At what point does a small business need to recognize the value of human resources expertise? When does it make sense to consider moving your small business in a more formalized direction from a human resources perspective? How can a small business act more like a large company when dealing with employees, and why even think these thoughts?
For most small businesses, their primary assets are wrapped up in their people. The business may have a great product, a creative visionary at the helm and even the bank’s financial support to enable growth but their employees will make the difference between success and failure in the long run. Successful companies pay attention to their “human capital” (a term I personally despise).
The scenario is almost always the same for small business when it comes to human resources. The business founder takes care of HR until he or she hires an administrative assistant, at which time they pass that responsibility to the new Administrative Assistant. The company grows till they hire a CFO / Controller who then takes over HR. The Company grows to about one hundred employees and finally considers hiring a HR professional. Although this is a normal progression, chances are much has taken place, or should have taken place related to the human resources of the company. Chances are there were poor hiring mistakes and firing mistakes made; savings lost from benefits selection; employees being paid too little or to much or classified wrong opening the company up for FLSA litigation; confusion over employee actions or expectations created by no job descriptions or handbooks; losses of great employees for unknown reasons; and the list goes on. Finger pointing at the founder, Administrative Assistant or Controller won’t work for several reasons. The founder is most always the technical expert turned business owner and is correctly focused on growing the business. The Administrative Assistant had HR added to his / her job description and thinks of the position as merely administrative in nature, maintaining employee files, sending out birthday cards and reminders of benefit enrollment. The Controller is very capable of doing the job and knows about all of the HR legal requirements but is used to and most comfortable in dealing with black and white financial matters and not so much with the maraud of grey areas involved with HR. The Controller delegates parts of HR to the Accounts Receivable Clerk, the Receptionist and anyone else whose head happened to pop up from their cubicle at the wrong time. Sound familiar?
Progressive companies understand the value added services provided by a trained and talented HR professional however hiring a full-time HR Director is not the only option available to small businesses, and in many instances may not be the most cost effective. Alternatives such as job sharing, outsourcing all or part of the HR function to a specialized consulting firm or utilizing a PEO (Professional Employers Organization) may provide the expertise and level of professional service required to carry the company until a time more appropriate for hiring a full-time HR professional employee. Companies should consider conducting a human resources process, procedure and systems audit to determine legal compliance and HR best practice standards. This audit can serve as a baseline from which a defined HR program can be developed and implemented.
Human Resources is more than simply an administrative function. It is both a tactical and strategic business partnership solution. The earlier in the business formulation and growth stage this concept in understood and implemented the greater value will be realized by both management and employees.