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HR: When Does a Small Business Need It?

HR: When Does a Small Business Need It?
May 19, 2022

Many small business owners start off handling their HR needs themselves. But as a company grows, HR management can quickly grow time-consuming—not to mention risky—without specialized support. At what point does hiring or outsourcing HR start to make good business sense?

For many small business owners hustling hard to get their company off the ground, HR needs aren’t typically top of mind. You’re busy growing your customer base, refining your products and services, and seeing to the other core elements of the business. Especially when bootstrapping with only a small staff, HR simply doesn’t seem like a major priority. 


Besides, most entrepreneurs tend to think of themselves as good with people. Possibly your team sincerely likes and gets along with you, and you’ve made it clear that anyone can approach you with an issue. And since any hiring and firing is going to happen through you anyway, why complicate things with a dedicated Human Resources function?


And let’s be honest: HR can be expensive. It probably seems far out of reach when a business is just starting out and not exactly flush with money. Why spend your precious capital on something you believe you can do on your own?


Dispensing with HR in the initial start-up and growth phases may be a necessity. But the point at which it will make sense to consider HR help will probably come a lot sooner than you think. As your business continues to grow, so too will your staff and the overall complexity of your organization — meaning the number of HR-related tasks could grow exponentially, eating up more of your time than you’re willing or able to give it. And if you’re not careful, an HR blip can have major legal and financial consequences. 


To find out how soon you should begin investing in HR to help speed the growth of your growing business, let’s break down the different ways it can help.


1. Saving Time


“It’s pretty silly that I didn't expect this,” says business owner Damiano Raveenthiran, “but when you run a team of 40, there’s something going on with someone every day. Just having to manage people is very time consuming.” 


Raveenthiran is the owner of Startup Slang, an eCommerce agency that helps businesses set up successful eCommerce stores. As the demands of managing a growing team cannibalized his ability to focus on anything else, Raveenthiran eventually learned that HR was the answer to giving him back his time.


“A lot of startups take things like managers, hierarchies, and HR for granted. They think, oh, we'll never need HR, I'm the founder, people can just come talk to me. But eventually you realize that, no, you definitely need an HR person to take care of this stuff. You have to buy your time back. Otherwise you just get pulled into a million directions and have 40 people asking you questions.”


Read more about how Damiano Raveenthiran grew his business with a smart sales funnel.


It’s not just fielding issues and complaints, either. From managing payroll to creating benefits packages to recruiting talent and developing policies around mental health, HR can take a number of time-consuming tasks off your plate, allowing you to focus on what you do best. 


To find out whether or not HR may be a worthwhile investment for your business, try to estimate how much time you spend on HR-related duties each week, then ask yourself: What is the opportunity cost of that time? How much is that time worth? 


2. Mitigating Risk


According to Inc. Magazine, the Internal Revenue Service penalizes roughly one out of every three business owners for payroll errors. The situation in Canada is likely not all that different.


It’s not just the Canada Revenue Agency you need to be worried about, either. It’s your employees. Every time you accidentally underpay them, every time their cheque arrives late, every time you miss a cycle because your head was somewhere else—that’s another bit of employee trust out the window, which can hurt performance and retention in the long run.


The point is, payroll isn’t just time-consuming—it’s also risky to get wrong. Fortunately, payroll software and services are both plentiful and relatively cheap. So as soon as you have an employee or two, start thinking about outsourcing this aspect of HR stat.


Unfortunately, getting payroll right is just the tip of the compliance iceberg. Workplace safety, employee disputes, layoffs and firings, disciplinary action—each of these must be managed tactfully and in accordance with national and provincial regulations, lest you find yourself facing legal and/or financial ramifications. And as more people join your team (perhaps distributed across multiple provinces or even countries) the risk of something happening goes up until eventually you have to ask yourself: can you afford not to invest in HR?


3. Ensuring Sustainable Growth


Hiring well isn’t just time-consuming—it’s pivotal to the success of virtually every business. Bad recruits inhibit overall progress, not just because of their underperformance, but because of the time lost training them, the money spent paying them, and the need to eventually start from scratch. 


Adding HR to your hiring process can help avoid these growth-slowing scenarios and gradually raise the calibre of your talent overall. Smart recruiting techniques, applicant screening, attractive benefits packages, and other tactics make sure that you don’t waste time and money interviewing people that are obviously not a fit, while formalized onboarding systems ensure people are consistently welcomed to the culture and get up to speed quickly.


If you’ve been burned by a bad hire, or find yourself spending more time than you have searching for (or screening for) the right applicants, it might be time to bring in the big guns.


It’s not just hiring, either. When it comes to growing sustainably, HR professionals are great policy-builders, ensuring that there’s a documented system of values, practices, and procedures for virtually every employee question or scenario. That way, the company culture isn’t left to chance, the rules of engagement aren’t just in your head, and the employee experience is consistent (and consistently engaging) across the board. 


HR is More Valuable Than You Think


Again, it’s natural not to think about HR in the early days, but the need to incorporate Human Resources expertise can be a critical factor in helping you grow faster and more sustainably over the long run. Ultimately, a capable and experienced HR professional plays a valuable role in supporting and enhancing employee performance, as well as their overall sense of loyalty and commitment. An HR professional also helps build the foundations for a proud and resilient company culture, which is no small matter in today’s tightening labour market. And there are myriad stats to back this up.  



Fortunately, investing in HR isn’t an all-or-nothing decision. If you’re not ready to hire HR professionals full-time, you can outsource the role to an agency like Peninsula, ADP, or PEO Canada, or consult with experts to create basic systems and documentation on your behalf. As for when to invest in HR, you may similarly apply a gradual approach, turning on specific HR functions “à la carte” before deciding to take the full plunge. Payroll, recruiting, benefits, compliance, retention—depending on your needs, one aspect of HR may feel more urgent than the next. 


HR may not be the most fun part of running a business, but it saves you time, speeds up growth, and sooner rather than later, you’ll find it’s money well spent.

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