Fractional HR Leadership and the Value of Outsourcing

Jim trailblazed fractional leadership well before it was as popular and common as it is today. He saw the value of fractional leadership early in his career during an M&A engagement, where the company’s value was greatly decreased by their significant HR problems. He realized that they needed consultative support and developed the concept of fractional HR leadership to help solve these problems, while also ensuring the company’s HR problems didn’t negatively impact its worth.

Today, fractional leadership has become an attractive model, specifically for small and mis-sized companies. It offers “huge value for the price”, allowing companies to forego a full-time hire or team, without sacrificing quality and expertise. Companies appreciate being able to outsource things like HR and payroll not only for the ease of administration, but also to protect confidential information. As Jim shared, he has worked with a lot of owners who “don’t like that confidential information sitting on anyone’s desk inside the company” – and this is where a trusted outsourced HR and payroll partner can step in.

What’s the difference: PEO vs. Outsourcing

Jim educated the audience about outsourcing as compared to PEOs, and how Flex HR is not a PEO. Flex HR is a true partner, supporting a company with its HR and Payroll needs, while working as an extension of a company. Alternatively, a PEO is a effectively a “co-employment” agreement, where the PEO owns the employees, limiting flexibility for the employer.

What often makes a PEO attractive for smaller companies is the ability to negotiate better benefits, both in value and in cost. A PEO brings companies on as part of a larger group comprised of other companies, and as a result, is able to negotiate better rates. That said, when a company utilizes a PEO, the PEO effectively becomes the employer, and the PEO writes the checks – something many owners do not necessarily like. While a PEO may make sense for very small (think: singular employee) companies, they often do not make as much sense for the clients Flex HR serves, who are small and mid-sized and who require autonomy and flexibility.

The Importance of Hiring & Retaining Talent at any Stage

Whether it’s during something as critical and stressful as an M&A transaction, or just every-day operations, the importance of attracting and retaining the right talent is critical for all businesses.

Having been involved in more than 350 M&A transactions, Jim has developed a playbook for success when it comes to the people involved. Clients don’t always think about the plans before and after the acquisitions, specifically as it relates to their people, and that’s where HR plays a critical role. Jim recommends developing a 90-day pre-acquisition plan, and a 120-day post-acquisition plan, focused on providing communication, clarity, and transparency to the people affected.  Jim’s experience has taught him that without proper communication, employees at both the acquiring and acquired companies are at risk of jumping ship. Developing clear plans that address the most pressing employee questions like “how will my job be affected?” or “what does this mean for my compensation and benefits?” will ensure people are comforted and that they will make informed decisions before acting on impulse.

Even without something as nuanced as a merger or acquisition, retaining talent is critically important to companies at any stage. Jim maintains that deliberate networking is one of the most effective ways to hire and retain talent. Rather than spending time and resources on recruiting from the ground up every time a job opens, leaders should always have a pipeline of potential candidates ready. Making it a point to maintain communication with people you’d like to work with someday will make hiring a whole lot less costly – and starts an employment relationship built on connection and trust. As Jim sees it, “companies can’t find good talent, and when they find it, they can’t keep it”. Maintaining a solid network of candidates and partners can be the difference.

The Future of HR: AI, Outsourcing, and the Value of a Good Handbook

HR is not immune to the changes we are seeing across industries, and Flex HR is ready to help companies navigate these strange times.

Perhaps the most nuanced change the workforce is experiencing is the introduction of AI. One might wonder how AI is affecting HR – but as Jim sees it, its implications are vast but not all that new. HR teams have been some of the first to embrace automation, utilizing automated payroll and even more advanced HRIS systems to operationalize the workforce. HRIS systems can be automated to the point where no human intervention in certain processes – like onboarding – is even necessary. However, Jim advises that employers should consider whether full automation is a good thing.  “A lot of companies have not gone to full automation strictly because of face time with the employees. It makes the employees feel like they’re working for a machine instead of a person.” Striking the right balance between using automation for efficiency without losing the personal touch HR offers will be important.

Jim has also educated his clients on the importance of implementing AI policies. He has found that some companies don’t want AI at all, and some do – but with boundaries and limitations. Developing a clear policy on how and when AI can be utilized is an important step in providing guidance and clarity for employees. For example, Jim supports employees using AI to write something brand new but stresses the importance of proofing the output. “You have to proof it, you have to make sure all of the information is proper, and that it fits your operational needs. You just can’t rely on it to be 100% correct.” Putting proper structures in place to validate AI content is a useful tool for companies looking to embrace the benefits of the technology.

Jim understands the value of evolving policies to meet the needs of our current professional climate and touts the importance of an often overlooked document – the employee handbook. The Employee Handbook should not be a piece of dry legalese, but instead an opportunity to share about your culture, norms, and expectations – while also protecting the company. Jim advises against seeking an employment attorney to develop a handbook, but instead to engage a partner like Flex HR to write it. Yes – the handbook must legally protect your company, but it should also be welcoming and comfortable to read for the employee.

Do you want to hear more from Jim? Listen here for the full interview! And if you’re interested in outsourcing your HR to a growing, reliable, and experienced partner – contact Flex HR today!