Sabrina

Welcome back to the HR Connection, the podcast designed solely for those managing human resources in a 1 to 500 employee headcount organization. My name is Sabrina Baker. I am the CEO and founder of Acacia HR Solutions, an embedded fractional support firm. And today, Marie and I are going to do something a little bit different. We want to talk to you about the options you have available for help and support inside your organization. First, we want to help you determine your worth, understand your worth inside your organization, and help you articulate that to your leaders. And then when you're ready to get support, we want to make sure you know all of the options that are available to you because sometimes hiring a person is not the answer. It's not the best answer. So we want to make sure you know all of the options. If you are enjoying the HR Connection, we would love for you to subscribe and share with a friend. It is so hard to get into the reaches of small HR teams, small HR departments. It's hard to find them because they are so covered up in the work that they're doing that they're not always out there searching for things like our podcast. So if you know somebody who this would fit, please share this podcast. And let's jump right into today's episode.

Marie

If you are the only HR person at your company or one of very few, I want you to know something before we get into anything else today. What you are doing is hard. And it's not because you're not capable and it's not because you don't know enough, but because the function you are running was designed for a completely different scale than the one you're actually operating at. You know, you're probably handling payroll, leave, onboarding, investigations, compliance, and someone's performance issue all at the same time, all as one person. And, you know, somewhere in there, someone expects you to also be strategic, right? At the end of the day, this isn't a you problem. It's a design problem. And so today we're going to talk about it honestly. You know, we're going to talk about what it actually costs when HR is under-resourced. We're going to look at the math that most small employers get completely wrong when they think about HR headcount. And really, we're going to lay out all the real options available to you, whether you are trying to make a stronger case for your own role, trying to figure out what kind of support you actually need, or trying to build something sustainable for the long term. So let's get into it.

Sabrina

Okay, Marie, so let's start here with a little bit of truth from the CEO side of the table. The reality is that your CEO, all CEOs, this is true for our clients, it's true for anybody listening, their CEO, whether they say it out loud or not, they see HR as a cost center. They see it as overhead. It's listed that way on their P&Ls, on their revenue, that you have these departments that drive revenue and you have these departments that are overhead. And human resources is definitely in one of those buckets that is overhead, the overhead bucket. And so CEOs inherently do not understand that HR can actually help with cost and revenue. They just see it as a cost to the business, certainly a necessary evil in some cases, a necessary cost, but they just don't value what HR can actually bring to the table. It's not that they don't value the person necessarily. It's not that they don't value the ability to, in their minds, keep them out of jail, which is what I hear a lot in the sales process for us. I will have CEOs come to us and say, "I just need you to keep me out of jail." And I'll say, "That's great, but I can do so much more than that. I can actually help you grow your business." And they're shocked. And they don't believe me. They absolutely don't believe me. And so HR is definitely one of those departments that, no matter where you are, probably in the leadership chain and the executive chain, it's seen as this overhead, this cost center. And so the idea of giving more to that, the idea of giving more budget, giving more money is just adding to the overhead rather than adding to something that is actually going to drive revenue. So that's just something that I think our listeners have to keep in mind is that you are coming from a place, whether justified or not, and in my mind, not justified, coming from a place where you are seen as a cost. So I think we should start here. Let's start with what does it actually cost when HR doesn't even have what it needs to do the job right?

 

Marie

Yes. I think that the core of all of this is the fact that HR works best when nothing goes wrong, right? And nothing going wrong is completely invisible. So as we've said before, nobody is going to send you a thank you note for the lawsuit that didn't happen, right? No one's going to pull you aside after a very clean termination saying, "Great job. That could have been a lot worse." Like, that's just not how it works. So you end up in this position where the better you are at your job, the less anyone can see what you're actually doing. And really, when leadership can't see it, they start to wonder what they're even paying for. Now, we're going to talk more about it, but I want to be clear that this is not a fairness problem. It's a communication problem. And it's 100% something that we can fix.

Sabrina

Yeah. I would say that the reason, part of the reason that HR is seen as a cost center is because we often act like it. And that is because we are doing a lot of this invisible work. We're not talking about it. And we are preventing a lot of these things that would add cost to the business, or we're actually doing things that are adding revenue to the business, but not in a way that the business even realizes or understands.

