Intro: Broadcasting live from the Business RadioX studios in Houston, Texas. It’s time for Houston Business Radio. Now, here’s your host.

Trisha Stetzel: Hello, Houston. Trisha Stetzel here bringing you another episode of Houston Business Radio. So I want to introduce you to my new friend. We were having some fun before we started recording here. I’ve got Tom Applegarth on the line with me today from Preferred CFO. Tom, I’m really excited to have you on the show with me today.

Tom Applegarth: I’m glad to be here.

Trisha Stetzel: So let’s talk H.R.. But first, tell us more about Tom, and then let’s dive into Preferred CFO and the services that you’re providing to businesses.

Tom Applegarth: Absolutely. So I’ve been in HR my entire career. After graduating from business school, um, I went to work for BP Amoco and was with them in an HR role. And and then then I moved to Payless Shoesource. Uh, you know which at the time that I worked for them in the 90s, they sold one out of every five pairs of shoes in the United States. Wow. Today they sell zero. So it’s still a mind blowing for me. Um, but I was there for, uh, for eight years and a bunch of different HR roles. Um, I was, uh, worked for Goodyear Tire and Rubber Company, where I was the head of HR for one of their divisions. That was about a billion in sales. Um, and 8000 employees. Um, I worked for a company called Belden, um, that did about 2.5 billion in sales. And I was the head of HR for one of their divisions. That was also about a billion in sales. I was the head of comp and benefits for them. Um, I did a lot of recruiting. Um, and, uh, and, and then then I was the chief people officer for a company called Potter Electric. And a couple of years ago I joined preferred CFO. We do outsourced finance, accounting, HR and payroll for small companies. And then we also do a fair amount of recruiting for big companies. Um, and, and a few HR projects, certainly willing to do HR projects for big companies as well. Um, but but you know, we have a great team that’s just providing air support to, to companies.

Trisha Stetzel: Yeah. It’s fantastic. So very diverse background where you get to be on the other side of all of the things that you’re doing now, you’re providing the service to people like you.

Tom Applegarth: Yeah, absolutely.

Trisha Stetzel: Yeah.

Tom Applegarth: Fantastic. And and we’re, you know, just a fractional HR leader for small companies where it doesn’t make sense for them to hire an HR professional full time because they’re too small. Well, we’ll we’ll put in an HR manager, you know, who’s only working part time. And it just saves them a lot of money.

Trisha Stetzel: Yeah, absolutely. Let’s talk about the importance of that. So small small businesses don’t necessarily need what I would consider an HR partner or service, right? Where because they’re small, maybe they don’t even have any employees, or they have 1 or 2 employees. Now they’ve grown. Why is it important to allow a service like yours to be a partner in their business?

Tom Applegarth: Yeah. So I think I think once a once a small business hires their first employee, they’ve now taken a step into the government is now a partner with them because there are all kinds of laws around how you treat your employees. And and you can you know, it’s kind of like speeding. A lot of times you don’t get caught, but when you get caught, you’re going to wish you hadn’t got caught. Um, we have we have a client that, uh, that that, uh, became a client of ours, um, you know, in the last 6 or 8 months. And they had a they had somebody doing payroll and HR that, you know, didn’t really know what they were doing. They had they were doing lots of other stuff. So, you know, not necessarily expected to know what they were doing. And we got in there and we found all kinds of laws, including they have, uh, they have about 100 employees spread out amongst 10 or 15 states. Well, and they’re using paychecks to do their payroll. Well, paychecks is a great software and and works really well, but you still need to know what you’re doing, and you got to jump through a few hoops with paychecks to have them actually pay payroll taxes in certain states.

Tom Applegarth: And this company hadn’t done that. And so we we joined them and said, oh, well, first thing we need to do is clean this up because you haven’t paid payroll, you haven’t paid taxes in, like, you know, 5 or 6 states for a year and, you know, cost them a lot more money to clean that up. There’s a few other things that were cleaning up that hopefully, hopefully nobody from the government is listening. And they don’t they don’t, you know, come after us anytime real soon. But but some of those things can I mean, even for a small business like that, a few of those things can add up to 50, 60, $70,000. Um, you know, and so I think it’s important to have somebody that knows what they’re doing. And then the other thing that we really help with is coaching and counseling of the management team. You know, employees don’t often go sit down with their boss and say, hey, boss, you’re really screwing up. And here, let me tell you how. But that’s really one of the roles that the HR manager needs to play is understanding what’s going on, getting feedback from employees, and then coaching management on how they can be better.

