Partnering with a PEO to Improve Business Efficiencies

Operational efficiency is critical to business effectiveness. Market research firm IDC says that companies can lose as much as 30% in revenue annually due to inefficiencies. Thankfully, Human Resources can play a prominent role in driving greater efficiencies. Strategic outsourcing can help even more.

According to consultancy firm The Hackett Group’s research report, “Forging a Digital Path to World-Class HR,” world-class HR organizations “make better use of their staff to perform higher-value talent management and strategic planning activities.”

In other words, The Hackett Group has found that organizations that can deploy their in-house staff to high priority, strategic objectives can improve internal efficiency. Often, that requires outside help to free inside staff from transactional HR, but the best performing companies are careful about what they outsource. Specifically, these organizations make “more effective” use of (spend less on) outsourcing than typical companies because they selectively outsource in the areas of greatest need. Some of the most common categories for outsourcing include compensation and benefits administration, employee relations, and talent acquisition.

Vinay Couto of PricewaterhouseCoopers (PwC) agrees and also points out that HR can have an outsized impact in driving efficiency at smaller companies.

That’s because small businesses simply don’t have the resources or staffing to enable managers to spend their time focusing on strategic endeavors like workforce planning. “In those situations, it’s even more important for HR to step into the void,” he told the Society for Human Resource Management.

HR can fill that gap, and if HR departments themselves are resource-strained, outsourcing specific HR activities can free them to focus on more strategic objectives, while simultaneously lowering costs overall.

In fact, the National Association of Professional Employer Organizations (NAPEO) has found that administrative costs are about $450 lower per employee for businesses that work with a PEO.

Outsourcing is not the only route to greater efficiency that HR can drive. Automation, for example, yields tremendous efficiency gains when implemented strategically. Advisory firm Accenture reports that companies using automation will see revenues rise by 32% on average by 2022. In fact, Couto says, “The first thing HR should do is figure out how to reduce administration. Put it in a box and automate the heck out of it.”

He’s right: HR automation can yield bountiful benefits, as we previously detailed in this article.

CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.