Does an SMB Really Need a Dedicated HR Professional?

Updated: April 30, 2009

Issue

A company with less than 100 employees has the same HR issues as any larger organization, only in smaller quantities. SMBs (small to medium-size businesses) face many of the same legal and regulatory burdens; hiring and training needs; and payroll and policy administration. But HR problems arise less frequently in a smaller company, leading many SMB managers to believe that the HR function can be shared among members of the firm without sacrificing quality or compliance.

Analysis

In many SMBs, the HR function is divvied up along seemingly obvious lines. Payroll, taxes and benefits payments are usually handled by the accounting department. Hiring, training, motivation and performance reviews are the province of line managers. Time and attendance generally fall to the office manager. Legal and regulatory matters that require detailed expertise are often farmed out to part-time consultants. What more does an SMB need?

While all "essential" HR functions seem to be handled by a department, they are often not covered well. Recruiting , for example, is an ongoing process and not just an occasional chore. To hire well, a business needs continuous input on salaries , benefits and other competitive metrics. Keeping employee spirits high is another area requiring constant attention. Left to a single manager's discretion, motivation and morale become utterly dependent on that manager's limited understanding of what impels people, leaving out the ever-growing body of related knowledge that a dedicated HR person can review.

Overlooked Functions

When HR functions are shared among already overworked managers, there is a tendency to take risks by skimping on some legal and regulatory statutes. The phrasing of help-wanted ads may not be vetted for compliance with anti-discrimination laws, for example. Interviews may be conducted in an off-the-cuff fashion, without structured formats that help protect the company against charges of prejudice. Safety programs may be less than comprehensive. The benefits package that has always served the company may not be reviewed in light of current market conditions.

While a company may go for years without being penalized for these oversights, it will eventually face a large legal liability. A dedicated, full-time HR person who devotes his or her duties to minimizing risks is a proactive investment.

Being Competitive Takes Intelligence

A major role of an HR specialist is competitive intelligence. What's the going rate for a mechanical engineer with five years of experience? What sort of health insurance coverage are your competitors offering? These details can be learned through constant recruiting efforts, something that part-time, two-hat HR managers don't have time to do.

When to Hire a Dedicated HR Person

Many small companies of 50 or less employees, which are not in growth mode, can get by with sharing HR functions among existing employees. But most businesses plan for expansion, and rapid growth especially requires a focused, dedicated HR manager.

The risks of noncompliance and being less than competitive apply equally to small companies and large. The intelligence provided by ongoing, full-time recruiting efforts is worthwhile for a company.

Reliance on outsourced payroll , benefits administration and other HR functions can cost more than a full-time HR professional. And these outsiders often don't know any more about your company than you have time to tell them. An in-house HR person is familiar with your employees and can address their needs much better.

The Bottom Line

In general, the time to hire a full-time HR professional is whenever your firm wants to treat employees as its most valuable asset.

For more information on HR, consult the HR Resource Center, where you'll find comprehensive research, community-contributed content and advice from Focus Experts.

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