Marie

Yep. So with that, here's a number that I want every single HR person to have ready. Replacing a mid-level employee costs somewhere between like 50 and 200% of their annual salary. Now, this isn't a stat that I just pulled out of my hat, but it is a well-documented estimate from Workforce Research. And it probably is conservative when you think about everything that comes along with a hire. But that cost never shows up as a line item labeled turnover, right? You kind of touched on that in the beginning. It's going to show up as recruiting fees over here or lost productivity over there, three months of a manager's time getting someone up to speed or onboarding costs that just kind of spread across a few different budgets, right? So nobody connects it back to what it actually is. And what it actually is, is an HR outcome that didn't get managed. Now, that number that I mentioned a minute ago is your leverage. That is where the conversation starts when you need to make a case for what HR is worth.

Sabrina

Yes. So the turnover number is, I think, a fantastic number. And I think a shocking one in and of itself when you think that it could cost up to 200% of salary to replace someone. And I would say depending on the level or the complexity of their job, it could even cost more. I saw a great article on LinkedIn about replacing CMOs and like the institutional knowledge that you lose when you replace a CMO. And so, I mean, I think that it's an extravagant cost. And I think that when you are trying to talk about HR's worth, just turnover alone and what some of the programs that HR can put in place, what having more heads in HR, what having more support in HR could do to reduce turnover is a great place to start. But there's a lot more, right? There is obviously compliance misses. So, you know, when we have things that like, you know, you're not doing something simple as preventing sexual harassment training in a state where you're supposed to be, the fines for that can be insane, filling out I-9s correctly. Like, very simple things that if you get audited, the fines for that can be so unbelievably costly. And to think about all of our clients who have come to us, and they have not done the proper trainings, they don't have things filled out correctly. Like, these little things to them that are like, "Oh, no big deal. I just didn't fill out an I-9 correctly." I've been through an I-9 audit. They're awful. And they are very expensive when you don't have them done properly. Misclassification of an employee. This is something we talk about all the time. And it's something we've had our clients go through. They come to us because they are being sued or investigated by, you know, the EDD or whoever it might be because they've got an employee who was misclassified. And we know what that costs. We've talked about that before. One employee of one of our clients, $70,000 in a fine. That's insanity. And so there's definitely all of these areas where we can show how us doing this preventative work, to your point, this invisible work that they don't even see, makes us not just a cost center, but makes us a cost savings center. But also then when we have the support we need, when we have the team behind us, then we can actually do other things inside the business that allow it to drive revenue. We can put the kinds of programs in place that we need to when we have the support that move us completely from cost center, even off of cost savings, into revenue driver. So one of the things that I teach you all, and you actually just did this today, was to not do things in private, right? This is one of the things that we have, we talked about, we've mentioned it before on the podcast, but I just want to say it really plainly that as an HR professional, that invisible work should never be invisible. I want you to shout it. I want you to talk about it. And I'm going to use your example today because you had a conversation with a client who, you know, we love working with her, but she's very busy. And that busyness sometimes leads her to make some decisions or to move quicker than we need to. And you were able to have a really good moment, a really good teaching moment. In a frustrating moment, you could have just lost your mind as well, but you didn't. You had a really good moment and a really good teaching moment. And she came back and appreciated that. And you put that in our chat. And I know that you didn't do that to be like, "Hey, look at me. I'm so good." You did that because others get frustrated by the same client. And it was this win that none of us would ever have known about had you not shared it. And that's really, I think that if HR professionals want to talk about making themselves more relevant in the workplace and making themselves see how am I driving revenue, how am I driving things inside the business, they have to start being willing to talk about what they're doing. So when somebody doesn't leave and they were going to, I just saved us 200% of that salary. When we catch somebody who was misclassified or we prevent somebody from going down a lawsuit or whatever it is, I just saved us this or I just drove this. I mean, I think we have to be loud about that stuff and not see it as we're bragging, but that we are justifying the work that we're doing. And to the point of this episode, the support that we need on the team to be able to do it thoroughly.

 

Marie

Yes, exactly. And, you know, we say this a lot, but it's hard to shift that kind of mindset, right? Like, it is something that can come and go so quickly and so easily that you don't even notice it's an opportunity to share or talk to your peers or anybody else about it. Now, I want to continue with what you're saying. And I want to talk about naming what you're preventing versus just what you're doing. And I want to share a practical shift that I had to make in my own work style in order to see any kind of change. And I would say that happened internally with our team, but also externally with our clients. So first and foremost, start tracking and naming what you're preventing, not just what you're doing. So saying something like, "I processed 12 onboarding packets this month." Sure, that is one way to say it. However, saying something like, "We onboarded 12 people with a process that allows them to ramp up one month faster." Now, that is a completely different framing of the exact same work, right? One sounds like admin where one sounds like productivity. Again, same work, completely different landing. And that difference is what gets you into the room because you are showing value.

