doing it all takes a lot of time and can become a 2nd job for many entrepreneurs. In addition, you may face an opportunity cost if performing these duties or having inexperienced HR personnel takes you away from sales or servicing your customers; you’re also exposed to a higher level of risk and liability. One disgruntled employee, a union drive, missed deadlines or misunderstanding of a regulation, and your business could suffer an expected loss. Finally, as a small business, you may not have the negotiating leverage with insurance carriers and this may affect your ability to contain costs.

Pros:

  • You have 100% responsibility
  • You get to do it all

Cons:

  • HR may become your “night job”
  • Opportunity cost if HR duties steal focus from sales or customer service
  • You own all employer-related liability Inability to contain long-term costs
  • Employees may express dissatisfaction with the level of benefits and HR support
2. Hire multiple vendors to perform HR functions

Outsource to multiple vendors: one vendor for each function (payroll, benefits broker, pension, hr handbooks/policies, recruiters, employment law, etc). Small businesses that choose this route typically have contracts with 8-10 different vendors. The upside is you get specialized experts to do each function and you will gain a modest time savings for yourself and your employees. The downside is the amount of time spent managing the vendor relationships, including ramping up each vendor on your specific business needs. In addition, it will be up to you and your staff to manage the interactions between these vendors and the data that flows between their IT systems (e.g. payroll deductions to medical carriers, dental carriers, vision carriers, pension providers). As a small company you may not have access to the same web-based HR technology that big companies do, forcing your employees to spend time filling out paper forms rather than leveraging automation. Also, when something important needs to be addressed, you won’t have a “single point-of-contact” to drive everything that needs to be done. Finally, you may not have negotiating leverage with each vendor and this may affect your ability to contain costs.

Pros:

  • Shifting some responsibility and administrative tasks to others
  • Time saver in the short term
  • Leverages vendor expertise

Cons:

  • Multiple vendor management—no “one throat to choke”
  • May have to settle for limited HR automation or none at all
  • Lack of data integration between vendors and systems
  • You may still need to hire internal staff to manage the vendors & data flows
  • You own all employer-related liability
  • Lack of control of long-term cost

3. Outsource HR to a Single Vendor

Partner with a HR outsourcing provider as your trusted advisor. The upside is you manage a single relationship and gain HR expertise, HRIS technology, and a qualified team to manage your HR function. This saves time and costs in the long term. However, it is important to find the right one—an HRO that tailors its services and cost structure for your specific industry.

Pros:

  • “One stop shop” for all HR functions.
  • Time saver – you can focus on building & running your business
  • You gain a scaleable HR department without the overhead expense
  • HROs can provide you with “big company benefits” with much more choice
  • HROs have negotiating leverage to help you contain costs of benefits and HR over the long-term
  • You gain a trusted advisor who will take the time to understand your business and be accountable
  • Reduced employer-related liability
  • HROs provide advanced HR Technology to make your employees more productive
  • Your employees can self-serve and get answers to HR questions wherever, whenever

Cons:

  • Perceived loss of control – you no longer have to perform 100% of HR duties
  • Change from your status quo

In general, HR providers can manage your organization’s HR functions better and more efficiently than if you did it yourself -- allowing you to stay focused on your core mission.