When you’re small, you do all the hiring by yourself for two reasons: a) you have to control who you work with, and b) you can’t afford an HR manager. But as your headcount increases, at what point do you need to get a dedicated HR manager? Or, do you need one at all?
According to HR software consultancy Software Advice, once you get +50 people, you definitely do. How about earlier? It depends on your industry and organizational structure. If you have high employee turnover or you don’t share recruitment responsibilities with others, you need a dedicated HR manager as soon as you have around 7 people.
When and why to hire an HR manager
HR managers are a must at big companies. Big companies can’t function without processes and HR managers are great at standardizations.
Thankfully, most digital projects don’t require elaborate processes.
But small companies are different as they either don’t have processes or they change often. That’s natural. You just need to realize at what point it’s smarter to hire an HR manager than handling everything yourself.
Existing processes break as you grow. Whenever you hit a growth breakpoint, you have to reexamine your structure and processes. For example, when you first start a company, you manage everything HR-related, from recruitment to payroll. As you grow, you start spending more and more time on managing human resources. But at one point, you have to stop and reconsider your duties. You have to analyze whether the time you spend on HR tasks could be better spent.
A good rule of thumb when it comes to hiring an HR assistant is: If it takes more than an hour per day, you’re better off hiring someone to assist you. (Keep in mind the assistant doesn’t have to be an HR manager; a project manager or office manager will do just fine too.)
What type of industry you’re in has a lot of impact on when to hire an HR manager. For instance, the IT industry is very competitive.
There aren’t enough IT specialists and so a lot of companies are competing for a finite resource. The turnover is also high as IT specialists often switch jobs because they can easily find a better one. Plus, talent varies widely. You have to spend a lot more time testing to see whether they’ll be a good fit and even then nothing is guaranteed.
This all means you have to constantly recruit new people.
Companies which rely on part-time workers and remote freelancers are also a classic example of a company which needs a dedicated HR manager (or even a team) as soon as possible.
Some industries are very small and finding the right person can take a lot of work. If you want to find and hire a talented person, you need to spend a lot of time on finding them. In that case, you should think about hiring an HR manager early. They can visit career fairs, snipe talent at universities, and work on your employment reputation.
“If the volume of hiring is pretty high and consistent, either through growth or turnover, you need a dedicated recruiter.” - Peter Rosen, president of HR Strategies & Solutions
If you’re a digital agency, you whole income depends on workers. The more contracts and clients you can serve, the more you can earn; and the only way to serve more clients is to have more people working for you. That’s why an employee number 7 in an agency should be either an HR manager or a project manager.
Who to hire first, a project manager or an HR manager? A project manager will make sure you have satisfied clients while the HR manager will make sure you always have employees in the pipeline when someone quits. In that regard, it’s better to have a project manager first simply because if you have to replace employees that often, something’s very wrong with your company.
If you’re a product company, you don’t need an HR manager that soon. You can get away with doing mostly everything by yourself. But once HR-related tasks start taking up 30 hours/week (ie. almost a full-time position), you should hire an HR manager. Plus, you’ll be sure you can handle expansion and more work in the future.
Startups don’t need an HR manager
Startups should avoid hiring an HR manager as long as they can. When you’re a startup, you need to quickly adjust to your surroundings. But if you introduce bureaucratic processes early on, it will stifle your agility, which is the main advantage you have over your competition. Hiring an HR manager kills agility.
In addition to agility, you really don’t want to rely on your HR manager to motivate and inspire your team. That’s a job only the CEO can do. You should know who works on what, have an open door policy by default, and appraise and motivate everyone.
An HR manager performs 3 main functions:
- Compliance - makes sure hiring, firing, and promoting are legal
- Recruitment - find new employees and onboard them
- Organizational and professional development - provides training opportunities so employees can grow professionally; and provides insight to management on how to develop the organization
A startup has no need for #3 - if it does, it’s not a startup. #2 you definitely want to be doing yourself at first - and not have another employee being the buffer. Though you might need some tips on technique, you can get those from a consultant or mentor. #1 you definitely need but you can probably get by with some consulting from someone in the field or a lawyer who deals with this topic. - John Seiffer, entrepreneur, investor and growth advisor
The best course of action for startups is to hire someone part-time or on a as-need-basis. A consultant can help you set up the basics and help you with legal compliances (like what reports to file in your state and what statutory requirements you need to fulfill on federal, state, and local levels).
Other than that, there is very little value in an HR manager. Everything an HR does can be split between a product manager, an office manager, the CEO, and other team members.
What HR manager can do for you
An HR manager’s activities can be split between team members. But once you’ve identified you really need a dedicated HR manager, here’s a list of things they can help you with.
Recruitment takes a lot of time. An HR manager can take care of formalities like promoting a job position, finding potential candidates, screening CVs, running background checks and calling references, scheduling and conducting interviews, offering the position, and some onboarding.
When a project manager has a lot on their plate, an HR manager can help them to make sure no one is overworked.
A CEO and line managers should know their employees the best and work on making them better, but sometimes this part gets out of focus due to all the work. An HR manager can help you with appraisals, employee satisfaction surveys, feedbacks, training programs, and team building.
An HR manager can help you identify dissatisfied employees and plan successions.
An HR manager can help you identify dissatisfied employees and plan successions.
This way, you don’t have to worry if your key player leaves. An HR manager will make sure you have someone in the pipeline and a stack of people they can call for replacement. This is especially important when you take into the account that a typical hiring process takes anywhere from 7-20 weeks.
Handling bureaucracy is something you should outsource as soon as you can. It’s not part of anyone’s core business and doesn’t add any value to your customers. If you don’t have an office manager, you can delegate bureaucracy to an HR manager. They can take care of payroll, benefits administration, legal and paperwork (contracts, certificates, contract changes, contract terminations, clearance forms, various statistics and reports), and keeping track of sickness/absence/vacation day.
Other posts in the series on growing a business
- Part 1: Why entrepreneurs burn out
- Part 2: How to make sure your business can grow
- Part 3: How companies grow and die (Adizes lifecycle)
- Part 4: Setting up a self running business
- Part 5: Introducing processes
- Part 6: Staying relevant
- Part 7: Staying profitable
- Part 8: How management changes (Greiner's growth model)
- Part 9: When to hire first project manager
- Part 10: A practical approach to risk management
- Part 11: Identifying key players
- Part 12: What happens when a key player leaves
- Part 13: Leadership pipeline
- Part 14: When to hire first HR manager
- Part 15: Contractor vs full-time employee
- Part 16: Hiring process for growing businesses
- Part 17: How and where to find talented employees
- Part 17: Hiring advice for growing businesses
- Part 18: Systematic onboarding
- Part 19: Avoiding toxic workers
- DOWNLOAD THE WHOLE EBOOK (PDF)
Total Business Re-Configuration
Management and You
Crash Course in Talent Management