Dear Workforce How Do We Know When It’s Time to Add a Full-time HR Department

Dear Doubling:

Consider yourself fortunate that nothing glaring has yet forced you to consolidate HR activities in one place. Organizations adhering to the decentralized approach you describe risk confronting expensive compliance liabilities while missing critical opportunities to gain a competitive edge through their people. So the short answer is: Yes, it is time for you to consolidate. Here’s why:

Avoid Compliance Risk. Note that all organizations (particularly those with more than 50 people) are subject to many federal (not to mention state) regulations pertaining to leave, compliance reporting, discrimination, work hours, benefit coverage and so on. The bigger the company, and the more locations in which it operates, the more complex these compliance issues become.

Is your accounting department truly capable of keeping up with all of these issues? What about the individual supervisors who are recruiting, hiring and firing people–are they all briefed, for example, on questions that are off limits in job interviews? Are they properly documenting, in a consistent manner, the terminations that they handle?

The best way to assess your degree of exposure is to conduct a comprehensive compliance audit of all of your HR practices. The results will help you determine whether compliance issues alone demand a quick transition to a formal HR function.

Build a Framework for Growth. Smaller organizations, particularly those with fewer than 50 employees, typically have enough shared knowledge and practice to meet essential human resources needs.

Growth, whether organic or through mergers and acquisitions, will put a dramatic strain on the organization if an HR framework is not in place. This framework would include a reasonable policy and procedure structure, investment in key resources and capability to support the business through recruiting, onboarding, setting expectations and doing performance management. The framework allows growth to take place without distracting management from its business focus. The alternative often is chaos.

Make the Most of Your Talent. There is a third and enormously compelling reason to establish a dedicated HR function. Professionally run HR departments will add tremendous value to your company by ensuring that you hire–and keep–the best talent to drive your business forward.

HR can do this by advising on a myriad of issues, from determining whether your company has the right people in the right roles to providing managers with training they need to lead the organization. How well your company deals with these broader issues and presents itself to employees and prospective employees constitutes your company’s branding. A scattershot approach to HR, such as you have now, is limited in the impact it has on your brand. A well-managed professional HR function, however, adds tremendous value and gives you a competitive edge in attracting and retaining superior talent.

SOURCE: Jud DeCew, Capital H Group, Boston, February 10, 2006.

LEARN MORE: Here are some more tips when starting an HR department for the first time. Also, more information on how and why to brand HR.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.