Should I hire a person for human resources full-time? Until when can I manage on my own? Should I engage an external consultant for human resource management while I haven’t grown much yet? What should I engage them for? What do human resource specialists do at all? These are questions that at a certain point in business pass through the head of every small entrepreneur or company manager.
From my experience, more and more entrepreneurs recognize that human resources are the foundation of stable growth, regardless of the company’s size. The decision about the need for human resources is specific to each organization. Most companies can, and should, gradually introduce formal human resource management structures as the organization grows. However, a standard mistake in all industries is thinking that the need for HR functions disappears after employees are hired. In practice, it often turns out to me that it is precisely then that human resources become key to maintaining order, culture, and productivity.
When deciding whether you need an internal human resources specialist, an external consultant, or an entire team, it is important to understand the role that human resources play. When talking about human resources, many entrepreneurs I have met still think only of administration, although the role of the HR specialist is much broader and strategic.
Role and importance of Human Resources in small companies
To save costs at the very beginning of their business and keep the company “running,” owners of small companies often handle various jobs themselves – from answering the main phone and basic accounting to IT troubleshooting. The list is of course even longer, but these are just some of the hats that small entrepreneurs wear every day.
In many small companies, human resource functions often fall into this “do it yourself” category. Owners take on tasks such as HR administration, payroll payment, benefit management, candidate search, creation of employment contracts and hiring, conducting interviews, and caring for employee satisfaction, and more. However, as you pile more and more tasks on yourself, human resource management can negatively impact other business processes and obligations.
I notice one recurring pattern among medium-sized entrepreneurs: the more the number of tasks from the human resources area grows, the more time for strategic thinking decreases, and HR processes remain neglected just when they are most needed.
It is precisely at that moment that it is important to think about the value of your time as a company owner, and if you delegate HR tasks to others in the team, then also about the value of their time. These unrelated tasks from human resource management can pile up and take away important time from the actual productivity and profitability of your company. If you notice a significant drop in productivity or if other employees cannot adapt to additional demands from their primary role due to human resources tasks, it is probably time to consider engaging a human resources specialist.
Small companies with fewer than 10 employees usually do not need a permanently employed human resources specialist. With enough foresight and preparation, in this development phase you can resolve most HR tasks and challenges independently. In many, responsibility for human resources is taken over by an existing company member, such as the operations director, accountant, assistant, or Office Manager. However, what you absolutely need is a solid foundation of HR policies and procedures.
In this phase, an external human resources specialist can help you in building and designing HR systems that, once established, your human resources mostly function with minimal guidance until you grow a bit more. Through my work, I increasingly realize that small companies that set clear HR processes early later grow faster and with less “firefighting.”
If you are a growing small Company or start-up (10-50 employees)
When a small company starts reaching about 20 employees, it is necessary to have one person officially employed and dedicated exclusively to tasks from the human resources domain. With that company size, it is already important to have established HR processes so that business runs smoothly.
Tasks such as introducing new employees or preparing them for the role usually require a designated human resources person so that new employees are not neglected. Another good example is employment processes in the company – it is necessary to have someone who leads the HR processes. But hiring is not the only component of the human resources specialist’s role. In this phase, many start-up companies and small companies want to establish more formal performance evaluations. And again – this is a project that someone needs to lead.
A company with about 50 employees realized it had a problem because their people were not basically ready for work even after 3 weeks. That means that onboarding takes too long in its first phase and that the HR process is neither structured nor documented. After engaging an external human resources specialist, that problem was resolved very quickly.
In this size, the responsibility for creating the organizational structure, job titles of team members, and descriptions of their tasks, creating benefit packages also arises – and that is just the basic list of tasks for the very beginning of human resources. It would be desirable in this phase to also have software for automating HR processes of work recording, absences, and performance management. These are all projects that someone needs to lead.
If the company does not have a strategic goal of expansive growth in terms of hiring, one person for human resources is on the border of sufficiency, but then the person will not be able to devote quality attention to every topic, let alone quality attention to people. Ideally, as you approach the number of 50 employees, you have 2 people in the HR team: one for creating HR systems, processes, and policies and managing projects, and the other for operational implementation and daily contact with employees.
In this phase, it is a good idea to engage an external human resources specialist for any of the mentioned projects, either short-term or longer-term until you decide to formally establish an internal HR team.
If your start-up plans rapid growth
If you know that your company will quickly go through a phase of significant growth, say an increase in the team by 50% – 100% within 6–12 months, it is a very good idea to hire a human resources specialist right from the first day.
When hiring and introducing a large number of new employees, human resources immediately become a full-time job. The human resources specialist will save the rest of the team a lot of time by taking over various HR tasks of hiring and onboarding, and will also keep you on top of the pile of contractual documents and other HR documentation that follows new employees.
Additionally, when a company grows significantly, its work culture can change dramatically – and someone needs to ensure it does not go in a negative direction.
A start-up that grew from 12 to 40 employees in 10 months without a human resources specialist faced a drop in employee satisfaction and increased conflicts. After hiring an HR specialist, human resources proved to be the central function that stabilized the team.
If you are a small company (50-100 employees)
By the time your company grows beyond 50 employees, you will definitely need to already have a person in the team with enough experience in the human resources domain – and from my professional experience, even two.
With 50+ team members, there is a potentially unacceptable number of tasks and HR administration that needs to be carried out operationally on a daily basis:
- Human resource planning
- Candidate selection and daily communication
- Hiring interviews
- Employment processes through offers, contracts, and confirmations
- Onboarding process
- Introduction of benefit programs and their maintenance
- Creation of HR processes, policies, and procedures
- Preparation for payroll calculation
- Job systematization
- Probation evaluations and performance evaluations
- Maintaining a positive work culture
In this phase, human resources are no longer just support, but a strategic HR function that directly impacts the company’s growth and stability.
If you are a medium and large company (100+ employees)
In this phase, you need a whole human resources department with multiple HR specialists because it is necessary not only to operationally meet all the requirements of the company and employees, but also to regularly improve and upgrade existing ones and develop new HR processes and initiatives.
However, if you think project-wise, it is a smart decision to engage an external human resources specialist for individual requirements.
When to Engage an External Human Resources consultant?
Before making a decision about engaging an external HR specialist, it is important to understand in which situations support in the human resources area brings the greatest value:
- If you do not have enough resources to hire an HR person permanently
- If you do not have time, knowledge, or desire to deal with HR tasks
- If you need help in implementing new HR processes, policies, or projects
- If you are facing challenges that you can no longer handle on your own
- If you want an objective view on issues in human resource management
How to choose an external Human Resources consultant?
Before selecting the right HR partner, it is useful to evaluate several key elements:
- Research different external consultants and compare their HR services and prices
- Check the experience and qualifications of potential HR consultants
- Have a short chat with them, in person or online, to check if you are “on the same wavelength”
- Check if the HR consultant understands your company’s culture and needs
Conclusion
Human resources are the foundation of every successful organization, regardless of whether you have 5, 50, or 500 employees. There is no universal answer to the question of when to hire a human resources specialist. The decision depends on the specific situation and size of your company. Using these guidelines for human resource management, you can make an informed decision that is best for your organization.
I hope this text was useful to you, and if you have additional questions, feel free to contact me.
Andrea Čerina
HR Consultant
