Do Small / Mid Sized Businesses Really NEED “HR”?

Only if they want to optimize Profits! 

Some owners of small to mid sized businesses think of “HR” as “that department in a big company I used to work for that was just known as the paper pushers and the compliance police”. Unfortunately, because there are so many “tasks” that need to be done in HR, that’s often what the first person hired in that area is responsible for. But many never get the time, nor are they given the support, to shift their focus to the strategic side of HR. And what does that even mean?

Let’s define “HR” in a realistic, practical way to put everyone on the same page. HR is the people side of a business, and people (employees) are the glue that holds everything together and causes the P&L to actually perform. Okay. That’s huge. So let’s break it down into smaller pieces that make it easier to wrap our minds around.

Recruiting, Hiring, Compensation, Benefits, Payroll, Performance Management, Workplace Liability Management, Workplace Safety, Employment Compliance, Record Keeping, and Separation. Defined this way, it’s the 11 parts of the “tactical” employee lifecycle. All the things that happen employee‐wise on a day‐to‐day basis. But “tactics” are only “things done to accomplish an end goal or strategy”.

To have a “Strategic HR” focus in your business that helps drive the P&L, we still have to define the “HR Strategies” above the “HR Tactics”. There are 7 HR Strategies that if not done properly, or to their fullest extent, can drain, restrain, or threaten profits.

1) HR Time, and 2) HR Money: Nothing(!) happens in business without either Time and/or Money to make it happen. Whether it’s IT, or Finance, or Sales, or HR. So it’s HR’s fiduciary responsibility to ensure those two resources are optimized when they develop and adjust the HR portion of the company’s Business Plan.

3) Business Protection: Employment is one of the most regulated and potentially litigious parts of running a business. There are three critical Employment Risk focuses that HR should address – Mandatory Risks, Voluntary Risks, and Proactive Risk Reduction.

4) Long Term HR Cost Containment: There are costs that are always going to exist in a business, but the internal experience of the company can lower the cost or mitigate increases. Things like workers compensation, state unemployment rate(s), and certainly the spiraling increases of health insurance.

5) Turnover: This is a huge drain on expenses, time, and productivity in a company, and it can increase exposure to employee litigation, because the point of separation is the riskiest in the employment relationship.

6) Talent Attraction: The inability to compete with better or bigger employers to attract the best and brightest employees can significantly hold back a company’s success.

7) Employee Productivity: Especially in today’s still iffy economy, almost all employers are trying hard to find ways to get more out of their staff. And often the number of their staff is smaller than what it was in the past.

So all businesses, whether they have 5, 500, or 5000 employees can develop a mindset that HR will help drive Profits if they first prioritize which of the above 7 HR Strategies need the most focus at that time.  Then they should identify which of the 11 Tactical parts of the Employee Lifecycle will have the most impact on the chosen Strategy.  Next, they should single out which of the many, many possible HR Tasks, Functions, and Services will affect the chosen objective(s).  And finally, they should identify which of those Tasks are being done and which are not, so they can ensure the current activities are being performed at their optimum level, and they can put in place the needed resources to start the new – now Strategy and P&L focused – tasks.