Trisha Stetzel: Wow, what a concept, Tom.

Tom Applegarth: There you go.

Trisha Stetzel: A feedback loop, right?

Tom Applegarth: Exactly. Absolutely.

Trisha Stetzel: The employees are doing so before we started recording. I’d like to shift just a little bit to the conversation that we were having about bringing everybody back to the office. So what are your thoughts around that, especially from an HR perspective. And payroll. It does. It makes a difference, I think.

Tom Applegarth: Yeah, it does. And so I speak with a lot of CEOs that are both clients and prospective clients. And then, you know, a few of my friends that that are CEOs today. And I have yet to meet the CEO that actually has an office. I have a few, a few clients that you know are totally virtual and don’t have an office. Um, and, you know, I’ve never had an office. Uh, um, but but the ones that actually have an office, I think it’s they all all of these CEOs want to bring people back in the office more. And the question I always ask them is, you know, help me understand why. And a lot of it’s around, you know, I’m not sure we’re getting the creativity, the teamwork. You know, there’s something about being together that we’re missing and and I agree with them about that. But I worry about, okay, if you force people back in the office that don’t want to be there, you know how much creativity and teamwork and, you know, do you think you’re really going to get. And so, you know, I think that if you tell, you know, I think if a manager so, you know, in some of these small companies, the CEO is the manager and I give them a lot more weight in, in their decision of whether or not they ought to bring people back to the office. Um, I think back to the, uh, the CEO of Goodyear Tire and Rubber Company.

Tom Applegarth: I was the head of HR of $1 billion division, and I shook his hand like, maybe three times in two years. He had no idea what was going on in our business. We had 8000 employees, a billion in revenue, you know, great guy. And and you know, and Goodyear was like 15 billion in sales. So, you know, we only had 1/15 of his business. So I didn’t necessarily expect a ton of face time with him, but he had absolutely no idea what was going on in the business. And so in that scenario, when that CEO and and I have no idea what Goodyear Tire and Rubber Company is doing from a work at home perspective, because it’s been 20 years since I worked there. But, you know, a CEO that is not managing the team, mandating that everybody come back in the office, I question whether or not they really know whether or not that’s going to be the best thing. And in most of these organizations that are doing that, that are a little bigger, and the CEO isn’t managing all the employees directly, um, almost all of their managers disagree with the CEO and don’t think they should force their team to come in. Me personally, I think the manager probably has a better feel for what’s going to help them achieve their goals and objectives. Then the CEO, who may be, you know, three, four, five people removed from that work team.

Trisha Stetzel: Absolutely. And, you know, it’s that feedback loop again, where you’re talking about having this HR person really understand what’s happening with the people in the business and able to convey or relay that message to those who need to hear it. Right. Um, what? Tell me how this shifts the way your business is operating with these businesses that are going back to the office?

Tom Applegarth: Yeah. So, I mean, we’re we’re we’re coaching the, the the CEO and and and sometimes I’m, you know, we’re we’re more successful. Sometimes we’re less successful. Um, but then one of the things that’s an easy sell that I think is really good is all right. You know, you’ve you’ve decided you want to bring people back in the office. Well, before you just totally make that mandate. Let’s do a employee engagement survey, and we’ll have some questions there about coming back to the office. But then we’ll have lots of other questions as well. But I I’m a big believer in employee engagement surveys because they they really help people provide anonymous feedback, which is the only way you really get, you know, even semi honest feedback, right? I mean, if people have to put their name to feedback, rarely it happens. But but most frequently people are going to pull their punches a little bit. And so I think that kind of anonymous feedback is good. I think I think I think that companies should get help when doing an employee engagement survey, because benchmark data is important. Because and I’ll give you my favorite example, most companies, if you ask the ask employees, um, do you think your compensation is, uh, you know, high low or about. Right. Almost. You know, usually way more than half say. I think my I think my pay is too low.

