May I be brutally honest for a second? When we come into a new client partnership we often find their HR infrastructure and strategy to be a mess.
They are up front about it in the sales process and I reassure them that we are used to being handed a tangled ball that we have to unravel. What strikes me though is that it had to get to that tangled ball, that mess, before they decided it was probably time to invest in HR.
It is a stark reminder that HR is overlooked and underinvested in until it gets too painful to do so.
I read an editorial recently about how startups and small employers often invest in a Chief Revenue Officer before investing in a Chief People Officer. The writer felt that was backwards. I’m not sure there is a correct order of hires that can apply to every business, but I do know that HR is not invested in early enough in most small orgs.
I talked last week about how HR is viewed in small employers so it isn’t hard to see why this happens. This week I’ll tell you what we walk into and see if that puts into perspective what is lost in the space between winging HR and investing in it.
Compliance Risks
This is low hanging fruit and honestly, the least of the problems a lot of the time, but certainly not investing in HR often means not being 100% compliant with the legal side of employing humans. There is a reason one of our first actions with new clients is an audit. Compliance issues are usually the easiest to fix and we want to get that out of the way.
Here is why I say it’s low hanging fruit. Compliance risks are a big deal of course. One lawsuit can damage a small employer not only financially but from a reputation standpoint. However, the likelihood of a lawsuit, or at least one so large that it can’t be overcome is actually pretty small in our experience.
Nonetheless, the ROI here is simple to understand. Even the smallest of lawsuits costs money, time, resources and depending upon reason, morale. Buttoning up compliance practices can mitigate financial risk. We go beyond the buttoning up for clients ensuring that not only are their practices compliant, but they are documented, trained on and audited regularly.
Lack of People Management Structure
I share with my team all the time that my style of entrepreneurship is to jump out of the plane and build the parachute on the way down. This has served me very well. I’m comfortable shipping things before they are fully fleshed out.
The comfort with taking risks, moving before everyone is ready and iterating as you go is a trait I share with many of our small employer client founders. We will hit a few branches on the way down, but we will land.
The blindspot in this approach is that rather than a structured parachute with proper stitching, a makeshift work-around is put in place. The entrepreneur can land (run a growing business), but the lack of structure wouldn’t hold employees as well. The structure needed for employees to also land safely is missing. So everyone is flailing around, hoping they are doing the right thing to survive.
It is a constant tightrope to know when to jump and when to continue to build and I don’t know that I have a good formula for figuring that out. But I do know this. When I take the time to create structure around clear policies, workflows, processes, communication and engagement, the next jump gets so much easier to execute because everyone knows their part.
The ROI here centers mostly around efficiency. When everyone is aligned on their role, how it contributes, what process and workflows to follow and what to do when they hit a roadblock, they stick the landing way more efficiently than if everyone is jumping and hoping for the best.
Lack of Leadership Training or Development
Many of the leaders we work with inside client sites are homegrown. They have grown up in the business they are in or, if they come from the outside, they have grown up in a very similar environment.
This lack of depth in experience means that at some point they were a very strong individual contributor and were then tapped to be in a leadership role. But due to always working in smaller environments, they haven’t really had the development they need to really lead. They have great skills and workplace knowledge, but lack soft skills that contribute to long term engagement and thriving environments.
This year, my top 3 leaders and I embarked on a year-long journey to develop our soft skills. We are meeting bi-weekly with me leading development for them, and I am working with an outside coach on my own development.
We are one quarter in and I can already see a huge value in investing in this time. Having the way we communicate, our emotional intelligence and how we show up as leaders be top of mind has definitely changed how we interact with our internal team and external clients for the better. I’m excited to see the changes after this year is complete.
I would argue that the ROI for leadership development is larger than any other aspect of how HR contributes. I have watched client after client struggle because leaders are not leading effectively.
I have listened to leader after leader scoff at development because soft skills are fluff only to wonder why their workplace is a revolving door. The ROI for leadership development is loyalty and for a small, growing company, that is worth its weight in profitability.
The longer an org underinvests in HR, the longer it takes to fix the issues created by doing so. It is much easier to steer a ship in the right direction from the get to than to turn it around.
Waiting until the problems are overwhelming results in issues that may never be fully resolved in a way that feels good for everyone. It could mean never realizing the full potential of the business in a way that could have been. The ROI in investing in solid HR is not to be denied and anyone who does so is hurting their long term business growth.