Has your Business Outgrown its HR Function?
The Importance of Scaling HR Functions for Growing Businesses with 50-100 Employees
Growing small companies usually start off with an informal HR function—a longtime manager who directs recruitment, payroll and performance challenges; or spreading these tasks around a few managers. However, by the time the company has grown to around 50-100 employees, they have almost always outpaced the capacity of this de facto HR function and the continued lack of HR expertise can be a risky and expensive proposition inevitably leading to unnecessary turnover, and unwarranted employment claims.
Large companies have the luxury of hiring experienced HR teams to manage recruitment, onboarding, employee relations, and compliance. These teams work directly with executive teams to advance desired corporate culture, develop performance metrics that align with annual goals, and accountability measures to support disciplinary action. However, companies in the 50-100 employee range are often in a catch-22; while they need the employee relations and compliance expertise that larger companies pay well for, their budgets often makes recruiting experienced HR staff cost prohibitive, resulting in recruiting inexperienced HR personnel who focus primarily on recruiting, payroll and fire-fighting employee issues. However, with strategic attention and proactive solutions, companies can ensure their HR practices scale effectively to meet their evolving needs.
The Dynamics of Growth
Signs of Outgrowth
Growing businesses typically recognize that they’ve outgrown their current HR function through several telltale signs including:
Delayed Processes: Recruitment and onboarding takes longer, and employee grievances go unresolved.
Increased Turnover: Limited retention strategies lead to higher attrition rates.
Compliance Risks: Difficulty keeping up with labor laws and regulations creates vulnerabilities.
Employee Dissatisfaction: Overstretched HR resources struggle to maintain morale and professional development initiatives.
Manager burnout: Overworked Managers reactively manage their teams leading to inconsistent discipline and discord or apathy among team members.
For businesses of this size, several factors contribute to the HR function falling behind:
Growth Spurt: Expanding operations or adding new departments introduces complexity.
Limited Resources: Small teams often lack the bandwidth to handle increasing demands.
Outdated Systems: Manual processes fail to adapt to rapid changes.
Unclear Focus: HR planning may not align with the company’s strategic growth goals.
Impact on Business Performance
The consequences of an ineffective HR function are significant:
Operational Disruption: Errors in payroll, compliance lapses, and delayed recruitment processes, disrupt daily operations leading to a fire-fighting culture in place of strategic growth initiatives.
Culture Erosion: A lack of HR support can lead to weakened company values and employee engagement.
Lost Talent: Without clear retention strategies, companies risk losing skilled employees, or failing to attract desirable candidates.
Legal Risks: Non-compliance with labor laws results in fines, penalties or costly litigation.
Strategic Solutions for Small Businesses
Scalability is key to planning out how to support your growing business.
Invest in Technology
Cloud-based HR management systems (HRMS) are especially beneficial for companies with around 50 employees. These systems can automate tasks such as payroll, compliance tracking, and employee record management, freeing up HR personnel to focus on strategic initiatives. Affordable and scalable solutions are readily available for smaller businesses.
Outsource HR Functions
Outsourcing is a particularly effective strategy for small companies facing HR challenges. Partnering with external agencies for tasks such as payroll processing, recruitment, or compliance allows businesses to focus their resources where they are most needed. Outsourcing provides access to expertise, ensures legal compliance, and offers flexibility to scale services according to the company’s growth.
Expand the Team Strategically
Though smaller businesses may not have the resources for a large HR team, hiring specialized professionals such as a part-time compliance officer or recruitment manager can significantly enhance operational efficiency. Strategic hires ensure key functions are adequately supported and minimize the disruption caused by rapid growth spurts.
Align HR with Growth Goals
HR leaders in small companies should work closely with management to develop a roadmap for scaling operations. This includes forecasting workforce needs, preparing for potential expansions, and identifying leadership pipelines.
Enhance Employee Engagement
Even with a smaller workforce, robust engagement initiatives such as team-building activities, recognition programs, and professional development opportunities can improve morale and foster loyalty.
Track Key Metrics
Regularly monitoring employee satisfaction surveys, turnover rates, and recruitment effectiveness provides valuable insights into HR performance and highlights areas for improvement.
Case Studies
Learning from Smaller Successes
Case Study 1: A Startup Scaling Quickly
A growing healthcare provider with just over 50 employees experienced rapid growth, adding new roles and responsibilities. Its single inexperienced HR employee struggled to manage recruitment and onboarding and an audit of their personnel files revealed significant lapses. By implementing standardized processes across their recruitment lifecycle including uniform candidate screening methods, accountability metrics and outsourcing payroll tasks, the company streamlined operations, reduced unnecessary turnover and improved employee satisfaction.
Case Study 2: Navigating Compliance Challenges
A boutique retail company expanding within its region faced challenges in adhering to diverse local labor laws. By hiring a part-time HR consultant and outsourcing their employee relations function, the company successfully mitigated risks and ensured smooth growth.
Case Study 3: Strengthening Workplace Culture
A manufacturing company with 80+ employees noticed a decline in workplace morale during a period of rapid operational changes following an acquisition. This was because the management team was overwhelmed by employee complaints and resistance to changes in their workflows and job responsibilities. By outsourcing engagement initiatives and providing management with outsourced specialized HR support, the company revitalized its culture and achieved team cohesion.
Conclusion
For companies with around 50-100 employees, outgrowing their HR team is a natural challenge. However, by investing in resources such as technology, outsourcing, and strategic hires, these businesses can ensure their HR practices evolve to meet their needs. A proactive approach to scaling HR operations not only supports employees but also lays the foundation for sustainable success. As smaller businesses continue to expand, robust HR strategies remain vital to achieving long-term goals while preserving their unique culture and values.
Click the button below to complete the Company Diagnostic Questionnaire to discover turn-key, scalable HR solutions to help your company overcome its growing pains, and refocus on growth.
