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Small Business Digest


HR Still Offers Challenges To Small Business Leaders

Whether 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 a small business, the HR function can’t be ignored altogether.

According to Lori Kleiman, 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 evaluate the best HR approach for any small business.   

Does the company have a touch point for 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. Does the company have someone who can be focused on employee issues and career development throughout their relationship with the organization ?

Where can the HR function reside?
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 the company combine HR with another function, or would the organization be better served with a dedicated HR team?

Can the HR function be outsourced?
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. Does the company have the capacity to handle HR internally, or should it consider outsourcing the function altogether?  Is the outsourcing decision based on the ability to provide the HR expertise or just an evaluation of expense.

Does the company have workforce issues?
If the company has particularly high turnover, trouble recruiting workers, confusion with compliance or other workforce issues that can be time consuming to manage, the organization may require dedicated HR staff. Are employee issues fairly minimal or does the have more extensive workforce challenges?

What are employee costs?
When management examines budgets, it may be shocked to see how large a percentage of 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 the 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 the company had dedicated HR staff?  And if it didn’t?

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

Can the company 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. Does the compoany have the understanding of compliance issues needed to manage them?

Can HR help meet the company’s 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 management envision giving the HR function a seat at the management table?

Does the company have an effective leader for the HR function?
Whoever leads the HR function needs to be a trusted member of the management 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. Does the company have someone up to the HR challenge?

The answers to these questions can help the company get a better sense of it’s 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 are implemented, make sure they add value to the business and fit the culture of the organization.

Lori Kleiman is a Glenview, Ill.-based human resources consultant. She is the author of the recently published book, Fire HR Now.

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