How to Evaluate and Optimize Your HR Function

This post was co-authored by Senior HR Consultants Teresa Foltz and Kelly Wells.

At the point of launch, most companies and the leaders that run them can understandably focus only on the barest of essentials while they gain footing. This is an inherently healthy focus, but it can also lead to risky rationalizations that what is working today will continue to work tomorrow.

One area that is especially prone to this type of rationalization is human resources. Many fall into the trap of viewing HR as only a cost center or primarily as a mechanism for managing payroll and benefits. Others may view HR more broadly but convince themselves that they can wait to devote more attention and resources to it, only to experience negative events that make them wish they had acted sooner. Below, we explore a straightforward, three-point plan for evaluating and optimizing an organization’s approach to HR.

1. Form a strategic understanding of what the organization will need from HR today and what it will need moving forward.

Ensuring that employees get paid on time and onboard with the right paperwork or filings to ensure compliance is an HR priority that doesn’t go away. There is much more to HR than that, however, especially as an organization grows. To prevent HR-related issues that could severely impact operations or even company survival, leaders need to be deliberate and proactive in mapping out what HR must deliver to support key milestones and new stages of growth. Examples of questions that leaders should explore include:

  • Will there be a need to expand the benefits offered to employees today in the next 1-3 years?
  • If expansion into a new region is a possibility, what will that mean for the employee base and approach to hiring?
  • What thresholds on the number or types of workers employed by the company are likely to be reached in the near term will bring about new compliance requirements?
  • How will professional development and retention practices need to change to keep pace with competitors and alternative employers?
  • Are the HR functions that departmental managers or staffers perform today something they’ll be able to scale and keep up with as more people are hired?

It’s can be easy for leaders to get caught up in the daily grind or what they see as more pressing priorities and believe they don’t have time to assess exploratory questions like these. But leaders must understand that not addressing these questions proactively leaves them increasingly more vulnerable – to lawsuits, compliance issues, talent flight, and more – and that addressing these issues reactively will take exponentially more time, resources, and money in the long run.

2. Conduct an objective and thorough health assessment of the organization’s current HR function.

Assessing a company’s current HR function in the context of where the business wants and intends to go is highly instructive. It is not a casual “how do we think we are doing” exercise, but rather a deeper examination of the HR practices, policies, processes, and people in place. Specific areas that an HR health assessment will examine are likely to include:

  • Documentation practices
  • Policy notices and communication
  • Hiring and retention programs
  • Performance management and evaluation
  • HR support systems/technology
  • Compensation approaches
  • Range and administration of benefits
  • Training and development

HR health assessments are best conducted by certified HR professionals who can pinpoint areas of vulnerability, assist in remedying issues that require immediate action, and identify efficiencies that can be gained. When these issues and opportunities are addressed, leaders gain confidence in their practices and people, and employees benefit from better service and support from the HR function.

Those who guide HR health assessments can also work with the organization’s leaders to develop an actionable roadmap for HR in the future, helping leaders to better understand at what points they are likely to need new systems or supports and what the costs and benefits of such supports will be.

3. Determine the right mix of HR leadership and staff needed to deliver on the organization’s initiatives.

Answers to strategic questions and outputs from an HR health assessment provide an organization insight into whether it has the right people and resources in place for its HR function. For example, an accounting manager or staffer in an early-stage company may, out of necessity, devote a portion of their time to perform rudimentary HR functions and process payroll. While they may admirably address the basics of these functions, they should not be expected to have the broader knowledge and perspectives of a certified HR professional who could tackle the broader strategic issues facing the organization.

Organizations need the capability to spot and address real and potential HR problem points before they impact individuals or the business. Though no fault of their own, non-HR professionals “don’t know what they don’t know” when it comes to HR, but that plea will be of no help and hold no legal weight should serious issues arise. Warning signals that an organization’s HR capability is insufficient could include:

  • Increases in time-to-hire new workers and complete onboarding
  • Missed or near-missed payroll deadlines and consistent payroll corrections required
  • Regular delays or rework related to benefits processing
  • EEOC complaints or workforce commission challenges

Leaders need to be objective and honest about the capabilities of their HR-focused staff. If they’re not knowledgeable enough today, can focused development get them to where they need to be? Are supplemental staff with focused expertise needed to shore up areas of vulnerability? Should the organization look for an HR leader who has successfully served other organizations who have experienced similar growth paths?

A Stronger Approach to HR = A Stronger Company

Business owners and leaders face a tough task in balancing their focus on near-term needs and long-term goals. When the focus shifts too far in the direction of the “here and now,” leaders are prone to overlook key aspects of functional areas like HR or rationalize that they “will get to it later.” Unfortunately, “later” often arrives in the form of negative events that could severely impact the business. Organizations that are proactive in assessing and addressing their HR function prevent these events from happening in the first place, improve their bottom line, and strengthen their ability to compete in the marketplace.

Have questions about assessing the health of your organization’s HR function? Request a free consultation from a vcfo expert who can help.