How Small Businesses Can Get Started with Human Resources

When you started your business, the first thing on your list probably wasn’t what to do for your human resource management. You may have thought you could get away with not worrying about HR altogether. But HR is the foundation of every organization. 

Since human resources are all about people—or your employees—it plays an integral role in making your business a success. After all, you have no business operation without the employees necessary to run it. To get started with your human resources, you have to understand what human resource management entails. 

What Is Human Resource Management?

Human resource management (HRM) is the formal system for businesses to manage people within an organization. More specifically, HRM manages the lifecycle of employees from beginning to end (i.e., hiring,  onboarding, training, termination). HRM is also responsible for the structure of your organization (i.e., culture) and crafting and communicating policies and procedures that maintain business operations and legal compliance.

The goal of human resource management is to acquire, develop, and retain talent to accomplish the company’s objectives. It’s also part of HRM’s responsibility to optimize this talent to maximize company productivity. HR can’t do this without aligning talent with the company’s goals—which requires an HR strategy.

When establishing the human resource management function in your business, you have a few options. 

1. You can hire HRM internally
2. You can outsource your human resource needs
3. You can do a combination of the two above

Here is a look at each of these options. 

Executing Your Human Resources Internally 

To effectively manage all of your HR internally, you usually need an HR team, or at the very least one dedicated HR person on staff. As you grow and develop an HR strategy, look into hiring an HR professional who can do the following:

• Administer compensation, training, and benefit programs
• Advise and coach managers on recruiting and employee relations
• Support the documentation of staffing, training, and performance evaluations
• Act as a liaison between employees and management regarding company policies, practices, and regulations
• Ensure policies, procedures, and HR programs are consistently administered, aligned with organizational goals, and comply with professional standards and laws and regulations

Keep in mind, one HR worker can’t handle everything. The duties above are a lot for one person to manage. Chances an HR person will be able to guide the strategy or support execution, but unlikely able to do both. Deciding which is right for you will depend on how much you’re willing to pay for an HR professional and what additional support you may have. 

For example, the average starting salary for an HR professional is roughly $55,000 in Denver. But to cover everything outlined above means hiring an HR professional with a bit more experience, which adds to that cost. And this salary doesn’t include any legal expertise, safety consultants, or recruiting costs your business may need. Adding that could put a total annual HR budget for staffing and resources over $100,000. 

Some small businesses may be able to afford the price tag and hire internal HR staff. However, there are disadvantages to this approach. True HR expertise is expensive, employee-related liability and compliance concerns are 100% yours, and you or your HR personnel may not have enough time to focus on strategy when worrying about all the administrative HR tasks. Outsourcing to an HR partner may be a better approach or a compliment to this option. 

Outsourcing Your Human Resources 

There are many benefits to using an HR partner. For example, if you find developing an HR strategy daunting, an HR partner can help with that. But they can also help you execute your strategy by taking on the tactical responsibilities of HR. 

Many small businesses use a full-service HR partner to stand in as their HR team until they grow. Later, businesses may choose to hire at least one person internally to guide the HR strategy and partnership. 

Because an HR partner can provide a lot, they may not be the right fit if you’re only looking for someone who can manage your payroll or benefits. And if you only have a couple of employees or all of your workers are contractors—it won’t make much sense either. An HR partner will be the best fit for your organization if your company is growing and has the resources to facilitate a partnership.

It’s totally up to you whether you handle HR internally, outsource all of it, or do a combination of the two. Once you realize there’s HR support for your business, you decide when and how you’ll take advantage of it. Our consultants at Obsidian HR are happy to speak with you more and help you decide! Reach out to us today. To learn more about how to get your HR up and running, download the full resource, a Small Business Guide to Human Resource Management.