Sabrina

And let me tell you that as a CEO, if you come to me and say, "I have put together this onboarding process that allows people to ramp faster, to get to productivity faster, to get to revenue generating faster," I'm all ears. Whatever you've done and probably whatever you're going to ask me for next, you're going to get because that's especially in a small business where you might have cash flow issues. You might have, you know, you're not completely in the black yet sometimes, or especially if you're going like through seed funding, if you're in that size of a business where you're going through seed funding or you've got these private equity backed firms, all of that ramping productivity, getting to revenue faster, those are things that they are constantly, constantly dreaming about, right? Keeping them up at night. So being able to show what you are preventing, maybe the loss, you know, if you think about your onboarding example, that can be preventing turnover within the first 90 days. If you've got a great onboarding program or turnover in the first six months, whatever the timeframe is, it can get them to ramp faster. It can get them integrated into culture and engagement faster. And we know that those affect the bottom line. So rather than just repeat or reporting tasks, which I think is what we do a lot, I onboarded 12 people and we just report the tasks that we did. Reporting those outcomes, I think, is so important. And I know in my seat that when you all do that with me, I'm absolutely all ears.

Marie

It's true. And a lot of our conversations go a lot quicker too, right? When we can speak that language.

Sabrina

Okay, Marie, so you know what all of our listeners are probably thinking. That would be fantastic. They would love to do that if they actually had the time to set up an onboarding program that allowed people to ramp faster. I'm sure they have lots of ideas for how to do that and not just onboarding, but performance management and all the other great things that HR does. But again, we have this capacity constraint inside of small businesses. And if you're the HR professional managing that, and we talk about that more than we probably need to, but it is the reality of this life. If you especially are an HR department of one, it can feel impossible to get to a place where you are building projects that drive revenue, drive things, or prevent really expensive things when you're just trying to get payroll ran while you also have three people asking about their benefits, right? And so that's where the getting support piece comes in. And what we find, what I find for sure in the sales process, what I know to be true, is that small businesses wait way too long. And then to hire HR help. And then when they do hire it, they hire one person and expect them to do everything, all of it. And this is where everybody gets so bogged down in the, "I can't be strategic. I can't do the things that I want to do, work on the cool projects, help the business move forward and grow because I'm one person trying to do all the things." And we completely get that. We have clients that come to us way late. Like, they've got a lot of employees and they've never had HR, or they've had one person and they come to us shocked because of what we can do in 20 hours. And it's because there's three people on the team that are doing that. It's three different people that are managing that. So of course, they can do a lot more. And so I think that what I'd like to do is I think we spend the first half of the podcast here really talking about how and encouraging people to start thinking about their work and outcomes and preventions. What are you driving? What are you preventing that are cost or that are revenue? And then make sure you're talking about that. Make sure you're saying it using that language. And then in the next breath, let's really talk about when you know you need the support, when you want to be able to do more, and your head count justifies being able to get that support, then let's talk about what that support could potentially look like. Because I think that people automatically think I need to hire another head, right? I talk about this with CEOs. I talk about this on the YouTube channel all the time. And this with our CEO clients all the time, which is maybe it's not a head count problem. Maybe it's a structure problem. Maybe it's a this problem. So let's not just assume we have to add another head with all of that other overhead because that comes with benefits and it comes with payroll taxes and it comes with all these things. It is one option, but there are actually more options. So why don't we walk through what support could actually look like if they get to that point where they kind of have the CEO's ear and that that person is ready to invest more in HR and add to it?

 

