The Website and Blog of HR Author and Speaker Lori Kleiman

Nine Questions to Help Small Business Owners Consider How to Handle HR

nineWhether it’s recruiting, retaining or training employees, or maintaining compliance with federal and state guidelines, human resources departments play a critical role in small businesses. But not every company needs a dedicated HR staff. In fact, many small businesses can do—or have already done—without a formal HR department.

No matter the size of your business, you can’t ignore the HR function altogether. But there are options for handling HR-related issues and tasks, and a formal HR department may not be the best solution for everyone. Consider the following questions to help you evaluate the best HR approach for your business.

Do I have a touch point for my employees? Employees are more productive when they feel like they’re cared about, when someone’s paying attention. The HR function originally was formed to provide that attention. But the role has grown to being responsible for the “the life cycle of an employee”—from candidate development to separation of employment. Do you have someone who can be focused on employee issues and career development throughout their relationship with your organization ?

Where can I put HR? In many small organizations, HR is a hybrid function within finance or operations departments. Sometimes it’s an outstanding office manager or administrative person who handles HR. Wherever it’s housed, HR ideally should have a direct reporting line to the organization’s president or chief executive officer so that HR is focused on organizational goals rather than those of a particular unit. And if an individual is handling HR in a hybrid role, organizations need to provide continuous training on HR issues for that person. So, can you combine HR with another function, or would your organization be better served with a dedicated HR team?

Can I outsource HR? Some organizations have reasons for not wanting the HR function to have executive-level influence. Or they simply don’t have time or staff to devote to HR-related tasks. Do you have capacity to handle HR internally, or should you consider outsourcing it altogether? Is your outsourcing decision based on the ability to provide the HR expertise or just an evaluation of expense.

Do I have workforce issues? If you have particularly high turnover, trouble recruiting workers, confusion with compliance or other workforce issues that can be time consuming to manage, your organization may require dedicated HR staff. Are your employee issues fairly minimal or do you have more extensive workforce challenges?

What are my employee costs? When you examine budgets, you may be shocked to see how large a percentage of your expenses are employee related. It’s common to see 40 to 70 percent of organizational budgets focused on employees. Talk to the person most responsible for budget items that impact employees. Seek feedback from employee-facing vendors such as your payroll provider or benefits consultant. Consider hidden costs like unemployment and workers’ compensation that are typically kept in check by HR. What would be the impact on those costs if you had dedicated HR staff? And if you didn’t?

Can I leverage technology? A vast majority of the HR function is administrative. Many HR tasks can be streamlined or eliminated with technology. Can you implement technology solutions to take over some of those

Can I handle compliance issues on my own? Compliance needs constant attention in businesses of all sizes. Regulations exist for recruitment advertisements, new hire paperwork, employee files, treatment of employees, social media and a whole lot more. And that doesn’t even include healthcare reform. Do you have the understanding of compliance issues needed to manage them?

Can HR help me meet my business goals? Highly functioning HR departments are focused on and expected to contribute to achieving organizational goals. They have an understanding of the business, industry, mission and strategic initiatives. They add value by creating programs that drive business results and keep the workforce motivated and operating effectively. Can you envision giving your HR function a seat
at the management table?

Do I have an effective leader for the HR function? Whoever leads the HR function needs to be a trusted member of your team. He or she also needs knowledge of and experience with technology, finance, sales,  operations, and vendor and talent management. HR leaders need to be innovative and focused on business goals. Do you have someone up to the HR challenge?

Your answers to these questions can help you get a better sense of your HR needs. Several resources also can help small businesses evaluating HR. The Society of Human Resources has helpful tools, services and roundtable groups for anyone handling HR. Access to various HR databases and websites can be provided at low cost through your benefit vendor or payroll service. Community colleges offer courses to help you learn more or stay up to date on HR topics.

Whatever solutions you decide to implement, make sure they add value to your business and fit the culture of your organization.

Photo by Gareth Simpson

  1. Very helpful questions and insights!

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