There are a few hills I will die on. One of them involves screaming from the rooftops that managing HR in a small employer (1-500 employees) is different from managing it in larger orgs. Once you go beyond 500 employees, the structure of the HR team, problems they face and way they manage the work becomes a bit more standardized. Of course there is nuance from company to company, but for the most part it all feels very similar.
In a small employer, however,the nuance between one org and the next is vast.
Having said that however, there are a few similarities. Specifically, there are similarities in the advantages of managing HR in a small employer and also the challenges faced. This blog post will talk about those common challenges.
Challenge 1
Recruiting and Retaining Talent
I was originally going to title this section Top Talent, but the reality is it is often difficult in a small environment to recruit and retain any talent. Whether it be because of low compensation and benefits or a work environment that causes burnout on a regular basis, finding and keeping the talent needed to grow a small employer can be an ongoing challenge.
My Suggestion
We help our clients focus on retention so that the amount of recruiting you have to do is minimal. It is easier for small employers to create an environment where employees thrive and want to stay versus competitive for talent in the marketplace. This starts in the hiring and onboarding process and continues through the employee life cycle.
I have this mantra that before you can invite people into the front of the house, you have to get the back of the house in order. This applies here. Before you recruit new employees, make sure your engagement and retention strategies are in place to give them an opportunity worth potentially taking lower pay/benefits.
This is an area we will be talking about more in future blog posts and Office Hour events that we do.
Challenge 2
Managing Employee Performance
If your org is super small in number of employees - less than 50 - you likely have employees who are working in hybrid roles. They have an area of expertise, but then in an effort to get all the work done, they have taken on other responsibilities that are outside of that. Therefore when it comes to setting goals or measuring them against a job description, taking everything they do into account can be difficult.
My Suggestion
We suggest clients who do not have mostly traditional roles, scrap traditional performance management models for a continuous feedback model. One where you focus on employee development more than straight performance. That isn’t to say you do not set goals - of course you do - but if their role is constantly changing, or the business is, those goals become moving targets that are difficult to achieve. Focusing on growth and development in both tactical and soft skills will ensure that performance is moving the business forward without feeling like some unachievable thing for the employee.
Challenge 3
Offering Competitive Pay/Benefits
I’m not even sure I have to explain this one. Unless you have some serious funding, competing with much larger orgs in the pay and benefits column is nearly impossible. For most of our clients, that is just not a reality.
My Suggestion
I added Payfactors by Payscale software into our fractional support offering a few years ago so that we could help clients execute really good benchmarking for pay. I encourage even the smallest of orgs to determine their compensation philosophy and stick with it. Having software like this is also great for those aforementioned hybrid roles because you can benchmark both roles and then figure your rates based on time spent in each.
For benefits, think outside the box. I wanted to be able to offer benefits but knew that several members of my workforce wouldn’t take our benefits because they had great benefits through their spouses much larger org. I also knew that the benefits we would be able to get being so small would be costly and not really offer great coverage. Rather than go the traditional benefits route, we offer a QSEHRA which reimburses a dollar amount each month towards things like healthcare premiums, deductibles and even everyday expenses. It allows me to compete and offer something, but in a way that is manageable for the business.
Remote work, flexible scheduling and time off are all also considered benefits so think about ways you can amp those up to offer something that your larger counterparts do not.
Challenge 4
Lack of Alignment between HR Processes and Business Goals
The first challenge with this is that sometimes the business doesn’t even know what the goals are. No shame if that’s you, just saying that it’s hard to create people processes that help meet business goals if there are no goals or they aren’t shared with all employees.
If there are business goals, people processes are often put in place that may not even be driving the types of behavior and performance that helps to meet those goals. This leaves HR in the overhead column when really, they could be more beneficial to the bottom line.
My Suggestion
First, always make sure you are sharing business goals with, hopefully all employees, but definitely those responsible for affecting change, like HR. Then sit down and ask yourself if the people processes you have in place support those goals. For example: if your goal is to increase customer service, does your recruiting process highlight that as a core skill, even for those not in customer service roles? Does your onboarding process talk about what customer service means at your org and provide training around it? This is what I mean in aligning HR processes.
Challenge 5
Lack of Structure, Processes and Standards
This one hits a little below the belt for me because up until recently this was a problem in my business. I tend to work with little structure. I make up processes as I go and while I know the standards in my head, I didn’t have that documented. When we hear employees say that things feel chaotic or things are always changing or everyone does everything differently, this is what they mean.
My Suggestion
I started to really feel this as early as 5 employees. While I can work without structure, not everyone can. Further, not having that structure meant we weren’t being consistent in how we worked with clients. Start now with creating SOP’s, guides and templates for your most common workflows. If you are changing something, explain why. Put process in place where process makes sense. It’s a balance that we have to find between being an agile small business and providing structure that allows for consistency and efficiency.
As a small business owner myself I would love to say I have this all figured out, but probably like you I’m figuring it out as I go. These suggestions are all things we do inside this business and with clients in an effort to help mitigate the stress from these common challenges. As you grow, challenges do not go away, they just change. Tackling these things early on and staying on top of them as you increase your headcount will ensure they aren’t the massive headaches they could otherwise be.
Need help with getting over these hurdles? Chat with a Small Employer HR Manager today