What Does HR Do?

What are the roles of a Human Resources professional in your organization? A common rule of thumb is that a company should have a dedicated HR function once it reaches 80 employees or so.

This post comes from a recent meeting of a business owner peer board that I facilitate. Many thanks to the group for this excellent analysis. The ratio of employees to HR specialists ranged from about 60:1 (for companies comprised mostly of professionals) to 120:1 (for those with  a high percentage of production workers.)

Human ResourcesEveryone starts by hiring someone to administer benefits. That is more of a clerical position, and doesn’t necessarily require specialized education or training in human resources. Once we start writing paychecks for a professional HR manager, however, we often struggle to determine which higher level functions they should assume.

I’ve broken down the list of potential responsibilities into three categories, acquisition, retention and strategic support.

Acquisition: This is the first area of responsibility beyond benefits administration. The HR professional should be systematizing and supervising the recruiting process. Are all candidates going through the same interviewing process?  How do you measure return on investment for advertising? Would the company benefit from an internship program, and how are interns selected and ranked? Which openings are worth retaining a headhunter, and which can be handled entirely in-house? How is a request for additional staff justified and approved? Is there a system for integrating new hires?

Retention: Are performance reviews conducted systematically, consistently and on time? Is training or mentoring available and utilized to help people move along on a career path? Are salary and benefits competitive with others in your industry, and with other companies in your area who seek the same type of workers? Is there a process for handling complaints objectively and in the same manner for everyone? The HR manager also assumes responsibility for morale, including regular employee satisfaction surveys and company events.

Strategic: These functions should be expected from an HR Director position. They include designing and purchasing insurance (in many companies, the third largest single expense item,) government compliance/reporting and succession planning for key positions. An HR Director can also project future labor costs for budgeting, and support the executive team with assessments of labor market conditions and potential threats to the company. They are also responsible for the company’s image in the community, and its role as a corporate citizen.

In a small business, every one of the responsibilities listed above are yours. I’m sure some of you are saying “That’s all nice, but I am running a business. I can’t spend all of my time on HR activities.” True; but if you grow they will become increasingly important, especially in tight labor markets like the one we are currently experiencing.

Whether you are hiring your first HR specialist, or have one who is asking “Where do I go from here?”, I think this list is a fairly comprehensive look at how much a good professional can do for your company. After all, you can’t do anything without your employees.

Do you think we missed something? Please add it in comments.

Do you know someone dealing with a similar issue? Share “Awake at 2 o’clock” with another business owner.



Posted in Entrepreneurship, Incentives, Leadership, Managing Employees, Strategy and Planning | Tagged , , , , , , , , , , , , , , , | 2 Comments

2 Responses to What Does HR Do?

  1. John Vena says:

    I think you have done a good job describing most aspects of the role of an HR professional, but you haven’t touched upon “discipline”. In our organization, 60 plus employees, we use an HR contractor. In addition to those areas mentioned, a large amount of their time is spent supporting supervisors and department heads on how to respond to issues ranging from harassment claims to customer service complaints, attendance and general behavior problems. You haven’t addressed activities such as tracking discipline, conducting investigations, coaching managers and employees with policy or behavior infractions. Would you assign such tasks to the HR role as described by your “peer group”.

    • John F. Dini says:

      Excellent point, John. I don’t think it is appropriate to have HR actually conduct discipline, but making sure it is complaint with both government and policy, administered even-handedly, and that management is supported when claims arise should certainly be in there. Perhaps the group just doesn’t have any discipline problems. (wink)

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Too Busy to Do Business

Another tax filing season has passed, and the entire US accounting profession comes up for air. Of course, thousands of businesses and individuals have filed for extensions, thereby postponing the pain of calculating their final numbers for anywhere from a few days to six months.

As the CPAs emerge from their winter burrows and blink in the sun, the rest of the business community reenergizes, suddenly able to move forward with planning and analysis that has been languishing while their numbers-crunchers were busy losing sleep and feasting on ramen noodles.

I met with one firm about doing some valuation work in late February. They appeared to be excited about getting the business. When I called in mid-March with my first project they responded with “It’s tax season. Can you wait until mid-May?”

Perhaps it isn’t totally illogical to expect that an exiting business owner, having spent 30 years developing his largest single asset, should be willing to wait a few more months to begin his transition. The question isn’t so much whether it is unreasonable; it is why it should be necessary.

I have multiple clients with various needs, but all require some interface with their accountant. Some CPAs respond with quick but unsettling responses. “I think you can do this, but you’ll have to wait until after tax season for a definite answer.” Great. Business people always like making million dollar decisions based on “Maybe or maybe not.”

