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Performance, Development, and Maintenance
This is the retention piece of HR, and involves the day-to-day management and maintenance of your workforce. In this capacity, HR takes on many forms, including:
- Overseeing growth and development of employees
- Administering performance reviews
- Resolving workplace disputes
- Handling discipline and termination
- Communicating organizational updates
- Arranging workplace events
- Ensuring a safe work environment
- Promoting health and wellness services
All of these tasks are handled based on a set of company-wide policies and procedures that management creates in conjunction with HR, and which are outlined in the employee handbook. These everyday tasks are the one aspect of HR that can’t really be outsourced, as they require human interaction. Small businesses without an HR generalist typically rely on the owner or a senior manager to oversee these responsibilities.
Don’t underestimate the importance of these interpersonal tasks, as they have a strong impact on employee engagement and morale. Here are some techniques to help you keep your workforce happy and productive:
- Promote positivity by fostering a culture that rewards good ideals, ingenuity, and empowerment.
- Foster open communication and collaboration throughout your organization using tools like Slack, Google Hangouts, and Trello.
- Audit your organizational hierarchy to ensure leadership is accessible and receptive to the needs of employees.
- Reward top-performing employees with more freedom, responsibility, and development opportunities.
Here are some other tips to help you with your day-to-day human resources needs:
“An annual performance review should not be the only time an employee hears from you. Frequent employee reviews will help everyone perform more effectively, retain your team members longer (preventing costly turnover), and boost company morale. If you are giving frequent feedback (monthly or quarterly), the employee will know what skills to leverage, what you want them to improve, and what you want them to do differently.” — Susan Katz, certified facilitator, The Alternative Board – Baltimore Washington Corridor
“An owner or manager should schedule 10-15 minutes each day to make rounds to staff. Walk around and get to know your employees, how they really feel, and what issues they see facing the company. When staff see managers and owners going out of the way to check in on them, they learn more about each other and form a bond or connection. People are less likely to quit a job if they feel their boss cares about them.” — Doreen A. Lang, author of “How to Drive Employee Retention.”
How to Implement HR for Small Business
If everything we have just described seems like a lot of work, that’s because it is. Small businesses typically need to use some combination of staff and outsourcing to handle human resources. We’ve alluded to outsourcing already, but to clarify, HR outsourcing means handing over some or all HR responsibilities to an HR firm or using HR software to administer certain tasks.
Let’s look at each approach to HR implementation and evaluate the pros and cons to decide which is the best option for your business:
In-House HR for Small Business
When you first started your business, you probably handled human resources in-house. That is to say, you, as the small business owner, probably served as your company’s HR department. Handling things like payroll and hiring is manageable when you only employ a handful of people, but as your business grows, you will probably want someone else to oversee admin tasks so you can focus on your core competencies.
It is understandable to want to keep HR in-house. This gives you complete control over your workforce, company culture, hiring, and benefits. The problem is HR is such a multifaceted job that it’s hard to find all the required skills in one person. So now you are looking at multiple hires, which your business might not be able to accommodate.
In reality, budget and bandwidth limitations prevent most businesses with under 50 employees from keeping all of their HR in-house. What typically ends up happening is that a business will hire an HR generalist to take care of certain tasks and outsource things that can be automated like payroll, benefits, and compliance. Once your business reaches a point where it can support a full HR team, you may want to consider bringing HR in-house.
HR Software for Small Business
HR software will save you time by automating tasks that you would otherwise have to do yourself, such as payroll, benefits, hiring, time tracking, performance reviews, and certain compliance and onboarding tasks. If these admin tasks are taking up a substantial part of your day, or if your business is growing, HR software can keep you organized and efficient.
Here are some recommendations for HR software for small business:
While most of these options come with a monthly fee, the time saved will likely more than justify the expense. To help you select the best HR software for your business, consider performing a time audit to see which tasks are taking up the most time, and picking the software that can streamline those tasks.
This is what one small business owner told Fundera about using HR software at his business:
“We automate our hiring process using software, which has reduced our workload by 20-30 hours per week. Not only are we saving tons of money and time, but we’ve also created a much better process for applicants. They are able to complete the entire application, testing, and initial screening process within one hour instead of the two-three days it used to take to email our HR team back and forth in order to complete the initial screening process.” — Tom Corson-Knowles, CEO, TCK Publishing.
Professional Employer Organization
Professional employer organizations (PEOs) are firms that administer HR on behalf of small and mid-size businesses. PEOs are staffed with HR professionals and provide services via a co-employment agreement. Under a co-employment agreement, the PEO becomes the employer of record for your employees and is legally required to administer HR services like payroll and benefits.
The advantage of a PEO is that it assumes complete control of HR, allowing you and your staff to focus on growing your business. In addition, PEOs group co-employees from all the businesses they contract with, which allows them to secure benefits packages typically reserved for large corporations. Since the PEO is also the employer of record, they share liability in employment-related legal issues, which means they are incentivized to keep your business in compliance with all rules and regulations.
One drawback of working with a PEO is that it takes away some of your independence as a small business owner, since you will need to work with a PEO on tasks related to HR. It is also important to do your research before contracting with a PEO, as some PEOs might not align with your business’s culture or be able to accommodate your business as it grows.
Some PEOs small business owners should consider include:
The cost of a PEO varies based on the size of your organization and your HR needs. Most charge per employee on a monthly basis. PEOs have become an increasingly popular option for small and mid-size businesses looking for a comprehensive HR solution. It’s definitely worth considering if working with a PEO is right for your small business’s HR needs.
Human Resources Help for Small Businesses
Although we’ve provided you with a framework of what HR is and how it can help your small business, there is still a lot more information out there. Considering bad HR could stifle growth and potentially even doom your business, it behooves all small business owners to learn as much as they can. Here are some places where you can continue your education:
Small Business Association (SBA)
Society for Human Resource Management: The world’s largest professional HR society, representing over 300,000 members in 165 countries.
HR.com: A website with access to free HR educational tools and resources.
HR360.com: An online guide to the world of human resources.
U.S. Department of Labor Website: A resource for all your HR compliance-related questions.
Setting up HR for Your Small Business
HR is a large and complicated job. But at the end of the day, it is important to remember that you are working with other people. If HR seems complex it is because humans are complex. Always strive to treat your employees with dignity and respect, because that is how you would want to be treated if you were them.
People quit their jobs every day because they don’t like some aspect of their company’s HR, whether it be poor communication, limited growth opportunities, or bad benefits. By instituting good HR practices, you not only bolster your business’s chances of success, but you create a workplace that your employees enjoy coming to every day.
- Glassdoor.com. “50 HR and Recruiting Statistics for 2017“
- UltimateSoftware.com. “The Ultimate Software 2016 National Study on Satisfaction at Work“
- Gallup.com. “State of the American Workplace“
- CareerBuilder.com. “75% of Employers Have Hired the Wrong Person, Here’s How to Prevent That“
- SHRM.org. “Don’t Underestimate the Importance of Good Onboarding“
Matthew Speiser is a former staff writer at Fundera.
He has written extensively about ecommerce, marketing and sales, and payroll and HR solutions, but is particularly knowledgeable about merchant services. Prior to Fundera, Matthew was an editorial lead at Google and an intern reporter at Business Insider. Matthew was also a co-author for Startup Guide—a series of guidebooks designed to assist entrepreneurs in different cities around the world.