Tom Applegarth: But when you can benchmark that against other companies because I had one client that, you know asked that question, you know, came back, they were like wow 45%. I mean 55% of our employees think they’re underpaid. Tom, what are we going to do? I’m like, you ought to feel pretty good because the benchmark is like 40%.

Tom Applegarth: You guys are overindexed. You know, you guys are are they’re in a good spot doing really well.

Tom Applegarth: So don’t worry about it. You know, and so you need you need some kind of stake in the ground to understand and interpret the answers that you’re getting from your employees. But but I think that’s a good first step is, you know, let’s see how strongly employees feel about coming back to the office. And, you know, and there’s a big difference between telling everybody, I want you to come back to the office one day a week, and I want you to come back to the office five days a week, you know? So. So, you know. Hey, Ken, is there some middle ground here? Let’s let’s talk about this. Let’s not just, you know, pull a Jamie Dimon and say, nope, everybody’s back in the office five days a week or you’re fired, or I guess an Elon Musk as well for our federal.

Trisha Stetzel: Yeah, yeah. Then you have a bunch of employees stomping around and then you have a bigger HR problem, right? I mean, that’s the if you’re not careful.

Tom Applegarth: And and ultimately, to me, um, you really need to measure, you know, what are the 4 or 5 metrics that help us as a company understand whether or not we’re successful? Okay. And then if that’s what we’re measuring, what are the 4 or 5 metrics for each one of the CEO’s direct reports that help us understand whether or not their team is successful? And then you ought to be able to take that all the way down to every single employee in the company. And, you know, certainly there’s some some job functions that are easier to measure than others. But but the question I always ask myself is, if you cannot identify the 4 or 5 metrics for that job that tell you whether or not it’s being successful, are you certain that you need that job?

Tom Applegarth: And so and ultimately if you’re managing an organization I think you’re much better served to manage the 4 or 5 metrics for every person going down the organization. So, so if you’re a CEO and you have eight direct reports, each one of those direct reports ought to have the 4 or 5 metrics that help you tell if they’re successful, if they are exceeding the goals and exceeding your expectations, you ought to go play some golf, because all you’re going to do is screw this up. If you get in the middle of this, go play some golf, enjoy some work life balance. Go think about where your organization should be in five years. But don’t get into the day to day because you are green on all of your metrics now where you’re red. All right. Now dig in and figure out what’s going on. And if you’re only measuring the 4 or 5 metrics of the people that report to you as the CEO, what, how what percentage of their team is in the office probably isn’t going to be one of those 4 or 5 metrics that really tell you whether or not your organization is being successful?

Trisha Stetzel: That’s right. So, Tom, if someone’s interested in having a conversation with you about this, about HR, about all of the work that you’re doing out there for these companies, how can they find you?

Tom Applegarth: So you can go to preferred Cfo.com, or you can just Google Tom Applegarth and it’s Apple like the fruit. And Garth is in Garth Brooks. So very phonetic. And luckily my last name is unique enough that if you Google Tom Applegarth, Human Resources. I’m the only one who comes up.

Trisha Stetzel: The only one that comes up. Your face will be all over the screen. Tom.

Tom Applegarth: That’s it. That’s it.

Trisha Stetzel: Um, can we talk about the importance of outsourcing something so important to a business? So. And I believe unless you’re an expert at payroll or HR, you shouldn’t be doing it. So tell me. Tell me your thoughts on that.