Others simply beg off. “I can’t even take the time to think about that until after April 15th.” Still others don’t respond at all, obviously expecting that their clients will automatically forgive what would be an unforgivable breach of professional service expectations at any other time.

Even the definition of “any other time” is narrowing. The tax rush used to be the few weeks leading to April 15th. Then the weeks leading to March 15th (the business filing deadline) moved back the start of the out-of-service CPA season. With the increasing complexity of tax laws, and the concomitant rise in extension filings, the time between September 1st and October 15th has also become a no fly zone. The week or two leading up to May 15th and June 15th are slightly better, but not by much.

shutterstock_93857353Tax complexity makes handling almost any transaction without professional advice foolhardy, but are we really supposed to just draw a line through 16 weeks, or 1/3 of the annual business cycle?

There are lots of suggestions about how to simplify the code or spread out the reporting deadlines. A flat tax is interesting, but would largely remove the ability of legislators to show favoritism to big supporters and home-state causes, so I’m skeptical of its chances.

Another proposal is to let individuals file by their birthdays, or let calendar-year businesses pick another year-end. The government’s excuse is that it would delay revenues for the year of implementation. Really? Like they were planning on a balanced budget that year? Heaven forbid they would have to borrow any more than the $1,000,000 a minute they do already.

Until we find some more sensible way to fund the public sector, business owners are subject to double indemnity. Not only do we have to pay the bill, but doing so correctly requires that we also at least partially delay our attempts to earn the income that will be taxed.

Posted in Exit Planning, Leadership, Politics and Regulation, Selling a business, Strategy and Planning | Tagged , , , , , , , , , , , , | 4 Comments

4 Responses to Too Busy to Do Business

  1. Dan Bowser says:

    I love the title. When I was more active in my consulting practice and looking for additional clients, my best prospecting time was tax season. Business owners were unwilling to wait for advice and guidance. As a result, they left their CPA do the tax work and looked to me for the lucrative strategic planning and implementation. I love tax season.

  2. Mike Wright says:

    Excellent. Another thing to think about when I hear politicians talk about helping small business, and I know they have no concept of what small business is about.

  3. Ann says:

    Hi John,
    Great posts !
    Very interesting article thank you for posting !

  4. Great post John! I actually had a very similar conversation with a business owner only a couple of days ago on this topic. In Canada, our tax deadline is April 30th, so we have another week of our accountants being unavailable. You also hear so much about them working 80 hours a week, getting no sleep, rushing to meet deadlines, that it also begs the question as to how many mistakes are happening? Not intentionally, but only because of the time crunch and the pressure of the deadline. Realistically, as everyone talks about “added value” in our industry, you know that at tax time, this certainly isn’t happening.

    I agree with you that the governments need to come up with a new system for tax filing deadlines and not make it universally the same for every person. We’ve done it for businesses and base it on their fiscal year end, so why can’t it also be done for individuals?
    Thanks for a great read!

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Small Businesses Fantasies: Service

As an evangelist for small business, I am the consumer equivalent of the locally-grown food movement. I spend as much of my discretionary income as possible with the owned-and-operated businesses in my area.

As a consultant and coach to owners, I also admittedly observe these businesses with a gimlet eye. I know how difficult it is to run a good business; but I also know how easy it is to miss the things that really make your company shine above its competitors.

The most impactful of these is usually service. When I ask owners what makes their company different, most of the time the answer is “Our service!”

“We really take care of our customers. They know that we are there for them. Every person is greeted personally. I walk around telling our customers how important they are to us. All complaints come directly to me.”

I’m sorry, but those things are really just the opening salvo in the service wars. I’m greeted at Walmart, but it never makes me think “Boy, what terrific service! I was wondering how I’d get that shopping cart!” Managers in restaurants come over to ask “So, was everything you had absolutely wonderful today?” Geez, I’m eating in a chain restaurant. Lunch was fast, reasonably priced and relatively tasty. Is that supposed to be my definition of “absolutely wonderful?”

I could say no, but why bother? All they can do is offer me a second lunch. Too late (I’ve already eaten) and it’s only going to be more of the same. It wasn’t bad, but it is what it is. Which is a long way from absolutely wonderful.

Notice, however, that the chain restaurant is training the manager to check with the customers. Walmart is greeting you at the door. If all your small business does is duplicate the standards of corporate giants, please don’t pretend that it is special.

customer service departmentWe have a local residential service company whose owner buys substantial TV ad time. He promotes that his company is different because they will make an appointment for a service call, and phone ahead to tell you that they are keeping it. His ad is often followed during the same commercial break by Time Warner Cable’s, showing a giant phone bank with employees making appointments and phoning ahead to tell you that they are on time.

