By Tony Benjamin
Small to medium-sized businesses struggle to determine when the appropriate time is to hire a human resources professional. Well-intentioned articles pontificate on metrics to determine the appropriate time and some experts even debate whether or not a company needs a “human resources” function at all.
What is a small company to do, then? The answer is simple: The earlier the better, if its proper role is understood.
The human resources function has its roots in the military of World War II. Clerks were utilized to manage the information and paperwork required to keep a very large military in the field in far-flung theaters around the world. It’s no surprise then that businesses began to utilize them for the same purpose after the war ended to manage regulatory compliance and “personnel” issues.
Ironically, many owners and executives of small to medium-sized businesses still see HR in this light. They are the people hired to comply with state and federal regulatory matters and reduce the risk of being sued under burdensome discrimination laws. News stories fill business magazines and books are written about gargantuan companies that invest heavily in their employees and provide all kinds of perks and gimmicks to keep their employees happy and “engaged.” Small companies can’t afford such investments of capital and find little use for Ping-pong tables that employees don’t use.
What then is the role of HR in a small to medium-sized business?
Increasingly, research indicates that companies with strong cultures centered on values that drive the business’ model are the key factor in company success. Potter and Heskett were documenting the effects of corporate culture in 1992. They studied companies over an 11-year period and found that companies with a strong culture outperform those without by 75 percent and were able to grow their headcount by 83 percent more.
Why do companies with strong cultures outperform their rivals? Harvard Business Review has noted that customer satisfaction is directly linked to corporate culture as well (across multiple industries included in their study). Liveplan.com notes that average the turnover across all industries in the U.S. is 11 percent annually. Other studies have shown that 85 percent of employees say that a “good” company culture keeps them committed to their companies, reducing turnover costs and allowing companies to develop talent to elite levels.
Human resources’ role in a modern company is the efficient function of its largest investment, “human capital.” The design and implementation of a company culture is the central focus of human resources. Company culture — the sum atmosphere resulting from all interpersonal interactions — can’t be left to chance. If it isn’t HR’s role to design and implement that culture, whose is it? Management has strategic concerns of its own, finance is focused (properly) on money and cashflow, marketing with approaching new customers, etc.
If a production company purchases a machine that is designed to produce 100 widgets a day but only produces 80, is the company receiving the full value of the equipment it purchased? To ensure a positive return on the investment of the unit, the company maintains the machine the right way, utilizes quality material and modifies it to increase production as needed. Human capital — employees — is no different.
Employees, if they are going to produce at their full capacity, must have the proper maintenance, fuel and proper materials to operate at peak efficiency. If greater capacity is required, employees can be developed and trained to increase their level of production or change the product they produce.
The earlier this culture is developed, the easier it is to do so and less of an overhaul will be required to produce the kind of culture that produces the type of results the company wants.
The basic steps are the simplest to implement: A stated goal for the company (a mission or vision statement), the basic principles of success communicated to employees (company values) and the step-by-step milestones to get there (annual goals). These all have to be communicated to employees and nothing can be done to inhibit them or decrease their effectiveness (including compliance).
This is where an HR professional comes in. HR pros design policy, procedure and practices that enhance those clear guidelines. Benefits, perks and incentives are common tools used to promote the company’s culture. Beyond this, HR pros can develop hiring practices, onboarding, vacation/PTO policies, corporate communication and coaching and development plans that feed and solidify the culture as well. HR then trains management on the best way to maintain the culture and see it develop properly.
When is too early for a company to start this process? Probably before it hires any employees. Once an employee has been hired, however, the trade-off begins, culture is forming and the delay costs more and more.
To see HR in this light is to see it for what it is. The profession itself has been slow in responding to the growing need, but senior HR pros are equipped with the experience and knowledge to create fantastic cultures and develop human capital. Additionally, universities are now focusing more and more on the proper role of HR and are turning out better-trained graduates.
Tony Benjamin is the owner and founder of The Grange Strategic HR Consulting and has more than 17 years of HR experience.