“When to Hire a Human Resources Manager”

A human resources (HR) manager can potentially be the most important business partner you ever have, yet few emerging-growth entrepreneurs make this position a priority until they become overwhelmed by personnel and growth issues. The most successful companies view human resources as a vital link to their business success from the beginning. Take steps early to handle HR issues effectively and to hire the right HR manager to guide your growth.

In this Quick-Read you will find:

• How to implement an HR program in the early stage of your business.
• Methods of managing HR issues before hiring an expert.
• How to decide the timing on getting an HR manager on board.

SOLUTION [top]

Human resources covers more than just payroll and benefits — it’s about people management. No matter what size your company is, you can develop HR programs that will nurture employees and grow your company.

How To Implement an HR Program from the Start

Whether you have one employee or 100, people management should be paramount. Many federal laws do not apply to companies with fewer than 15 employees, and payroll may be fairly straightforward; but how you manage your staff will determine your growth and success as a company. From the beginning, consider doing some or all of the following:

1. Define your values. Focus on employee management even before you have employees. How are you going to treat people? Who will have the authority to make decisions? What benefits will you offer? Which is more important: Minimizing HR expenses or offering more and better HR services? The answers to these questions will provide the foundation for an HR program.

2. Learn the laws. Get expert legal advice for your developing company to ensure that you are in compliance with the federal and local regulations that apply to a company of your size.

3. Develop a hiring strategy. What kind of people do you want to guide your emerging-growth company? How will you find and retain them? Develop a plan for finding people who share your values.

4. Outsource. Contract an HR firm to handle specifics, such as employee screening or training and payroll services. Outsource firms can help you manage the burden, but they won’t have specific insights for your business. Don’t count on them for a unique approach — they offer similar programs to all their clients. See the Quick-Read "When to Outsource HR Functions" for more detailed options.

5. Manage as a team. Form an employee committee of interested volunteers to plan and manage routine HR issues including training, performance appraisal processes, employee handbook development and employee recognition programs. Often payroll responsibilities can be absorbed by the finance or accounting personnel, and labor-regulation compliance activities can be guided by your attorney.

6. Use teams of employees to evaluate programs when needed. Want feedback on the employee benefit package? Assemble an advisory committee of employees to evaluate the package and return with recommendations. Need new job descriptions? An employee advisory committee could help.

7. Do-it-yourself. Determine your values, and then work with your employees in a way that is consistent with those values. Focus on people but make sure you are also meeting payroll and the other administrative duties. In the Resources section, you’ll find a handy set of HR forms available for download.

When should you hire an HR manager? Here are some guidelines:

1. The earlier the better. An HR professional is a critical member of your executive management team. A sophisticated approach to human resources will help you find and retain employees important to your growth and help you meet all company objectives.
2. When your attorney serves as an HR surrogate. If you find yourself confounded by legal questions and in frequent communication with your attorney, you need an expert on staff to help guide the corporation.
3. When the company expands. Some experts say your company is ripe for an in-house HR professional when your staff grows to around 27 people. The 1994-95 SPEC study (Stanford Project on Emerging Companies) found that among rapid-growth Silicon Valley "companies that had ever hired a full-time HR employee, the median firm was 3.75 years old and had about 65 employees when that person was brought on board." [Strategic Human Resources: Frameworks for General Managers, by James N. Baron and David M. Kreps (Wiley, 1999), 490.]
4. When it is clearly cost-effective. Factors that determine whether you need a full-time HR specialist include:
   • Value added. Do you need the expertise of an HR specialist to avoid costly violations of labor regulations? To see that the most appropriate compensation and benefits provide incentives for valuable employees to remain loyal? To assure that uniform best practices are followed in HR activities, such as recruitment and hiring, personnel policy documentation, performance appraisals, and employee development?
   • Opportunity costs avoided. How much income do you forego because your money-making production and sales people are spending time at HR functions instead of their specialties?
   • Direct costs. U.S. human resources manager salaries averaged almost $60,000 in 1999, and HR assistants averaged $28,000. Check the going rates in your region at the U.S. Department of Labor Wage Estimates Web site.

REAL-LIFE EXAMPLE [top]

Example 1

In just two years Gregg Cole’s company, Beanstalk Internet Service has grown from a startup with annual revenues of $250,000 to revenues of nearly $600,000. With five employees and clients throughout southern Michigan, the company’s rapid expansion means HR issues are becoming critically important.

Before even beginning the business, Cole and his partner identified the type of employees they would need to deliver top-notch technical service, a cornerstone of the company.

