A New Way of Looking at Human Resources: Professional Employer Organizations
Managing human resources is just as challenging as making the right hires—but less satisfying. If things go right, it may seem that no one notices; it’s only when something bad happens that attention turns to HR. Today, many bad things can happen and managing staff properly has become incredibly expensive, time consuming and very complex—all reasons why more and more groups might look for help from professional employer organizations (PEOs).
The heart of the PEO concept is that the employer, the nonprofit association, enters into an agreement with a PEO to lease its employees from the PEO while still retaining the responsibilities to hire, supervise, motivate, promote and terminate all employees. What changes is that staff members formerly consumed with the management of HR issues are freed up and can turn their attention to more productive roles such as generating new revenue or servicing members’ needs.
By using PEOs, you’ll be allowing professionals—whose tools, resources and experience are generally vastly superior to what most nonprofit staff could deliver—to perform your organization’s HR functions for you. A PEO will typically:
• Assume responsibility for payroll functions and ancillary tasks such as issuing W-2 and W-4 IRS forms and maintaining employment records regarding attendance, vacations and sick time.
• Be able to provide your staff with a much more comprehensive and broader array of benefits than the association alone could hope to provide. Because PEOs have substantial marketplace leverage, due to the number of employees they manage, your employees gain access to more insurance companies and plans. More importantly, every eligible employee can custom-design a benefits program that fits his or her personal needs. Some might elect a very high or very low healthcare deductible, while others might want a Health Savings Account. Others might find vision and/or dental care beneficial. Having these choices alone is certain to help retain valued employees.
• Furnish you with a knowledgeable team of specialists in human resources, employment law, risk management and investments such as a 401(k). They can respond quickly and correctly with answers and solutions.
• Give every employee an employee manual that contains the latest modifications that might have been made necessary by the adoption of new laws and/or regulations.
• Respond to any HR-related claims against the association in order to maintain order in situations that could otherwise spin out of control.
When considering the cost of leasing employees from a PEO, you should consider two key issues:
• What are you currently paying for HR administration? Take into consideration more than just the salary and benefits of personnel who are engaged in HR support—your calculation should also include lost opportunities that might be gained if the employee(s) were freed to do more productive work.
• How much might you save in health insurance and benefit costs alone by taking advantage of a PEO’s greater purchasing power? You may find that these savings alone justify a PEO management agreement.
Like providers of all services, PEOs come in all sizes, structures and varieties. Not sure where to start looking? A good place to begin your search is the directory of PEOs maintained online by the National Association of Professional Employer Organizations.
—Steven Hacker, CAE
For most of us, hiring tops the list of human-resource challenges. No matter how skilled you may be, the outcome is virtually impossible to predict. And with all of the cultural and demographic shifts in the workplace in recent years, both employers and candidates have vastly divergent preferences and expectations when it comes to the hiring scene. But just as times change, so do hiring tools.
The Historic Ups and Downs of Testing. Some tools have been around a long time. The now-dreaded Myers-Briggs personality test and many similar personality assessments came into vogue following the end of World War II. Employers enjoyed early successes using batteries of tests and before long, they became pervasive. But over time, it became evident that tests as predictors of success were anything but reliable. Employers’ dependence on them began to wane significantly and all but disappeared in the 1980s and 1990s.
So why is the pendulum swinging back in favor of tests and predictive analysis? Like so many other things today, it has a lot to do with technology and cost containment. But don’t be mistaken—today’s testing in HR departments isn’t your father’s multiple choice personality assessment. Additional factors now include the high costs of hiring, which continue to rise, as well as the financial consequences of making poor hiring decisions. And thanks to layers of new laws and regulations, the hiring process is complex and likely to become more so.
The New Tools of the Hiring World. The emergence of new technology, coupled with “big data,” has ushered in a new HR age—the “era of people analytics.” Technology makes it possible to use tools that were unimaginable just a few years ago. HR specialists now have an arsenal of information about applicants that can be harvested quickly and easily from credit reports, social media and data banks containing a consumer’s marketing preferences and purchase transactions. This data yields new ways of matching applicants with jobs. Big data promises to control runaway recruiting costs by making more information known about more candidates more quickly and at less cost.
The newest HR recruiting tools include video games. The score is irrelevant; what is important is how an applicant plays the game. Algorithms analyze gaming behavior constantly, examining things like how they make decisions, whether they are bold and decisive, whether they can adapt tactics to different situations and much more. Video games reveal attributes that a face-to-face interview would never discover, no matter how long or arduous the interview. These kinds of video games are valid tools—neuroscientists, industrial behaviorists and technology engineers have all worked together to create games specifically for HR applications.
The co-founder and CEO of gaming-based technology company ConnectCubed, Michael Tanenbaum, explained the strength of these new options. “We are working in an environment that will soon be dominated by millennials, and we need to adapt to their preferences and values or risk not fully engaging with them,” he said. Games technology, he believes, is a better fit for candidates of this generation than older HR predictive tools like the written personality tests. That said, video games are “an add-on tool—not a replacement,” he clarified. In fact, on ConnectCubed’s website, you will also find an updated version of a personality assessment.
As a tool, game technology “supplements and broadens predictive accuracy and does so at a remarkably affordable price.” Tanenbaum explained that if your association is like most, you might use the tool for 10 or fewer hires a year. The cost would be $250 a month—far less than the cost of the collateral damage that occurs when a hire is a mistake.
ConnectCubed offers several variations of games from which to select based upon a recruiter’s objectives. A working memory game, for instance, tests reaction time, focus and mental bandwidth. “It is an effective screening tool for jobs requiring consistent performance in fast-paced environments,” Tanenbaum said. Candidates race against the clock to recall shapes in sequence and aim to beat their previous top scores. Another option is a spatial reasoning test, which ConnectCubed reports is highly correlated with general intelligence, the strongest predictor of job performance. A customizable quiz is also offered; this permits an employer to tailor questions according to the unique requirements of the job they wish to fill, and it’s one reason Tanenbaum refers to his company’s programs as “bespoke.”
While most ConnectCubed clients are corporations, a few foundations are now using its tools including Code To Work, a New York City organization dedicated to bringing under-served and under-employed populations to the attention of hiring employers—a critical function at a time when nearly 7 million young adults in the U.S. are unemployed and 3.6 million jobs remain unfilled. “We use an adaptation of a ConnectCubed product to help us screen very large numbers of potential applicants—something we could never do face-to-face,” said Barbara Chang, Code To Work’s executive director. “Ultimately, of course, we do get face-to-face, but only after using games technology to help us screen down to a manageable size group.”
ConnectCubed is one of a growing list of providers of similar products. Knack, a Silicon Valley startup, also offers a variety of games that appear much more video game-like than those produced by ConnectCubed.
Time to Move Forward. With many new and improved options at the fingertips of HR professionals, associations need to start investigating and investing in tools and strategies that make better sense for the futures of their groups.