Just because a local owner says his service is different doesn’t make it so.

Last week we ate in a local restaurant that has recently remodeled. It was nice before (a white-tablecloth establishment) but they obviously spent a lot upgrading it. The waiter, all in black, was very polite. Too bad he had to be sent back to the bar three times to find a liquor shown on the menu, forgot part of the drink order, served the appetizers when only half our party had drinks, sent someone else’s entrees to our table, delivered our 4 entrees in 3 separate trips, and forgot to tell the kitchen about one of our party who was emphatic in explaining her food allergy, thus requiring a remake after everyone else had been served.

I hate to say it, but a chain restaurant’s training and systems would probably have eliminated two-thirds of those mistakes. The expensive décor upgrade was wasted. I wish they had spent a tenth of the amount on service training.

“Great service” is a fantasy for too many small business owners. To paraphrase Michael Porter, the Harvard Business School strategy guru; if you aren’t spending money on it, and working to improve it every day, it isn’t differentiation.

Posted in Customer Relations, Entrepreneurship, Leadership, Managing Employees, Marketing, Marketing and Sales, Sales | Tagged , , , , , , , , , , , , , , , | 3 Comments

3 Responses to Small Businesses Fantasies: Service

  1. David Basri says:

    Even if you work on it every day, if you do not do it well the effort is still wasted.

  2. Francine DiFilippo says:

    people have stopped investing in training and expect their employees to intuitively “know” these things. not possible. Really caring is just not that common.

  3. Rob Kaufman says:

    Service is a nebulous term. It has a different definition whether it comes from the provider or the customer. What supersedes service is the experience from the customer’s standpoint. Today’s independent business owner has a great opportunity to differentiate itself from its competitors. Unfortunately, many do not know how to do this.

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Let the Business Owners Pay for It

When it comes to “No taxation without representation,” the rallying cry of our founding fathers, few identifiable population segments are as abused as business owners.

One of my long-time clients is a franchisor, and until very recently I was a franchisee, (although not one of his.) We often compared notes of our perspectives from both sides of that sometime-fractious business relationship. One recent conversation, however, illustrates my claim.

When I purchased my franchise almost 20 years ago, the franchise agreement was about 35 pages long. I marked it up, causing my attorney to note that I was among the 5% of his clients who actually read their franchise contract.

Over the years, I’m sure many of those 95% non-readers ran into problems they hadn’t anticipated. Now the law makes it the franchisor’s responsibility to make certain the prospective buyer has read the agreement. My client has to pay employees to review 181 pages of government-mandated documents with the buyer, and certify that they’ve been fully understood.

Apparently, having the wherewithal to buy a business isn’t considered sufficient qualification to expect that someone will actually pay attention to what they are buying.

finger from cloudScarcely a week goes by  without some owner reciting a new regulation he or she has been burdened with. A contractor who is scrambling for skilled employees in a tight labor market now has to submit forms listing those employees by ethnicity and pay grade to prove that he is paying them equitably.

A manufacturer whose customers sell his product in California must comply with that state’s anti-slavery law by keeping documentation that any overtime worked in his factory was fully voluntary. Another had his plant expansion held up because he was ordered to provide a letter, prepared by a city-mandated consultant (but paid for by the business), certifying that the products he will make there are the same as those he’s been making for the last 20 years.

A retailer has to pay for landscaping along the roadside public property that will screen his establishment from the view of passing traffic. That the desire to be seen is exactly the reason he bought land along a busy street seems to escape the regulators. The same retailer has to certify that the trees on his construction site will thrive for five years after completion of the project, and faces hefty fines if they don’t. The fact that the publicly-owned utility just trenched through the root structure of several of those trees doesn’t alleviate his responsibility.

By some estimates, about 70% of the new laws governing businesses are created by government staff without legislative approval or review. It seems that any effort to protect customers and employees, engineer social welfare or oversee business development comes in the form of a bill empowering an agency to actually make the laws. Their preferred enforcement mechanism is to saddle business owners with the compliance mechanisms.

The Occupational Safety and Health Administration (OSHA) is tasked with making workplaces safe. They do this by inspection, and by following up on complaints. To date, they haven’t required that an owner photograph every new machine installation, submit certification of the height of desks, and send them video of each worker performing his or her job. If that sounds outrageous to you, reread the examples above.

The World Bank ranks the United States as the 7th easiest country in which to do business. Apparently we are that high due to placing 2nd in ease of getting credit and 5th in ease of bankruptcy. (I guess that easy bankruptcy is to protect the people who were unfairly given the easy credit.) Our “ease of” rankings are 33rd in construction, 49th for start ups, and 53rd in taxation, putting us in those respective categories behind the Maldives, Mongolia and Peru.

