There are no paved roads as one enters this rapid-growth scenario—just a few crude paths that lead initially to payroll and benefits administration functions. Most likely, one or a few individuals are assuming responsibility for this important role from the owner, controller or business-unit managers who probably handled HR in their "spare time" up until now. Now that the business has grown from 10 to 110 employees in a matter of months, you have to forge your own way through the employee-relations wilderness to set up and run an efficient camp.
Policies and procedures should guide the organization—not strangle it. As HR begins to chart its course, its definition of policies and procedures serves as a compass to guide the human resources function in its dynamic environment. HR needs to address compliance with laws in order to establish consistent practices. In addition, HR needs to install baseline procedures for recruitment, performance management and compensation. Unfortunately, many growing, entrepreneurial companies resist such bureaucratic or controlling HR initiatives.
"You have to expect some resistance when starting up the HR department," says Sherry Lee, human resources director for Minneapolis-based Connect computer consultants. Lee joined Connect three years ago when the firm had 86 employees. Today, it employs 262 workers. As a smaller company builds its HR function, some employees may express an uneasy feeling, as they did at Connect: "What will I have to do differently in my job because of the new policies?" Lee recommends actively promoting HR as a way to support managers, relieving them of human resources functions so they can focus on their own jobs. And, she adds, "Use HR procedures as a tool to help employees—not as a club to punish."
It’s a delicate balancing act for HR professionals to set up policies and procedures without strangling the organization. The number of federal requirements and legislation that requires compliance increases significantly with a company’s growth. Just keeping up with the laws can be overwhelming. Local employer groups, benefits consultants and professional HR organizations are resources that can provide current information. CD-ROM services and the Internet also provide handy information databases of regulatory and compliance issues. Attending seminars can offer a wide range of education opportunities on topics ranging from employment law to diversity training and new recruiting processes.
Some of the major regulations to address from the start are: the Fair Labor Standards Act (FLSA), COBRA, ERISA, EEO laws and Affirmative Action programs, the Americans with Disabilities Act (ADA), and the Family and Medical Leave Act (FMLA).
Keeping track of laws and regulations in 37 states, in addition to OSHA and workers’ compensation factors, is a major HR challenge for Karen Jones, vice president of human resources for Minneapolis-based Select Comfort. This manufacturer and distributor of air-sleep systems has climbed Inc. magazine’s list of fastest growing, privately held companies over the past three years—from 69th (1994) to 30th (1995) to sixth (1996).
One area that HR in companies like Select Comfort must struggle with is the amount of increased compliance activities. Regulations call for consistency and documentation in tasks such as hiring an employee. For example, one must ensure that upon hiring new employees, HR sends the new hires notification of COBRA rights.
In sum, one needs to document all the information pertinent to employment and work references in HR files, as well as provide proper notification to employees of COBRA and ERISA rights, summary plan descriptions and other plan documents. Be sure to insert employment-at-will language in offer letters, employee handbooks and disciplinary documentation.
The biggest challenge for the first HR professional of a growing organization is knowing when such regulations are applicable. For example, once a company employs 50 workers, it’s subject to implementing the FMLA. And in the course of applying different parts of the law, HR can better balance the requirements with the culture of a company’s unique operating environment.
Be careful of incorporating regulation into a paternalistic culture that regards employees as "part of the family." The owner may be willing to grant liberal leaves of absence to certain dedicated employees while overlooking regulatory issues such as EEO laws, the ADA, the FMLA and guaranteed return-to-work issues. As an HR manager, you must ensure a consistent policy that balances this family-based culture with appropriate documentation and addresses benefits, return-to-work issues and the financial obligations of both the employee and the company.
Another potential danger sign may arise over the exempt/nonexempt status of employees. As an entrepreneur, the business owner may believe that a nonexempt perspective creates a clock puncher mentality, which restricts the ability of employees to put all their efforts into building the company. Yet the FLSA dictates that, based on the definition of the work performed, certain positions are nonexempt and eligible for payment of overtime. HR must ensure that all positions are appropriately classified as exempt or nonexempt, without discrediting the professionalism and work ethic of the organization.