Marie

Yes, exactly. Sabrina, I'm glad you kind of brought up those ratios because I do want to talk about something that I think does get misunderstood a lot, especially in small businesses. And that is the question of how much HR you actually need at different stages of growth. If your company has fewer than 75 people, you probably do not need a full-time HR person. Now, I know that sounds a little counterintuitive coming from an HR professional, but it's true. You know, the volume of work at that size does not justify a full-time salary benefits and the overhead that comes with it. Now, if you are an HR professional working in a company with less than 75 employees, you should feel really good about how your company feels about HR because they're investing in you this early on. However, when you get to 100 people, that picture starts to change. Now, you might have one full-time HR person. And if you do, there's a good chance that they're probably drowning, right? Because one person at that size is definitely still covering payroll, compliance, employee relations, recruiting, onboarding, and anything else that comes through the door. And really, that is a lot for one person to carry well all the time. Now, the instinct for both the HR person and for leadership is probably to say, "We need to hire another person." And sometimes that is the right answer. But a lot of the time, it's not. And here's why. Now, if the function is not set up well, meaning if HR is mostly reactive or transactional or, you know, spending the majority of their time putting out fires, adding a second body is just going to give you two people to put out more fires. The structure is what has to shift first. And that conversation about what HR is actually supposed to be doing at your stage of growth has to happen before any staffing decision will land the way you want it to. And I've seen this play out. I've seen this play out a lot of different times. You know, the ask gets approved, someone gets hired, and then six months later, you have more capacity, but the same problems as before. And it's because nobody ever stopped to ask what was actually driving those problems in the first place. So before we talk about what more actually looks like, I want to talk about what your options actually are. Because for most small employers, there are more of them than you think. So the first option is what a lot of you are already doing or trying to do. And that's one HR person running the function well with the right tools, the right systems, and clear priorities. This works. And it works really well at the right company size with the right support from leadership. The key word there is support. So an HR department of one who can influence, has a defined scope and leadership that understands what HR actually does, that is the person that can run an incredibly effective function. However, the challenge is when the scope keeps growing without the support growing with it, right? That is when one person becomes unsustainable. And that is when you really need to look at what else is available. The second option is what I think is the most underused model in small business HR. And that is pairing one internal person with fractional or embedded support behind them. And here is what that actually looks like in practice, okay? So you stay in seat. You are still the face of HR for your organization. You know, the person who employees come to, the person who knows your culture and your people. But behind you, you have access to a team, right? Thinks specialists in compliance, payroll, employee relations, whatever it is you need on any given day. What's important to understand is that you're not doing it all alone anymore. And your leadership isn't paying for a second full-time hire. They're paying for expertise on demand, which is a completely different financial conversation.

Sabrina

Yeah, so obviously this is our model, right? This is what part of what we do, we do two different things here. We either are fully embedded HR, which I know we're going to talk about in a second, or we are this support. So, and I think that this is where we can have a lot of fun. And where we can really, when I think about how we support the small business HR community, this is probably one of the best ways, is when you have a really strong HR leader in a company, maybe there are 100 employees, maybe they're even more because we've certainly seen them come to us at 300 employees and that's got one person running the show, which is insane. Or, you know, 300 and they have them, one person and a coordinator or something. And they come to get that extra support. And what is really helpful about embedded support, like what we have or fractional support outsourcing, is that you get that immediate expert. So you go and you hire somebody and they are, you know, good at what they're good at. But with any kind of outsourcing, with any kind of consulting, with any kind of fractional support, you are getting a team potentially like you do with us and you're getting those immediate experts in everything that you can potentially need.

Marie

Yes, exactly. Now, if you happen to be a CEO listening to this or someone who isn't an HR professional, but has ended up handling HR for your company, there is a third option. And I really want to make sure that you hear this one. This option is going to be one that more small employers are starting to explore. And it is the one that I think has the most potential for companies that are ready to build HR the right way from the start, or are ready to just stop doing it the way that they have been. And this is exactly what Sabrina was just talking about, which is a fully embedded outsourced HR team. And I want to be specific about what that means because it is very different from what a lot of people picture when they hear outsourced HR. This model, it is not a call center. This is not a generic HR hotline. But instead, embedded HR means a team comes in, learns your business, builds relationships with your managers and your people, and then runs your HR function as though they are a part of your organization because for all practical purposes, they are. Now, here's the part that usually gets people's attention. For roughly the cost of one full-time HR manager, you get a team of four to six people at different levels of expertise. That is a generalist who knows your day-to-day, specialists who handle the complex stuff, and someone with strategic experience who can advise leadership. Another thing to note is that you are not hiring one person with one set of skills and one bandwidth limit. You're getting a function. And the work gets done in a fraction of the time because the right person is doing the right thing at every level. Now, that is fundamentally a different model. And for a lot of small employers, it really can be a better one.

 