Those running for elected office are quick to trumpet their support for small business. They might start by giving business owners a say in the flood of regulations that are raining down on us daily.

I’d love to hear what you are putting up with.

Thanks for reading. Please share Awake at 2 o’clock with other business owners.

Posted in Business Perspectives, Entrepreneurship, Politics and Regulation, Strategy and Planning | Tagged , , , , , , , , , , , , , , , , , | 4 Comments

4 Responses to Let the Business Owners Pay for It

  1. Maryanne Guido says:

    Working with the City and County we are required to submit certified payroll, ensure our subcontractors submit THEIR certified payroll, and that subs certified they have been paid by us on a monthly basis. If sun fails to do do any of this the GC (we) do not get paid until we “make” each sub comply- or do it for them.

  2. Joani Gill says:

    John thanks for citing a few regulations that hinder business growth for small businesses. I believe our middle market companies suffer the same issues as they fight for their rights to thrive. Just a few years ago, The Association for Corporate Growth, a global organization focused on the middle market, began a grass roots campaign to become the voice on Capital Hill for this business sector. I urge readers to check out ACG.ORG or MIDDLEMARKETVOICE.ORG and see where they can help with this initiative and be heard collectively. CONTACT AMBER LANDIS, VICE PRESIDENT OF PUBLIC POLICY, AT ALANDIS@ACG.ORG.

  3. When is it time to get rid of the red tape and bureaucrats?

  4. Cathy Locke says:

    Since I am a small business and mainly wholesale to small and medium size businesses I honestly don’t feel I have a “snowball in hell” chance of making ends meet or even show a profit. I also feel we need to clean house with the red tape and bureaucrats.

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Time to Grow Up

Young industries no longer have the time to grow up.

The cycle of maturation has long been accepted as  a fact of life when a new concept becomes a business. There are a few pioneers (defined here in Texas as the guys lying on the ground with arrows in their backs.) As the product or service finds its market, leading companies emerge. Eventually, consolidation reduces the number of influential competitors to a handful.

A “mature” industry becomes akin to an oligopoly, such as automobile manufacturing or consumer products. There are a few dominant players (Procter and Gamble, Unilever) a few second tier (Clorox, SC Johnson), and hundreds of niche players with specialized offerings.

That model seems to be disappearing, or perhaps it is just happening so fast that the development cycle goes by in a blur.

Today, the new player who has the best story, who can attract the most capital, simply crushes or acquires its competitors. The process seems almost instant, and the Internet has made it into a “winner take all” game. Google, Amazon, Microsoft, and FaceBook are examples. They have competitors, but after 40 years Apple still holds only a 7.5% market share in personal computers, and Yahoo a 12% share of the search engine space. MySpace (yes, it’s still around) suggests that you use your FaceBook or Twitter ID to log in.

The employee benefits arena provides the hot example from 2015. Zenefits attracted investment at a multiple of 45 times projected revenues. (Their multiple of earnings is infinity, I guess, since they don’t have any.) That drove a flood of venture money into the online Human Resources industry. By some estimates over 200 new online HR companies were funded in 2015 alone.

Kiddie race carThese 200 companies will not have time to grow. A couple will continue to attract enough new capital to keep up. If the pattern holds true, in two or three years a dominant online player will emerge, with a handful of others in the also-ran category. The rest will go away, either snapped up by the wealthier players, or by having their money lifelines cut.

Where does that leave the garage entrepreneur with a great idea that isn’t based on the Internet? Is there still a place for building a better widget or a personal service, spreading by word of mouth, hiring employees one at a time, and building a national market player in something other than the technology industry?

The answer is no. Not because new ideas can’t be successful, but because there is no longer time to grow up. Like it or not, all businesses are tech businesses.

Posted in Business Perspectives, Marketing and Sales, Strategy and Planning, Technology | Tagged , , , , , , , , , , , , | 3 Comments

3 Responses to Time to Grow Up

  1. John Meetz says:

    WOW what are we doing in the TAB business? Are board meetings and coaching sessions obsolete? Maybe they should all be done on SKYPE! Is the ExitMap engagement a dream beyond the basic assessment, appraisal, and action reports – do they really have time or want a consultant in the process?

    • John F. Dini says:

      Most TAB members have no intention of building a national market-dominating player. As I said in the beginning of the piece, there’s always room for hundreds of differentiated small companies. In the past, some of those would grow up to be regional players, then national ones. The odds of that happening are much longer now.

  2. Richard H says:

    Couldn’t possibly disagree more. I assume that’s the response you were expecting.

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