How Does a Small Company Build an HR Function? Four Thoughts

Situation: A small company has no formal human resources, pay scale or performance review systems. The CEO wants to create a structure to address these gaps, as well as to encourage employee feedback. How do you build an HR function for a company with under 20 employees?

Advice from the CEOs:

  • Many small companies outsource HR services. There are a number of firms who provide outsourced HR services, and through them much of the HR activity can be conducted online. Examples include ADP, Administaff, Express Employment Professionals and PayChex.
    • These systems cover all of the mechanics of HR, and help to assure that the company is in step with changing regulatory requirements.
  • There are also a host of individual consultants who put together HR systems for smaller companies. These are most easily found using locally-focused Internet searches.
  • Employees in small companies are used to wearing many functional hats. Hire or assign a manager to create an HR system and implement it once it is set-up. This person will be in charge of the personnel review schedule, changes to regulations and contact with outside HR resources.
    • One company’s HR Manager has a one hour conversation with the company’s lawyers once a year to make sure that the company is up to speed on any regulatory changes.
  • Hire a Director of Operations and include HR in this individual’s responsibilities. This person can research options for discussion by the leadership team. Empower them to bring in resources that will meet the company’s needs.

3 thoughts on “How Does a Small Company Build an HR Function? Four Thoughts

  1. Marty Barrett

    H R has been part of my portfolio as COO and before as COO of small NFP organizations for many years. Having the expertise of SHRM … Society of Human Resource Management is invaluable. It’s the largest group of H R professionals and they will give you everything you need to make it work. And the membership fee is very reasonable.

  2. Robert Hunt

    Many of my Renaissance Executive Forum group members are considering outsourcing HR. There are so many companies to chose from. What key factors help you determine which company to chose, and what dangers should they be aware of when deciding to outsource HR?

  3. Sandy Post author

    Great questions, Robert. These are exactly the questions asked by the CEO – a member of Executive Forums of Silicon Valley – who originally asked this question

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