If you’re a small business owner or founder of a startup, chances are you’re cobbling together the various pieces of HR for your business. Maybe the office manager handles the day-to-day tasks of onboarding new hires and administering payroll. Or maybe you hired an HR consultant to get you up and running, and now you’re the one doing the day-to-day maintenance and dealing with updates. There comes a time when a cobbled-together approach to HR will no longer work. The question is: how do you know it’s THAT time?
According to an article published by the Society for Human Resource Management (SHRM), a study of about 350 small businesses found that the need for expert HR support often correlates to the number of employees:
- Companies with fewer than 50 employees: owners or CEOs assumed the role of HR manager
- Companies with 50-100 and 101-150 employees: had HR practices and strategies in place (e.g., job analysis, recruitment, compensation, benefits plans)
- Companies with more than 100 employees: two times as likely to hire an HR professional
“The 50-employee threshold—when worries of regulatory compliance with labor laws kick in—is often a critical stage of development,” Donald F. Kuratko, a professor of entrepreneurship at Indiana University, told SHRM. “In the early days of a small business, employees come for the passion and excitement of building a new company. Later, they may come for different reasons.”
If you’re at that 50 employee threshold, or you’re wondering if now is the time to add an HR expert to your leadership team, we have three signs that it’s time to do just that:
You have more than 50 employees
Whether it’s a payroll question, onboarding session, benefits management, or employee relations issue, the more people you hire, the more your HR-related tasks will increase. (And, frankly, the more HR emergencies and difficult personal/personnel situations there will be to solve.) As the owner, you should be spending your time on business strategy.
While people are a critical component of that strategy, managing HR shouldn’t be your primary focus. (If it is, maybe you missed your calling in HR, but I digress.) Similarly, your office manager may have been willing to handle the HR tasks when there were 15 employees, but now that there are 50 employees? That person may be fed up with handling “other duties as assigned.” As your employee count reaches the 50 employee mark, be mindful of the amount of time HR tasks take. Use that as information to identify when the time has come to look for an HR manager who can help.
You’re actively hiring
As your business grows, so does your need to hire the right people—not just people to get the job done (or your family and friends). Finding talent, whether full-time managers, or temporary help from part-time employees and interns takes time and skill. Sure, anyone can post an ad to a website, but going through those applications, scheduling interviews, asking the right questions, and then making a competitive offer? If you want a good fit and higher retention rate, that requires training and skill. Recruiting, hiring and retaining talent takes a strategy and the establishment of an employer brand. HR managers understand how to create and implement the strategies that will help meet your hiring and retention needs.
It’s also critical that early in the stage of your business, you’re establishing the type of employer brand that will help your company succeed. That includes creating a strong culture, engaging employees, and investing in professional development. There’s no “off-the-shelf” option when it comes to your employer brand. Creating a work environment in which people thrive takes effort; hiring someone to manage the people side of the business is the first step in making your company an employer of choice and retaining your amazing employees!
You don’t want to risk any hiccups with HR compliance, benefits, and employment law issues
Once you reach the 50 employee threshold, employee relations issues often increase. Your need to understand which employment laws (including those related to the Affordable Care Act) apply to your business also increases. Again, it comes down to time, energy, and education. It’s likely that the business owner (or the office manager assigned to handle HR tasks) doesn’t have what it takes to efficiently handle all these items. If you’re concerned about the cost of having an HR manager on staff, consider the cost of not having one—in terms of time and the financial impact if you’re found at fault for not adhering to employment laws or not providing required benefits. Even if you don’t hire someone full-time, it’s worth considering part-time HR support or using an outsourced HR service to handle ensure you’re in compliance with employment laws.
If you’re considering hiring an HR professional to join your team, make sure you embrace and communicate the business value HR brings to the table to the rest of your team. Link this new role to business goals and make sure you hire the kind of person who can help enable your employees do their best work. In terms of the focus for your new HR partner, discuss this list and identify what the top HR priorities are for your business:
- Recruiting and onboarding
- Compensation, benefits, and payroll
- Workplace culture/employee engagement
- Compliance policies, procedures, and gaps
HR professionals who work for a small business serve as generalists — they get to explore new areas, see the direct effect of their work, and make fast decisions. It’s a great opportunity for someone who enjoys working autonomously to take on a variety of responsibilities and challenges. Hire the right person to serve as your HR partner, and you’ll be excited about the results they help you and your employees achieve.
Liz Sheffield has more than a decade of experience working in HR. Her areas of expertise are in training and development, leadership development, ethics, and compliance.