Your SMB Guide in 2022: Why Do Small Companies Need HR?

When you hear of human resources, images of large corporations and multi-nationals come to mind. After all, having a dedicated team handling recruitment, payroll, training, and engagement require significant funding, which smaller companies often cannot afford.

However, the human resources department is a vital part of any organization. Whether you're an enterprise with thousands in your employ or a modest team of five, matters such as compensation, benefits, hiring, and career development are equally, if not more, important. 

If you're a small-to-medium-sized business, you may be wondering whether you should invest in human resources. We're here to say "yes," whether that means hiring in-house HR personnel or outsourcing HR services, and here are some reasons why.

Smaller Scale, Larger Impact

Smaller-scale businesses may have fewer employees and fewer funds. However, this only means that any late payroll, wrong hire, or dissatisfied employee has a more significant impact on the company.

Low Employee Productivity 

Fewer employees can make small and medium-sized businesses incredibly reliant on their staff. Hiring someone who is a bad fit for a position or compensating employees poorly can spell disaster for a small organization.

The shortcomings of one employee on a team of five can easily do more work for other employees. And over time, having your people pick up the slack of an underperforming colleague can overwhelm them, affecting their performance as well. This creates a snowball effect in terms of people management.

Financial Strain

Additionally, having fewer funds means that each hiring decision and employee training initiative should be well-thought-out to maximize funding. Hiring mistakes can end up costing you more if employees suddenly resign.

And when you lack a workforce, you likely have to spend more to fill a critical position on short notice or pay freelancers to help augment your capacity issues. 

Having a company's human resource person or team helps prevent recruitment, payroll, and engagement problems that can trickle down and negatively impact your business.

Risk Management

A huge concern for small to medium businesses is cost. In an attempt at saving on expenditures, some of them skimp on human resources but end up paying more because of some oversight.

HR helps a business manage its people organizationally and legally. There's so much paperwork and government compliance involved in human resource management. If you have employees with complaints against management or if employees file a case against you, a human resource person or team can protect you by providing the necessary documentation.

Human resource management maintains key documents and keeps track of employee records. Moreover, they are knowledgeable about legal requirements and will be responsible for arranging your company's compliance documentation so that you can defend yourself against complaints and legal actions. 

Employee Engagement and Satisfaction

You must keep a business running daily, but it's essential to nurture and grow your people to perform better and help your company improve over time. 

For any business, it takes money, time, and effort to provide attractive benefits packages, modify work conditions, or hold training for your employees' career development. Hence, many small to medium-sized businesses outsource these HR services. 

Hiring experts in the field saves businesses time and effort upfront and helps them save on costs later. Engaged and satisfied employees are more likely to perform better at work. Additionally, practical training that upskills and promotes employees reduces hiring costs.

Momentum

Small and medium businesses may have slimmer workforces and tighter budget constraints. However, this should not cause them to neglect human resource management. 

HR is crucial to managing and growing a business. Hence, any company aiming to grow and expand should begin with the end in mind and invest in HR even in its early stages. Doing so sets a precedent for success and helps kick-start the momentum for growth.

After all, starting things right and maintaining them as your company expands is more manageable than focusing on expansion first and having to backtrack and redo HR processes later. 

HR Services for SMBs

Start things off right and avoid legal and financial concerns by investing in your company's HR management. 

Reach out to FutureSense and learn more about how our  HR consulting services can help your business scale and grow today!