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When to Invest in HR for Your Business

Startups and small business owners alike are used to going without a lot of resources they’d like to have – and that’s often a savvy business move. It’s best to focus on your product quality and growing your customer base before you worry about buying matching office furniture.

One thing a lot of business owners tend to go without is HR – and that can make sense in the early days of your business, when it’s just one or two people. But eventually, your organization will need a dedicated resource handling your HR matters and it’s often sooner than you think.

So how do you know when it’s time?

There’s no one answer that applies to everyone. But from our experience working with hundreds of small businesses, we’ve found that the following situations usually signal that an organization could run more efficiently by hiring HR professionals or outsourcing HR functions.

Signs You Need HR Support

If your business is experiencing any of the following, hiring an HR professional or enlisting support from a consultant or PEO could be the solution.

  • High turnover: Employee turnover is expensive. Unfilled positions can slow your progress on projects, and the recruitment and on-boarding process means that you and the leadership team aren’t focusing on core strategic work. But high turnover doesn’t necessarily mean your employees are “flaky” or uninterested in sticking with an employer – it could be a sign that your business isn’t doing enough to meet the needs of your employees. The work of growing a small business or startup can be hectic and intense, but if that disorganization extends to areas like employee benefits, payroll and other HR processes, your employees will become frustrated. The good news is that it’s possible to offer attractive benefits and more structured HR processes by working with an HR services organization like a PEO. If you do, you’ll be able to plug right into top-quality benefits, take advantage of benefits administration professionals, and even rely on the PEO to help with coaching or training so employees feel supported and are less likely to leave. PEOs are also often able to offer their clients benefits options and pricing far better than what a small business could secure on its own.

  • Difficulty attracting new employees: Turnover and retention are closely related. If turnover is high and your employees review your company on sites like Glassdoor, you may find that those reviews make it harder for you to attract quality employees moving forward. But even if you’re recruiting your first round of new hires, you’ll find it hard to compete with Fortune 500 companies unless you’re able to offer contemporary and competitive employee benefits. As we mentioned above, working with a PEO gives you a an easy and cost-effective way to do that. Plus, when you partner with a PEO or hire a dedicated HR team member, they can help you develop a handbook and workplace policies. Being able to show that to a potential hire goes a long way to communicating that your business is a stable (and rewarding) place to work.

  • Difficulty finishing major projects on time (or at all): Missing one deadline after another can be frustrating and expensive. But the root of the problem may not be what you think. Often, when organizations struggle to meet their goals, it’s not because they’re not working hard enough but because their leaders are getting interrupted too often to handle important but non-strategic tasks (like adjusting payroll to reflect a compensation increase or approving a vacation). Context switching is a major productivity killer; in the growth stages of a business, it can mean the difference between success and failure. Outsourcing essential but non-core activities to an HR consultant or PEO frees you up to focus on core, strategic activities while also ensuring that your employees’ needs are met in a timely manner.

  • Lackluster employee performance: This may seem like a problem of your team not stepping up enough. In reality, it may be the result of their frustration, confusion, or boredom. Maybe they feel that they didn’t receive adequate training to do what you’re asking them to accomplish. Maybe they’re unclear about your expectations for their role. Whatever the cause, bringing on HR support can help resolve the problem. Whether you work with a PEO or hire a full-time employee, a competent HR professional will be able to help underperforming employees, identify the source of the poor performance, and create a pathway to success. That might include additional training, coaching, or goal setting. It may also be the first step to letting someone go – but when you work with an HR professional, you can be confident that any terminations will be handled in compliance with state and federal laws, so that you’re not at risk for a lawsuit.

Make Data-Driven Decisions about Your Team with Help from HR

Why do employees tend to leave your company?

Which benefits are most important to them?

Would your workers rather have more money or a more flexible schedule?

These are all critically important things to know about your workforce, but if you’re still handling all the HR work on your own, chances are good that you don’t know the answers. This is the kind of information that HR professionals gather during exit interviews, hiring interviews, and regular check-ins.

It’s the data that can help you make decisions about where best to spend your money to optimize employee longevity and performance. When you bring on professional HR support, you can have this data in front of you the next time you enter salary negotiations with an exciting prospective hire or put together a counter-offer to someone who has mentioned they’re considering another opportunity. It will give you an important edge in ensuring you have the best team possible.

A Final Thought – How HR Is Like Your House’s Wiring

I’ll end with a story.

Last week, I talked to a friend who just remodeled his house. He asked an electrician friend to take a look at his electric panel to see if he’d need to make any updates, given his plans. The friend took one look at the panel and screamed.

Apparently, my friend’s dad (who was not an electrician) had done all the wiring himself – and it was a total fire hazard. The house could have easily burned down.

Everything’s been fixed now, and my friend’s house is much safer. He was lucky – and he’s much happier now, knowing that his risk of fire is about as low as it can be.

That self-wired electrical box is a great analogy for what we sometimes see when we start working with companies that have never had professional HR support. And it’s not because our clients are reckless or don’t care about their employees – they just don’t know what they don’t know.

As long as nothing goes wrong, everything seems fine.

But if even a small problem arises, a “badly wired” company can mean major headaches for its leaders.

If you’ve never worked in HR, you probably don’t realize how many federal, state, and local laws there are dictating what kinds of documents you have to have and what kinds of services you have to provide your employees.


So if you’re experiencing any of the problems we listed above – or if you’ve just never worked with an HR professional and you want to make sure your employee management is compliant and low-risk, give us a call. We’d love to talk about how we can help your business run more smoothly and how you can focus on the strategic projects that matter most to your bottom line.