The question of whether a company needs a Human Resources (HR) department is not a simple one to answer. Ask the question to a variety of entrepreneurs, CEOs, and HR professionals and you’re likely to get a variety of answers. For instance, many experts will tell you that the number of employees in a company is the determining factor. A lot of companies with total employees under 20 assume that they don’t need an HR department. But size isn’t the only issue to think about. Other considerations include:
In reality, HR functions must be conducted for every company—no matter how small or large. So properly framed, the question to ask is: “What is the most effective way that HR services can be delivered by your company?” Is it better to have an in-house HR department doing the job or is it better to partner with outside HR experts, using a variety of vendors or even to a single source? For example, many organizations find that it’s more
Whether or not a company needs an HR department also depends on its business category and the competitive challenges it faces. Say you are a relatively-new, rapidly-growing firm offering professional services. You need to quickly onboard highly specialized talent and you can't afford to waste time by hiring the wrong person. In such a situation you are likely to require high-end recruiting capabilities that are beyond the scope of most in-house HR departments, thus the importance of a strategic HR partner is
On the other hand, if you are a manufacturing firm with a primarily blue-collar workforce—or a company employing unskilled workers—a small, in-house transactional-focused HR department may satisfy your needs.
The depth and breadth of HR services required by a company should determine the composition of the system it picks to deliver them. One of the ways to find out if
If you are a small- to mid-sized company with an employee base of blue-collar or unskilled workers and you only require transactional services, outsourcing coordinated by a single in-house employee may work best. When a growing professional services business like the one mentioned earlier needs both transactional and strategic HR services, a single-source professional employer organization (PEO) may be the way to go. A PEO can provide a comprehensive menu of HR services, including robust benefits packages that will allow you to attract top talent. On the other hand, if you are
Whichever HR structure your company has in place, it is important to conduct an ongoing assessment of that system in order determine if systemic changes are needed to ensure that your employees are receiving the optimum services possible. As you conduct such an investigation, also recognize that HR has evolved in the last decade. Beyond employee benefits, ask yourself if your company needs a more comprehensive range of transactional and strategic HR services. Today, many leading-edge entrepreneurs realize that a
The question of why a human resources department is important does not have a simple answer. However, understanding the benefits of strategic HR will help guide you in determining whether in-house HR, outsourced HR, or a combination of the two best suits your business’ human resources needs.
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