HR outsourcing gains favor in downturn: Pence

Small-business owners focused on finding and keeping customers in a difficult economy have little time for managing human-resource functions. At least that’s the belief of Stephen Pence, whose five-year-old consulting firm, Personnel Capital Management, helps clients with the task of managing employees.

Pence spent almost a dozen years in human resources at Charlotte-based Rack Room Shoes Inc. and lock maker Assa Abloy before launching his company. He also owned Fuze Salon in Elizabeth for three years before selling it in 2008.

That experience solidified his understanding of small companies’ need for human-resources services. He now has clients in the medical, veterinary, retail and manufacturing fields. Pence spoke recently with the Charlotte Business Journal about the human-resources needs of small businesses. Following are edited excerpts from that conversation:

What sort of demand are you seeing for your services?

Our clients are placing a stronger emphasis on cost reductions and cost containment without affecting their strategic plans. We have received requests to review payroll processes, temporary staffing-vendor selection and overall HR processes. Most of these requests are geared toward ensuring the value of the current process. We operate as HR generalists, allowing us to provide support in all areas of HR, including payroll, benefits, compliance, recruiting and training.

Is outsourcing human-resources functions an enduring trend?

This is the best way to do things in this economic state. We are seeing an increase in business because people can no longer devote their own time to HR functions when they need to be focusing on growing or retaining their business. I am on-site as much as my clients want me to be.

HR is one of the biggest expenses and it’s hard to find qualified employees to do what we do. Generally companies have a benefits person, a payroll person, a recruiter and an employee-relations person. We provide a single source for these functions.

How does the cost of outsourcing compare with handling these functions in-house?

Typically, we operate on a retained-service arrangement. In this working arrangement, our clients are not obligated to provide the same benefits as offered to full-time employees. Benefits costs typically tack on an additional 30% to 35% to the cost of a full-time employee.

Are employers taking a selective approach to outsourcing, giving consultants domain over certain areas but not all HR functions?

Companies are really doing both. For some companies, outsourcing the entire function is ideal. For others, it makes sense to have help with a few areas of HR management. It just depends on the company and its needs. We help companies identify which approach would work best for them.

Employee relations must be taking a hit as employers ponder or act on staff reductions. Can outside HR expertise help?

We have a unique perspective on the situation. Sometimes it’s difficult to see all the angles when it’s your company and you are making decisions from the inside. Quite often we find we are able to offer insight and direction that helps business owners reach the right decisions.

What are the growth areas in your business?

The overall management of health-insurance programs is a major emphasis right now. We partner with clients to help with the entire process of designing a program, vendor selection and rollout of the program. Clients want to know what happens if they do something different with their health insurance. Benefits have a huge financial impact on companies.

You offer employee training. Isn’t that one of the first expenses cut when businesses face a downturn?

Frankly, quite often yes. Training is the first area to go. However, it certainly isn’t needed any less. The need to train employees is constant. Companies often suffer because they choose to cut this particular area. Again, this is an area where we can most effectively assist our clients. We are a less-expensive avenue to critical training.

Source : Charlotte Business Journal - by Laura Williams-Tracy, Stephen Pence is Principal, Personnel Capital Management.