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4 Keys to Expanding HR in a Small Company

A man in a suit is crouching on the floor in an office.

​When small organizations navigate a growth spurt, their HR practitioners have an opportunity to demonstrate exactly how they can contribute to the business. For instance, they can influence and take responsibility for many aspects of talent acquisition, compensation planning and workforce management that had been the domain of hiring managers. 

But doing so means creating and executing on a daunting to-do list, say HR professionals who have been in this situation. And their work is often complicated by the company's unique challenges, so formalizing and expanding HR often takes place in an unsettled landscape.

In some cases, "expanding HR" means assigning one person to handle all the responsibilities related to recruiting and managing the workforce. In others, it means asking an administrator who's been splitting time between employment issues and other work to focus exclusively on HR. In still other cases, it means doing whatever it takes to ensure HR policies are consistent, adhered to and compliant.

For Nicole Cataldi, HR manager for Blue Rock Construction in Newtown, Pa., growing HR meant consolidating responsibilities that had been handled by other managers. For Peter Richard, SHRM-SCP and HR director of XMA Corp. in Manchester, N.H., it meant expanding recruiting activities and streamlining a range of processes that had been inadequately addressed in the past.

Whatever the specifics, common themes emerge whenever a small business grows and management realizes it's time to get serious about HR. Practitioners say leadership's key considerations should be:

  1. Recognizing when HR's responsibilities should be formalized or expanded.
  2. Identifying and plugging gaps in the organization's current approach to HR.
  3. Opening and maintaining effective lines of communication with both managers and employees.
  4. And, of course, ensuring that everything is done in compliance with applicable employment laws and regulations.

"Essentially, when a company is very small, you can just holler across the room if you have someone you want to deal with on an issue," said Dawn Laidlaw, SHRM-SCP, HR officer for Willis Smith Construction in Sarasota, Fla. "But when you grow fast and you have a lot of people who are fresh faces—number one, they don't even recognize you, and number two, you really need to reel things in and hold them more tightly."

Signs You Need to Expand Your HR Department

The first challenge is recognizing when HR needs to grow and become more formalized. Some symptoms of those needs, such as falling out of compliance, may be obvious to anyone who knows something about HR. But other issues may be subtle.

For example, a drop in employee morale and motivation may become apparent when a company is growing rapidly, Richard said. As workloads increase, workers become stressed and overwhelmed. "That was probably the first thing I noticed," he said of the time when 52-employee XMA began growing dramatically late last year. Even high-performers who were normally happy began showing signs of stress.  

Richard also observed more errors being made throughout the company. These included mistakes in order entry, products shipped without adequate packaging and an increase in quality-control issues. "If you're following your data—and we trend all of this and monitor it monthly—you can quickly see a change," he said.

Gaps in basic HR processes is another indication the department should grow. As the economy recovered from the 2008 downturn, Willis Smith began adding employees without any kind of onboarding, Laidlaw said (the company now has a staff of 95). New workers weren't being welcomed or properly oriented. "In my mind, that was critical, as we were trying to recruit people and retain people," she said. "That's where I dove in to say, 'You know, we really need to get this organized so that when someone shows up on their first day, it looks like we know what we're doing.' "

One sign may be right in front of you: Is HR bogged down? "I think it's simply going to be a product of workflow," Laidlaw said. "Especially if there are some red-light issues like complaints coming in—those are warning signs."  

Writing Your New Playbook

Once company executives decide to expand HR's work, it's time to take stock of how different responsibilities are handled and by whom. For Cataldi, an early step was to evaluate with other managers how processes such as onboarding and offboarding were handled. Where necessary, she modified her organization's employee handbook, personnel files, benefits administration and internal communications. 

"When I started, there was not a designated HR person or department," she recalled. "The functions that would typically fall within an HR department or be handled by HR personnel were split between current staff members." However, as Blue Rock grew, so did the need for employees to focus on their core responsibilities—in this case, "building buildings." Although planning the changes to HR was a team effort, Cataldi said her first order of business was to evaluate how tasks, processes and procedures were being addressed and then determine which needed to be somehow transitioned. 

While she took stock, Cataldi recognized the need for effective internal communications. Because many people are uncomfortable with change, she said, "clear communication regarding new processes, who's handling what and keeping everyone looped in is critical."  

Information Sharing

However, communication isn't about sending out a single message and moving on. As Cataldi observed, different people digest messages in different ways. So creating a communications plan that ensures you'll reach everyone is important.

For Cataldi, e-mail was usually enough to keep the office staff up-to-date because the employees had regular contact with her. She gave presentations to employees in the company's three other locations and made telephone calls to workers who spent most of their time in the field. "You can't just send an e-mail and pray everyone reads it," she said. "To be an effective HR person, you have to understand your audience."

Richard points out that communication is about more than keeping people informed. It's also about listening.

For one thing, listening will help your own efforts. "If the HR department is experiencing pressure to grow, then most of your peers likely are as well," Richard said. "Probably, you have a few allies in your organization who are going through the same thing, and when you can collaborate on what your efforts are and what's needed, it's usually a much more powerful result."

Clear communication also helps educate employees about who they should turn to for help with benefits, payroll and other issues. "Once I was given the title of HR officer, people in the firm knew that when an e-mail came from me, it was going to be about benefits or policies," Laidlaw said. In an environment where different workforce issues were once handled by different staff or managers, providing that kind of clarity smoothed the transition.

Compliance, of Course

Small businesses, for whatever reason, may from time to time fall out of compliance with employment laws and regulations. Because Laidlaw worked as a paralegal early in her career, she knew how important it was to keep the company on track. For companies that don't grow HR along with their business, "the courtroom is the danger," she said. "I always look at every situation as 'How is this going to look in court?' "

Practitioners encourage HR professionals to apply policies consistently and follow up on out-of-scope events quickly. If an employee or manager sends an inappropriate e-mail or takes actions that run against company policy, Laidlaw addresses the situation right away. Sometimes managers might lobby for a policy exception for a particular employee. Her answer to such arguments: "Now you're going to set a really scary precedent." Implementing and enforcing consistent policies was essential as she grew her company's HR.

Mark Feffer is a freelance writer who focuses on HR and technology. He's based near Philadelphia.