A Publication of WTVP

At what point do you add a human resources person to your company? The answer, of course, varies from organization to organization. 

There are many business owners with great ability, and significant day-to-day involvement in hiring, motivating and training employees. If the business’ success to date is due in part to the owner/executive’s proven expertise in areas like engineering, finance, management, marketing, etc., spending significant time on human resource matters, albeit effectively, may not be the best and most profitable use of his or her time and energy.

In other cases, there are owners/executives who are not as gifted or skilled in multiple areas (and whose HR efforts cause more harm than good) and could really benefit from having a human resources professional on staff at an early stage.

There has always been a rule of thumb that for every 100 employees an organization employs there should be one HR person employed. Does that mean a company with less than 100 employees does not need to have someone on staff in HR? No.

What about those employers or executives who only see HR as the "soft side" of the business without adding any significant contribution to the bottom line of the company? For those employers, I strongly suggest they conduct an analysis on just a few of the areas where HR can have a huge impact on the financials. The staggering cost of making poor hiring decisions and having high employee turnover can cripple a business. Do you realize the cost of employee turnover to a business has been estimated to range from 1 to 10 or more times the individual’s annual salary in lost productivity, duplication and operational inefficiency? Excessive absenteeism, poor productivity and quality, skyrocketing medical, dental and worker’s compensation costs are just a few of the areas where a human resources professional can have a dramatic impact.

Take drug testing, for example. With the guidance of a professional HR person, employers can develop and administer their own pre-employment drug-screening program.

Speaking of investments, you undoubtedly purchase various types of liability insurance to protect your building, equipment, etc. from fire, theft, and other catastrophes that can interrupt or destroy your business. And even if you never had a claim against these policies, you continue to purchase the coverage year after year. Do you know one employee lawsuit for wrongful termination, discrimination, harassment, unpaid wages, or any number of other claims can similarly threaten your business? If all goes well, HR can dramatically enhance the value of your business, and diminish the likelihood of such employee disputes. If problems arise, as we all know they can in spite of our best efforts, an HR professional can provide the needed insurance, in the form of documented defensible personnel policies and practices, essential to a positive resolution of employee complaints.

I have only touched the surface of what HR does to add value to an organization. Human resources has earned its seat at the table and should be a key member of the management team of any organization regardless of size. Even if you decide to start by hiring someone on a part-time basis, it will be a major step in the right direction.

On a final note, it is well documented that HR pays. A Watson Wyatt study found superior HR practices not only correlate with improved financial returns, but they also are a leading indicator of increased shareholder value. Companies with the best HR practices provided a 64 percent total return to shareholders over a five-year period—more than three times the 21 percent for companies with the weakest HR practices. What more do we need to know? IBI