Outsourced HR management, a fractional HR head or an in-house hire: how to choose

Choose by the kind of HR work you have, not by the size of the business or the title you want on the organisation chart. Most growing companies have three kinds of HR work mixed together. Outsourced HR management handles one of them well, a fractional HR head handles another, and an in-house hire handles the third. Sort the work first and the choice is usually clear, and quite often it turns out to be a combination.

The difficulty is that all three are offered under the loose label of getting HR help, so founders compare them as if they were rival products. They are closer to three different trades, and comparing them on one scale produces the wrong answer.

1. 1

   Recurring operations

   Work that follows a calendar and a checklist: employee records, letters, the joining and exit sequence, leave and attendance administration, payroll inputs and routine employee queries. It is high in volume, predictable and mostly done at a desk. It needs reliability more than seniority.

2. 2

   Judgement and design

   Work that arrives as a situation rather than a task: a key person resigns, a complaint is raised about a manager, the appraisal needs redesigning, a team needs restructuring. It is irregular, the stakes are high, and the right answer depends on having seen similar situations before.

3. 3

   Presence

   Work that only happens if somebody is physically there: the conversation in the corridor, noticing that a shift is unhappy before anyone complains, being the person a new joiner can find on day one. It cannot be scheduled, and it does not work over a video call.

Every business has some of each. What differs is the proportion, and the proportion is what decides the arrangement.

• Outsourced HR management is an outside team carrying your recurring operations to an agreed scope. It works when the work can be written down as a calendar and a set of steps, and when the inputs reach the team on time. It does not give you someone in the building, and it is not designed to make your hard decisions for you.
• A fractional HR head is an experienced HR professional who works for you for part of each month on a continuing basis. They carry the people agenda, prepare the difficult decisions with you, and guide managers before a hard conversation rather than after it. They are not there to type letters, and if the records are in disorder their time goes on catching up instead of on the decisions.
• An in-house HR hire is a person on your rolls, present every working day. Their strength is presence and continuity. Their limitation is that one person rarely brings both a reliable operational hand and senior judgement, and the level you hire at decides which of the two you get.

Take every HR matter from the last three months that reached you, your accounts team or a manager. Put each one in a single pile: operations, judgement or presence. Be strict about it. A letter that needed drafting is operations. Deciding whether to issue a warning is judgement. A supervisor telling you the night shift is restless is presence.

MOSTLY OPERATIONS
  Regular, predictable, mostly paperwork.
  Look at: outsourced HR management, with a named
  person on your side who supplies the inputs.

MOSTLY JUDGEMENT
  Fewer items, higher stakes, often urgent.
  Look at: a fractional HR head, with operations
  covered by someone else.

MOSTLY PRESENCE
  Problems surface on the floor, not on paper.
  Look at: an in-house hire, at the level the
  presence work actually needs.

MIXED
  The usual answer. Use one arrangement for the
  largest pile and another for the next one.

This takes under an hour and is more reliable than a rule based on headcount, because two businesses of the same size can have very different piles. For example, imagine a single-site company with a stable office team; this is an illustrative case, not a client. Its pile is mostly operations with the occasional difficult case. A company of the same size spread across several sites with shift workers will have a far larger presence pile, and an outside team on its own will leave a gap there.

• In-house executive plus a fractional head. The executive carries operations and presence, and the fractional head carries judgement and coaches the executive. The internal person tends to grow fastest in this arrangement, because someone senior explains the reasoning behind each decision.
• Outsourced operations plus a fractional head. Suits a business with little presence work, such as a small office team. Operations run to a calendar remotely, and the senior person handles the cases.
• Outsourced operations plus a site coordinator. Where presence matters but judgement work is rare, an office manager or site administrator with a defined HR role can be the local face while the outside team keeps the records straight.

The combination to avoid is a single junior hire expected to cover all three piles. It is a common choice and a common source of disappointment, because the person ends up doing operations competently while the judgement work drifts back to the founder.

Each arrangement fails in a predictable way when its boundaries are left vague, so write them down before the start date.

1. 1

   For outsourced operations: the scope and the inputs

   List the recurring work in scope, the calendar it runs to, and the inputs your side must supply and by when. When outsourced operations go wrong, the cause is often late inputs from inside the business rather than mistakes by the outside team.

2. 2

   For a fractional head: the mandate

   Name the decisions they take part in, what stays with you, the working rhythm each month, and the route for something urgent between visits. A fractional HR management arrangement without a written mandate tends to turn into a help line.

3. 3

   For an in-house hire: the role, not the title

   Write which of the three piles the role owns and which it does not. HR Manager means something different in every company, and a hire who expects judgement work and gets only paperwork is unlikely to stay.

4. 4

   For all three: where the records live

   Agree that records sit in the company's own system or files, not in a provider's inbox or on one person's laptop. You will change the arrangement at some point, and the change is painless only if the records belong to you.

• The fractional head is being contacted between scheduled days most weeks. Judgement work has become continuous, and a senior in-house hire may now make sense.
• The outside team keeps reporting late or missing inputs. The gap is inside the business: a person on your side needs to own the inputs, or the process itself needs fixing through HR process consulting.
• Problems keep arriving as surprises from the floor. The presence pile has grown and nobody is there to hold it.
• Your in-house executive has become reliable and wants more. Move a category of judgement work across, with the fractional head supervising, before you lose them.

Start with the arrangement that covers your largest pile and review it after one quarter, using the same three piles. The second arrangement, if you need one, becomes obvious from what the first one leaves uncovered.

GullyHR's fractional HR management covers the judgement work, and where you have no HR person, its mandate states which recurring work is carried remotely and which stays with your own team. Payroll outsourcing and the other hiring and HR outsourcing services are scoped separately, so you can take the piece the piles point to first and add the next one later.