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Is outsourced HR for you?

As human resources director for the fast-expanding Lupe Tortilla, Monica Loera could use some help. The company has six Mexican restaurants around Houston and plans to open four more this year. Loera, who speaks Spanish, is charged with hiring the people to man the new stores. Yet she has many other duties, among them paying frequent visits to the restaurants to communicate with workers who don’t speak English. But instead of growing the HR department to cope with a heavier workload, Loera is outsourcing some of its functions.

But instead of growing the HR department to cope with a heavier workload, Loera is outsourcing some of its functions, like recruiting managers for the new restaurants. “We are a growing company and we [outsource] in different departments,” she says, noting that Lupe Tortilla’s marketing team already uses outside graphic designers, and keeps some other pros on retainer.

Outsourcing HR is not only cost effective for a small growth chain like Lupe Tortilla, but it allows Loera to tap into the collective experience of outside HR professionals. Though it’s unusual for a restaurant to hand over its entire HR department, many see benefits in using outside help with specific functions, like administering health care and pension benefits or, in the case of Lupe Tortilla, management recruitment.

Lupe Tortilla turned to the Achilles Group, a Houston firm that handles HR functions for small- and medium-sized companies, to help with interviewing and screening potential job candidates as well as retaining talent. Achilles works with all types of industries—like hotels, banks, manufacturing and construction—something that Loera sees as an advantage. “They have a broader perspective of the HR department,” she says, adding that she draws upon their expertise in other industries, using the group as a sounding board for advice.

According to a study conducted by the Society for Human Resource Management, 58 percent of all HR professionals outsource part of their department. Fifty-six percent of those who participated in the study say they outsource to cut back on costs, while 55 percent say they wanted to control legal risk.

While outsourcing is nothing new, recently there has been a spike in the number of small- and medium-sized companies that farm out responsibilities. “The small- and mid-sized markets seem to be growing a lot,” says Jennifer Schramm, manager for workplace trends and forecasting at SHRM. Many firms that handle HR functions are starting to target smaller companies as well.

There are still hurdles to a functional transition from in-house to outsourced HR, though. Sixty-four percent of those surveyed by SHRM feared that customer service to employees might be affected, while 51 percent steered clear of outsourcing because they didn’t want to lose the control.

And some restaurants that have tried outsourcing their entire departments have pulled back after poor results. Pat McCarley, chief financial officer for Cordua, which runs six South American-style restaurants in Houston with 450 employees, says that after outsourcing its entire department he felt the employees weren’t getting the support he wanted from human resources.

“A lot of the role [outsource companies] serve is to protect the company from employee [lawsuits],” he says. “We wanted HR to be a benefit to our employees.”

Cordua brought the HR department back in house but decided to continue outsourcing tailored employee programs. In late March, Cordua rolled out benefits to assist employees—including financial counseling for family life and educational planning—using an outside company.

Andrea Brooks, director of training at Metrotainment Cafes, says her company outsourced the entire human resources department while it looked to replace a key HR manager. Executives with the Atlanta-based company felt a middleman could handle HR duties. “[Metrotainment] found out very quickly that it was not successful from an HR standpoint,” Brooks says, adding that it lasted only about six months.

Executives found they lost contact with their employees when HR was outsourced. “We are a people company,” Brooks explains. After shoring up its in-house HR department, Metrotainment, a growing company with eight restaurants and more in the works, can have more contact with its 500 employees. Another company handles Metrotainment’s payroll, which frees up time for managers to get out in the field and interact with workers.

“We are so employee driven,” Brooks says. “We make money by making people happy.”

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