Tom Applegarth: Yeah, I agree with that. I think that goes for every function. You know, I mean, every small business owner is an expert in some things. And if you’re an expert, well, there’s absolutely no need for you to bring on another expert. Right? You’re the expert. Yeah. Um, but if you don’t think you’re the expert in HR or payroll, you’re probably right. And you’re going to potentially there’s a lot of lot of people I’ve worked with over the years that have spent five, six figure sums Because they didn’t have an expert. And if you’re a small company, generally if you have less than 100 employees and maybe even less than 200 employees, going and hiring an HR and payroll expert is probably costing you more than it needs to. Um, because if you have, especially if you have less than 100 employees, you don’t really have a full time job for an HR expert. You’re either going to be overpaying, or you’re going to pay somebody who may say they’re an expert, but you’re not paying them enough for them to really be an expert. And, you know, I’ve there’s a lot of clients that that we bring on that had a, you know, somebody who, you know, wasn’t an expert but doing the job and they’re just not they’re just not equipped to do it. It’s not their fault. They’re an expert in something else. But you know, and definitely in HR everybody seems to think that that they know what they’re talking about. Um, usually, you know, 5 or 6 minute conversation. I can help them understand. They don’t really know what they’re talking about. But it’s one of those functions probably a little bit like marketing to, you know, everybody thinks they’re an expert in HR and marketing. And, you know, most of them are probably wrong.

Trisha Stetzel: I would agree. And there’s so much liability alongside of being your own HR person. Right. Or hiring somebody with from within. And that happens often. Somebody gets promoted. Now they’re the HR person right. And they don’t know. And they’re not looking at the laws like your company would and know all of the changes that are happening every it’s not even just every year. It’s every few months there’s something new out there. And that is exactly why someone would want to, um, engage with you. So let’s talk about not everybody understands this whole idea of fractional. So you do a lot of fractional work. Air. We talked about the CFO work and some of these other areas that you can do fractional work. So first explain what that means fractional. And then tell us the services that you offer in that fractional space.

Tom Applegarth: Yes. So fractional means getting you know somebody that has 20 plus years of experience in an area and is an expert and, and has lots of experience with, you know, big companies, small companies, all sizes of companies, and you’re basically hiring them on a part time basis because you can’t afford them on a full time basis, and you probably don’t even have 40 hours a week worth of work if you’re if you’re a small company. So. So that’s where preferred CFO for CFOs, controllers, CPAs, HR managers and payroll managers. That’s what that’s what we do is we have people that are working for us full time, but they’re working for 3 or 4 different small companies, and we’re it’s just like having your, you know, a full time employee in that we pick up the phone 24 over seven, just like a full time employee. You don’t always get us on the first ring, but we’re calling you back really quickly because we’re part of your team and and we’re we’re embedded. So it’s it’s really the best of all worlds that you’re you’re not paying as much. You’re getting the expertise, but you’re still getting somebody who’s going to return your phone call within, you know, a reasonable amount of time, usually hours. I mean, you know, you call just like just like when the CEO of of Potter Electric used to call me, it might take me an hour or two to get back to him if I was in a meeting or whatever. Um, it’s the same with the CEOs of small companies that are now giving me a call or giving somebody on my team a call. I mean, we’re returning that call as soon as we can.

Trisha Stetzel: Yeah. So bringing this expertise at something affordable for these small businesses, I think that’s so important for people to hear. You can have amazing experts on your team and not have to pay for them to be an employee on your team. Right. You can use them as a fractional service. And I think that’s so important. So as we start to get to the back end of our conversation, I’d love to hear your favorite story. It could be a client story, some part of you figuring out what you wanted to be when you grew up, I don’t know. So tell us a story, Tom.

Tom Applegarth: Well, my my favorite story. And and it’s I mean, it’s it’s the one I, I, I tell the most because I think one of the things that companies do that can cost them a ton of money is when you terminate somebody, every time you terminate somebody, there’s a potential risk. And so the story I always tell to help people appreciate this risk is when I was involved in it, we had a plant manager who was managing a plant of about 100 employees and a horrible plant manager. Um, but he had worked for the company for 30 years, been around forever, but, you know, retired. My my hypothesis is he retired, but just didn’t tell anybody. He kept coming to work, uh, occasionally. Um, and so, so, you know, so his boss was like, we need to fire this guy tomorrow. I’m like, well, you know, he’s been here for 30 years. We probably need to first, you know, if not from a moral perspective, from a legal perspective, we need to give him firm guidance on What are the 4 or 5 metrics he’s not hitting that he needs to hit, or we’re going to fire him and let’s do it in writing and let’s you and I do it together. So we have witnesses. So if this thing ever ends up in court, you know. So we gave that to him. And a couple months later his boss is like, all right, I need a firing today. He’s not hitting those 4 or 5 metrics because, well, he worked here for 30 years. He’s, uh, you know, it’s only been a couple of months.