Sabrina

So I think we have two examples of this. We had a client come to us last summer who had always hired, they have about 90 employees and that's globally. So they have a good amount of employees here in the States. And then they have international employees as well. And actually a good, I'd say it's probably, I think it's half and half. I'm not really sure, but it's around half and half where it's like half here, half globally. And they had always hired, due to budget constraints, they had always hired new hires, new hire generalists. And they had done that as they were a growing company. And what they found was two things. One, that they were constantly needing to train the generalist, even though this was an HR department of one situation, it was just the generalist. The generalist had a lot to figure out because they were new grads. They had no experience. They wanted to do a good job, but they just didn't know what to do because they didn't have that experience. And then the other thing that they found out was that every two years, that person left because they got the great experience with our client. And then they went on to bigger and better HR teams, which totally makes sense, right? And so the client stopped and said, what it could be a potentially better situation for us, we can't keep hiring generalists that are going to leave every two years or that we have to train, but we also don't have the budget for like an HR leader director level that we think is important. And so they found us. And they, you know, within the budget that they have, and then within the hours that we can work with them and the team that they get, they actually get that level of expertise they need with the level of tactical work that they need. And they don't have that revolving door situation anymore because if somebody with us is on vacation or out, then somebody else just steps right in. The other example that I have is from earlier this year. We had a client join us around 150 employees. They had, you know, people managing HR and functions that also had other jobs. They were great employees, but they were doing other things as well. And so HR was never a priority. And the difference in just three months of us working with them in making HR a focus, making HR, you know, our focus and doing what we know needs to be done to set up a functional HR team, the difference in just that time is phenomenal to the point that they're increasing scope with us, right? And increasing their hours. And so I think that small businesses really have more options than they can possibly imagine when it comes to human resources. The first piece is to value it and find out that you need it. And then if you can find the person in-house, if you can bring somebody that is going to be, you know, your HR department of one, if that's all you can afford, and they're going to be able to do all of the things from the strategic to the tactical, and you're going to support them in that as leadership, then that's great. If not, if you can't find that person or you don't have the budget for somebody at that level, then you have the option to look at, you know, outsourcing or like our embedded model, which is the same really as in-house. It feels the same as in-house. And then if you are an HR person and your business is growing, you're 100 plus employees and you need that support, same thing. You have the option that if you can find a great person who's going to be able to come on full-time and you have the budget for that, and you can pay the benefits and the taxes and all of that, and they have the knowledge that you need all-encompassing, great. If not, you also have this option of this, you know, support team that is outsourced, but again, feels internal. And I think that that's maybe part of the biggest pushback about outsourcing HR or about pushing in it was that it feels outsourced. And a lot of models don't. Our model definitely does not feel outsourced at all. People forget all the time we're not on their payroll. That's clients say to me, I forget your team doesn't report to me. There are lots of options for small businesses, again, to get that HR support that they need. It just takes that shift in leadership to say, we value this. We're going to invest in this. And now let's find the right solution to add people to this team so that we can move them from a cost center to a revenue generator.

Marie

Sabrina, you really wrapped us up with a strong message right there. And so I just want to say, in short, when I think about what our listeners are going to take away from all of this, is that there really are options available to you. And more options than most people in this space actually realize. You know, all in all, there are smarter ways to build this function. And you deserve to know exactly what they are.

Sabrina

All right. So good conversation as always. I think that it's just good for us to be able to share options, talk about, it's hard. It's hard in a small business to get the support that you need. Just the internal support to take you seriously, but then also the headcount support that you need. And so making sure that you can speak to your leaders in terms of what you're preventing or what you are driving in terms of revenue and cost. And then once you have their ears on that, getting the support in the headcount that you need to be able to, you know, saying things like, if you want me to do more of this, if you want me to do more of this, like getting people faster to ramp, and if you want me to do more of this leadership stuff that's keeping people instead of having us be this turnover revolving door, then I need more help. I need more staff on my team to take some of that tactical off. And then of course, we walked through those options that we had for you. In the meantime, what we want to do with this podcast for a couple of episodes is get a little tactical with you. And so we had talked about a few episodes back, I don't even remember anymore, Marie, what episodes are what now, but we had talked a few back about our streamline process. And part of that was an audit that we do. And so we want to come in next episode and go through that. And Marie, that's going to be mostly you because you're the one using this more than I do. But talking through what does an HR audit look like for us? What are the pieces that we use? What are we looking at? It is way more comprehensive, I betcha, than others that I've seen, for sure, because we don't just look at the compliance piece. We are looking at compliance strategy and infrastructure. So check out the next episode coming out. If you're not subscribed now, it would be a great time to do that so that you can make sure you get that when it comes out. You can also connect with Marie or I on LinkedIn. We love it when listeners connect with us. And certainly if you have ideas for future episodes, that would be fantastic. Finally, we are looking for guests on the HR connection. What we want is practitioners who are in the trenches. If you are doing this work, you are an HR person. However, whatever that looks like for you, it could be an HR director, an HR department of one, you could be the marketing manager that was given HR and you're trying to figure out what to do. Whatever that looks like for you, if you are managing human resources in a one to 500, we would love to hear from you. Because we want to have guests and we want to be able to get you on the podcast and spotlight all of the great work you're doing. And so if you are listening and you are interested in that, then please reach out directly to Marie on LinkedIn. We're going to make sure all of this is in the show notes so that you can click easily and get to her profile. But please connect with her and let her know as she will be doing episodes with guests.

Marie

Very excited. Very excited to talk with some guests and very excited to talk to all of you about our audit. You know, thanks so much for listening and being here today. We'll see you next time.

Sabrina

See you next time.