By SueCanyon | September 17, 2007
One of the questions that has been popping up lately has to do with the Human Resources function and its role in the small business. Just as there is a common misunderstanding among the various accounting roles in business, there is a similar misunderstanding regarding HR. Business owners are hiring Human Resources Consultants in droves, expecting a certain outcome, but not getting it.
To understand this problem, let’s look at a few facts.
Fact 1: Consulting is very lucrative. When a manager in a major corporation gets laid off (for what reason?), and then has a difficult time finding work or lacks the energy to go through the process of finding a job, they often decide that they can become a consultant. They believe their high fees are justified because it takes them months of marketing to land just one project so they have lots of bills to pay from being out of work for so long, rather than because they provide so much benefit that the client will save far more than they spent on the consultant. You know the old adage, “if you can’t ‘do’, then teach. If you can’t teach, then consult.” The consultant who can’t ‘do’… and can’t teach… is worthless. And do you want someone advising you who lacks the energy to land a job?
Fact 2: The consulting and coaching industry is burgeoning. There are more ‘consultant trainers’ out there than ever before. Marketing experts are teaching how to market this lucrative work, and marketing techniques are being honed. But the delivered product remains no better for the consumer.
Fact 3: Among true small business consultants, to specialize in human resources is equivalent to a college student who majors in physical education. There is, indeed, a place for these folks in large corporations which may need assistance with their benefits programs or may wish to employ personality testing in their recruiting efforts. But, the mom and pop business does not normally have the ‘resources’ to employ such tactics.
Fact 4: Provider ignorance is even more prevalent than market ignorance. Human resources consultants really believe they can help, and small business owners are so desperate that they are easily sold on the idea. But business owners are looking for something that the HR consultant is not equipped to provide.
Fact 5: Small business is struggling, and the area in which they struggle the most is in productivity. While an HR consultant will insist that they can help with productivity, their help comes at the cost of moving around or replacing the current employees. Most small business owners are reticent to play what they believe is fruit-basket-upset… the business works precariously as it is. Instead, the productivity that owners wish to increase is with the employee base left intact, exactly as it is. “After all,” they surmise, “we’re getting along this well, we just want to get better.”
Fact 6: True productivity comes from improving processes and moving roadblocks out of the path of the people, not so much from asking people to change. Small business desperately needs operations consultants who can ‘do’, who can teach, and who can consult. These folks are worth the price because they return that value back to a business many fold.
What do Human Resource experts do?
A Human Resources Consultant or executive will make sure that the company has the tools it needs to fill your open positions with those employees who have the skills and education to fill the jobs, the temperament to fit within the organizational culture, and the energy to contribute to the success of the company.
They will set up and/or administer your benefits programs. They will do salary surveys and benefits analysis to make sure the company remains competitive in the market for the best employees. They will manage the system that produces job descriptions and the system that delivers appraisals.
They will keep and update the policy manuals and will perform indoctrination of new employees prior to reporting to their positions. They will ensure government compliance of the hiring, pay, and employee recordkeeping aspects of the business.
They may even deliver training in skills such as team building, time management, and training trainers. Be careful here because a benefits manager may have little experience in training and even less in training within these areas.
An initial lone Human Resources employee would prepare ads to fill positions, perform screening interviews to forward a qualified set of candidates to the hiring manager, and may administer the pay raise and benefits processes. This position should never be any more involved with payroll than to forward formal information to the accounting department should there be a change in status for any employee.
What do Productivity Experts do?
Productivity experts understand the value of one minute. They look at EVERYTHING! Arguably, one minute of direct labor time in most facilities is worth about $1. If they could find an extra 15 minutes a day, times five people in the shop, times 250 days a year, you would save almost $20,000! If they can help you use that 15 minutes per day to produce more product and get it delivered, you would make 3% more revenue at the cost of only your cost of goods sold (so maybe 40% profit?)
Revenue $100,000 $103,000 $3,000
Cogs 60,000 61,800 1,800
Overhead 30,000 30,000 0
Profit 10,000 11,200 1,200 40%
They seek to improve your bottom line in many ways that allow you to begin to see lower costs almost immediately. They will save you far more money than they will cost you. Their work ends up paying for themselves many times over.
So, when you seek to improve your operation, look first for a qualified operations consultant rather than an HR consultant. Hire the HR resource once you’ve grown large enough that personality testing becomes a valuable solution.
And if you want to learn how to do much of this work yourself, then check out the Profit Power Action Pack lessons at http://www.profitpowerpack.com/.
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