Tom Applegarth: He’s got, you know, he’s turning a little bit of an organization. It’s not like it’s just him personally. Right? He’s trying to change. So let’s, let’s, let’s give him another written warning and tell him, here are the 4 or 5 metrics that your organization needs to improve. Or we’re going to going to have to fire you. So we did that a couple months later. All right. Let’s fire him right now. I’m like, okay, all right, I think we can fire him. But and I’m a firm believer in this and this this incident helped, uh, helped reaffirm it. I’m like, any time you fire somebody, especially if they’ve been with you for 30 years, we ought to give them severance if they sign an agreement not to sue us. Just think of it as insurance. This guy was like, no, you’ve made me waste four months. We’re not giving him a dime. I’m like, oh, dude. So I went to his boss. You know, the division president. And I’m like, hey, come on, 30 years. We need to do it. And a division president is like, no, we’re not. We’re not a dime. I’m like, it’s a mistake. And then the mistake I made is I didn’t go to the CEO. I should have. I said, oh, it’s a mistake, but I guess, you know, you’re a division president. I’ll let you make a mistake. Made a mistake? Of course. The guy go, gets a lawyer, sues us. That cost the company $1 million. And the CEO came to see me and said, Tom, what happened? And I’m like, I’m sorry.

Tom Applegarth: I should have. I should have come to you. I knew this was going to turn out bad. I made a mistake. I should have come to you. I didn’t, um, you know. And, hey, that’s what happens. You get a jury of 12, they only need nine. They do crazy stuff. And, uh. And there’s no doubt in my mind that we weren’t discriminating against him based on age, which was his allegation. But that doesn’t matter. It doesn’t matter what’s true. What matters is what a defense attorney who’s I mean, a plaintiff’s attorney who’s working on contingency can convince nine of 12 jurors. That’s all that matters. And that’s why I think you need, you know, uh, the certainly a well written agreement. Severance agreement. And you don’t have to give people a lot of money. A week’s pay, two weeks pay. I mean, you don’t have to give people a lot of money, but give them a little bit of money, have them sign a properly documented severance agreement. There’s a lot of rules there, so make sure you know you don’t just write one out on a napkin. You need to know what you’re doing for it to be enforceable in court. But but literally in my 30 plus years, either me or somebody who’s worked for me has probably fired over a thousand people. And, um, and, you know, most of them have signed a severance agreement, and no one who has signed a severance agreement has ever, um, got an attorney to be willing to take their case.

Trisha Stetzel: Yeah. Wow. That is a very expensive lesson to learn. Tom.

Tom Applegarth: Expensive lesson.

Trisha Stetzel: Thank you for sharing that. So if people want to just remind us how they can find you, if they want to have a follow up conversation with you.

Tom Applegarth: Yes. Go to preferred CFO. Com or Google Tom Applegarth. Um, and the human resources and you’ll see my LinkedIn and everything else there.

Trisha Stetzel: Awesome. And I love that you made reference to Garth Brooks because I kind of like him. And it’s Houston rodeo time.

Tom Applegarth: I’m just saying I like him, too. In fact, my my wife with our first born child said maybe we should name him Garth. I said, come on, Garth, Apple. Garth. No, that’s I have to veto that one. That’s awful.

Trisha Stetzel: It’s not a good parenting decision. I’m just saying. Tom, thank you so much for being on with me today. The work that you’re doing is really important to small businesses, medium businesses, giant businesses. And I think the more we can educate our small business small to medium sized business owners, the more they can take advantage of these really great services that are actually affordable. Yeah.

Tom Applegarth: Thank you. It’s good to be here.

Trisha Stetzel: Yeah, absolutely. And that’s all the time we have for today’s show. Join us next time for another exciting episode of Houston Business Radio. Until then, stay tuned, stay inspired, and keep thriving in the Houston business community.