Even HR

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Short-term pressure for financial results is intense. Companies turn to outsourcing as they try even harder to hit their numbers.  All company functions and departments have fallen under increased scrutiny – even HR.

First Friend

A recent WSJ article (“Companies Say No to Having an HR Department”) highlights this point by providing a few examples of where centralized Human Resources departments have been eliminated (link). Part of the article’s appeal no doubt lies in implied irony and the fact that the mere mention of HR has broad appeal to anyone who has ever had a job.

In most cases, HR is the first line of contact for a job candidate.  In this sense, HR at least temporarily becomes the face of the company. Once a new employee is hired, HR maintains a daily presence in the employee’s life by shepherding the on boarding and orientation. Be it benefits enrollment, relocation assistance, or clarification of work rules and policies, most employees quickly come to view HR as their first friend in a new neighborhood.

Outsourcing Candidate

The varied nature of HR activities makes it a very interesting candidate for outsourcing. Under the outsourceable category, there exists a transactional piece of HR that can be serviced via self-service employee portals. Employees get used to, and may actually in many cases prefer, having their benefits and other employee data impersonally reside somewhere out “in the cloud”. So far so good, but this was the easy part. The rest of the picture is not as clear. In fact, far from it.

One of the justifications cited in the article for outsourcing HR is the concept of moving HR responsibility closer to the action by decentralizing it geographically and organizationally to become an increasingly on site activity performed by departmental managers and supervisors. In my view, this flies in the face of the primary value-adds of an effective HR organization. These are consistency and structure.  As organizations grow, consistency and structure become obvious imperatives to support operations and protect the company.

Putting functions like compensation, hiring and firing, organizational development, performance appraisals, regulatory compliance, and benefits administration into the hands of line management pretty much guarantees that things very quickly turn into amateur hour with little hope for consistency and structure.  It becomes a very hard to control free for all, Wild West-like, swashbuckling, Darwinesque and Dilbert-like compilation of HR practices that can put the company and its assets at risk when placed in the wrong hands.

So, the answer to today’s question as to whether I think companies should outsource, eliminate, or decentralize their HR departments is a resounding no.  Good HR people add value and help businesses.  I have seen it first hand, so I know it’s true!

Bread and Butter

Now here’s where employees who view HR in a certain way walk right into a good old-fashioned haymaker about to be thrown by yours truly.  While appearing to be right-handed and thrown from over the top, this punch really comes from some down and dirty, out in the streets, Golden Gloves corporate experiences with HR.

“Some workers say they feel the absence of an in-house HR staff acutely, especially when it comes to bread-and-butter HR responsibilities such as mediating employee disputes and resolving pay problems.”

Bread and butter – really? Well, no – not really. In fact, stop and get a hold of yourself if you agree with that statement.

Because HR is that first friend, many employees mistakenly believe that the primary function of an HR department is to help them.  While this may be part of the service HR provides to employees who look to HR for such support, it is not from my experience the primary reason HR exists.  What many employees fail to realize is that a large part of what HR is there to do is to protect the company, its owners, and its assets.  It is certainly not the only thing HR does; however, it is arguably one of the most important.

Protectors & Informers

A great example of HR as protector can be seen by those expecting HR to prevent bullying and legal harassment.  HR is likely to address injurious behavior targeting a member of protected class because this constitutes illegal harassment.  By addressing it, HR protects the company from lawsuits, fines, and potentially costly settlements.  Absent HR perception of a legal or regulatory threat, a lot of questionable behavior goes unaddressed. Phone it in – it’s just real life in the trenches.

Enter HR as informer. Assuming confidentiality while venting to or kibitzing with HR can be risky business because at some point your information and views may be interpreted by HR as constituting part of its protective duty.  While not necessarily recognized at the time by HR or employee to have much significance, sometimes these conversations later become increasingly relevant in HR’s view of its duty to protect.

Yes, when I finally write my first best-selling business book, all major corporate functions and their associated heroes, villains, triumphs, and tragedies will be there with us -even HR.

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Supreme Courting

Conestoga Wood Specialties v. Sebelius.   Even looks weird, doesn’t it?

 

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Starting Points

Pennsylvania’s Lancaster County is known to some east coast tourists as a destination. Of sorts. Amazing as it is to some of us who live here, it’s a place where New Yorkers and other nearby Bridgegate survivors routinely flock for seasonal family oriented getaways.  It’s the place where an entire weekend’s central focus can become the Amish culture. “Look there’s one.  Quick. Get his picture while he’s not looking.”  You know, that type of thing.

Ironically, this same touristy area, defined by its Amish residents and sprawling farmland, holds some economic vitality beyond  tourism. There exists a handful of decent-sized middle market companies that thrive there. The majority of these companies are privately held. Accordingly the operations of these companies and the ways in which they go about their business tend to speak to the values of their owners.

Reflecting the cultural and political tenor of Lancaster County itself, the views of these business owners tend toward the conservative side of the spectrum. What results in the workplace could just transport those “aren’t from around here” into a twilight zone experience that yields some blurry boundaries between church and state.  Now I guess we will see how in versus out of synch with national views this local business community really is.