Now he’s considering whether to farm out payroll services and some of the other administrative duties. Before he decides which route to go, Cole is working with three consultants, all specialists in different areas, to help him identify the best growth strategies. He’s also evaluating how soon he can hire an HR manager as part of his staff.

While he has few formal employee management policies, Cole believes in leading by example. "We are putting policies in place with everything we do and say," Cole said. "We are trying to be energetic and interested every time we go to a customer, and that gets instilled in our employees."

Example 2

When personnel matters began taking up three hours of his day, Darrell Jackson decided it was time to find an HR manager.

The vice president of Jackson-Dawson Integrated Marketing Communications in Greenville, S.C., feared legal fallout if an HR problem slipped through the cracks, and he didn’t have time to respond to job queries from newly minted college graduates.

"You can go to seminars, but it’s a touchy area," Jackson said. "When we were small it wasn’t such a problem. Now we’re getting more and more resumes. I regretted having those people apply and not get a response from us. I don’t like to think I might have missed the boat and have them not apply again in the future."

Fast growth of the company forced the issue. Over the past 18 months the company has added more than 10 positions, bringing the staff to 50. Even with help from finance manager Barbara Plotczyk, who had prior HR experience, Jackson found employee reviews, benefits selection and hiring drew his attention from his marketing and public relations duties.

He finally decided to move Plotczyk full time into HR management, finding a new person to be finance manager. The results: Every person who sends in a resume gets a response, the firm stays up to date on changes in employment law, and morale is higher.

"Some people wouldn’t come to me with their problems because of my position; it intimidated them," Jackson said. "Barbara’s door is an open door."

It wasn’t that employees feared what Jackson may do in response to their issues, an HR manager is just viewed as more of a neutral party, he said. In one instance, a pregnant staffer went to Plotczyk to discuss whether she should return after she gave birth. Another time an employee had problems with a co-worker who Jackson supervised and brought it to the HR manager. "He was afraid I might be biased," he said.

DO IT [top]

1. Assess and document your values regarding personnel management. Is your behavior consistent with what you say? Consider your corporate culture and the benefits you provide. Evaluate the role of your employees in your overall corporate success.
2. If you have fewer than 20 people, consider whether all your HR needs are being met. Are you handling personnel issues while also managing the payroll, benefit packages and administrative duties? Are you working to achieve your corporate objectives? List the HR areas you are successful in and those that are being neglected.
3. Draft a job description for the HR director that lists the HR work being done by you and your staff that a director would assume. You may want to use ideas from the U.S. Department of Labor’s Occupational Outlook Handbook and Dictionary of Occupational Titles. In the DOT, note especially the responsibilities listed for HR clerk in class 209.362-026 and the various HR managers listed in class 166 — especially 166.117-018, the personnel manager. Estimate the staff time and opportunity costs of continuing to do the work yourselves, and compare your estimate to the cost of adding an HR specialist.
4. Get estimates from local HR service firms for carrying out the HR responsibilities you listed. Ask for estimates for individual functions, such as payroll, benefits and training, so you can consider outsourcing each.
5. Fill in the gaps. Can you outsource some of the payroll and administrative responsibilities? Would employee teams be most efficient when it comes to researching new incentive programs or employee guidelines? Or is it time to hire an in-house manager on a part-time or full-time basis?
6. Do it. Whichever method you decide will best serve your HR needs at this time, start the process.
   • Ask employees if they would be interested in serving on a committee to discuss and manage HR issues. Form the group and give them a task.
   • Ask colleagues for referrals and begin calling HR contract firms to take on some of the administrative duties.
   • Decide whether you want a professional to lead your HR activities, or a clerk to do the detail work for committees and task forces appointed from your present staff or provide liaison with an HR service agency.
   • Develop an official job description, and begin the search for the right HR person for your company.

RESOURCES [top]

Books

Managing Human Resources in Small and Mid-Sized Companies, 2nd edition, by Diane Arthur (AMACOM, 1995). Chapter 2: "The Human Resources Function in Small and Mid-Sized Companies."

Internet Sites

Personnel Forms, Entrepreneur.com

"Worker, Rule Thyself," by Christopher Caggiano. Inc. (June 1997): 89-90.

"Do You Need an HR Director?" by Donna Fenn. Inc. (February 1996): 97.

Society For Human Resource Management
Click on the Publications button to browse HR Magazine articles. Click on the HR-Careers button to find job ads to use as models when the time comes to start recruiting an HR person.

Writer: Polly Campbell and Brenda Russell

Marianne Koch, a visiting associate professor of Management in Science and Technology at the Oregon Graduate Institute of Science and Technology, contributed to this Quick-Read.