Atop the National Stage

Reflecting the Germanic roots of the area, it’s not surprising that some business owners are of Mennonite faith. Matching this description is Conestoga Wood Specialties and its Hahn family ownership.  Ring a bell yet?  These names may sound familiar because they are suing the United States government in the national Supreme Court case of Conestoga Wood Specialties v. Sebelius et al. (Hobby Lobby is pursuing similar action.) The Sebelius et al side of this case is none other than U.S. Secretary of Health and Human Services Kathleen Sebelius and a few other similarly perched appointees of the current Administration.

The case recently began with its opening arguments.  This showdown has been brewing for awhile, with successive appeals at the appropriate levels of jurisdiction.  The Hahn family is following the legal roadmap to what it hopes is justice regarding a “matter of conscience”.  The essence of the case is that the Hahn family is challenging the Affordable Care Act’s (aka “Obamacare’s”) universal applicability to their approximately 1000 employee for-profit business.

More specifically, the company’s suit holds that it should not be required by law to provide coverage for emergency contraceptives as part of its employer-provided medical benefits plan. The suit further holds that the company should be entitled to receive exclusions similar to what the current Administration has provided to some religious and/or non-profit organizations. “It’s really not only just for Conestoga. We’re taking a stand for other businesses as well,” said Anthony Hahn about his appeal. “This is a religious liberty issue that is concerning to us.”

Real Conviction

From reading the filed suit document and how his lawyers have framed the arguments, there is little reason to question that Mr. Hahn has real conviction around the issue. It’s clearly not about money but rather is about something that goes to his core belief system. Admirable is Mr. Hahn’s willingness to put his money where his mouth is and go after what he believes in. Among what’s good here is freedom of speech, freedom of religion, and pursuit of due process all in one fell swoop. Whether he wins or loses does not erode the wisdom of the Founding Fathers in these regards.

With a noted separation versus state exception, I have no horse in this race.  I see the case very clearly as to whether or not a for-profit secular business and its owners should be allowed, for any reason,  to selectively opt out of following any of the laws of our Land. On the one hand, Hahn and his company elect to participate in a limited liability form of corporate ownership provided by law and enjoy S-Corp relief from double layer taxation provided by law. On the other hand, a few specifics of Obamacare’s health plan coverage? Not so much.

This case becomes very important for the Court, as granting such exclusions can establish a very slippery slope in business. Round and round she’d go, but where she’d stop….well who knows? And that’s a big part of the issue at hand.

Slippery Slope

While typically not regarded with as much lightning rod controversy, there are reportedly religions which do not believe in life-saving measures such as blood transfusions. Short of life-death implications, case-law also contains suits by Amish seeking social security tax exemption and Jewish business owners at one time contesting now-outdated “blue laws” requiring their businesses to close on Sunday.

What if a business owner said she didn’t believe in trash removal?   What if I owned a Pennsylvania business and sought exemption from two specific laws to which I object?  Just for the record, one is PA’s corporate stock franchise tax that taxes accumulated business equity, which I believe unfairly taxes the success and “savings” of a business.  The second is federal discrimination testing on 401K plans, which I believe hinders savings, thus increasing individual dependence on government in the long-run.

While I assure you my beliefs on these topics run very deep,  I probably wouldn’t get my day in court because it is not a religious objection and probably would not even be seen as constituting a moral dilemma. It would be seen as a financial objection, which ironically is what business should be about.

Two More Thoughts

1. There appears to be no mention of damage to the company from the Act.  It’s all about the religious views that put the company’s ownership at odds with the Act. So it seems logical that battle lines are being drawn by the suit’s language. A statement by the YWCA on local television aggressively criticized the suit as being “an assault on women’s’ reproductive rights.”  How the Court chooses to align legal principle with societal tenor will be a very interesting part of the decision which is expected in June.

2. The Act requires employers with more than 50 employees to provide the disputed coverage without an employee co-pay.  This is an interesting point because the no copay part is a pretty tough stand for the Act to have taken. Even though the Hahns’ objection is not financial in nature, perhaps this represents some room for future compromise.

Closing Arguments

Conestoga Wood Specialties clearly falls under the mandate to provide the required coverage until such time as due process yields a favorable result for the company. Absent that outcome, the company’s potential courses of action include:  full compliance, deciding not to provide health care coverage to its workforce, or electing to pay rather significant fines that would likely impose serious financial burden on the business.  Obviously this set of choices and associated implications would be problematic on many fronts.  Hopefully, there are some other more creative plan design options (see copay above) that would provide some middle ground for the Hahns if the Court decides against them.

Also mentioned in some analyses is the notion that, “what if the views of the owner do not represent the views of all employees?”. Guess what? This just in. If I learned one thing in my nine years as CFO of a privately held business in Lancaster County, it’s that there two kinds of people in a privately held family business. Those who own it and those who don’t.

Recently the Wall Street Journal ran an article about owners in family owned businesses spending less time actually working than their counterparts in other business types.  Prepping for court cases, travel, and time in the courtroom has to be significantly cutting into the time Hahn can spend on his business.

Countering this closing argument is that Mr. Hahn most likely considers his Supreme Court case to be an integral part of what he’s doing for his business.  This, my friends, is the essence of owning your own business.  It’s your time. It’s your money. It’s your life.  And it’s your legacy.  It’s also your set of choices.  Choices where no one is going to stop you.  Because they really can’t.

 

 

 

 

 

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