Any procedures established must fit with this growing-organization mindset—they must not create an inhibiting, bureaucratic structure. For example, a rapidly changing organization won’t be able to respond quickly to a complex compensation system. HR should pursue options that provide more flexibility.
Jones says that Select Comfort created an open corporate culture from the beginning that allows employees to have many opportunities to participate in the business’ success. Therefore, the procedures developed by the home office are implemented at the retail-store level across the country by area sales managers who also are responsible for recruiting, hiring, training, disciplinary actions and termination.
Play the role of risk manager. But don’t depend on policies and procedures alone. As HR establishes policies and procedures for the company, one becomes the de facto "risk manager" who must assess the areas of vulnerability within the organization and ensure the entrepreneurial business owner is aware of possible liabilities.
For example, most HR professionals have read about recent court cases regarding employment at will and rigid disciplinary procedures that have left organizations exposed to noncompliance with their own rules. That’s why it’s important to take precautions when publishing policies and procedures in an employee handbook and other communications.
HR should remember the KISS principle—keep information short and simple—to manage the risk of noncompliance, particularly in the employee handbook. One should offer only the broad policy issues without articulating a step-by-step disciplinary action protocol. Then HR can provide supervisors and managers with a separate procedures manual that provides guidance on managing the discipline steps, but one that doesn’t imply a prescribed order of completion. Human resources managers can also use defined sections in the published document that specifies the handbook doesn’t constitute an employment contract.
With limited resources, HR can’t afford to operate traditionally by centralizing management of all programs within a department of one. It will have to share certain risks with various department managers and supervisors. By delegating accountability for executional aspects of some HR programs, managers can spread the potential of adverse exposure throughout the organization. However, the trade-off is in monitoring these shared programs. By participating in the final interview prior to a hiring decision, for example, HR has the opportunity to do a quality check on the recruitment process by listening to how the applicant portrays the proposed work, the relationship with the manager and the work environment.
Assessing risks takes a constant vigil of employee relations. Problems arise at any time, and one disgruntled employee can eventually move the masses. HR’s best preventative measure is to keep its finger on the pulse. This means taking the time to walk around the operations and being accessible to employees. By presenting an open demeanor, one allows people to approach human resources staff to discuss their issues and problems. Getting to know how the employee grapevine works can be used to HR’s advantage to confirm what has been formally announced and to alleviate the unspoken concerns of employees.
"Employees have the capability to solve many problems," says Anne Losby, director of HR and training for Teltech, a national provider of scientific and technical research that employs 150 people. Teltech’s employee environment encourages responsibility and accountability. When the company initiated a cost-cutting process, the employees were encouraged to share their ideas about the best way to meet the company’s goals. That means, says Losby, that it’s not OK to say, "Nobody ever told me that." Losby believes it’s part of her job to facilitate problem-solving among employees, especially when they’re frustrated. "It’s worth it in the end," she says, "because there’s more ownership when employees solve their own problems."
Adapt to a changing workforce —and its implications.
To become competitive, small growing companies need to leverage their employees as their most important competitive advantage. That means ensuring the makeup of one’s employee base. Employers today need to get beyond the technical issues, and acknowledge the impact of the changes in the workforce of the 21st century. Rather than simply complying with the mechanics of the laws, the HR professional today should engage a forward-looking perspective that leads the organization in addressing diversity.
As Diane Arthur points out in her book—"Managing Human Resources in Small & Mid-Sized Companies," Second Edition (Published by Amacom)—demographic changes by the year 2000 will create a whole new work environment. Women will constitute half of the entire U.S. labor force, minorities will account for one-third, and approximately 50 percent of working individuals will be foreign-born or people with disabilities.
In the technology industry, there’s still a great need for aggressive recruiting and training because of a shortage of qualified workers. "It’s been a struggle to find resumes of women, minorities and immigrants," says Lee, "but we’ve increased our success in these areas by more actively recruiting at the college level and by working with diversity organizations."
Says Arthur: "For workplace diversity to be effective, employers must commit to valuing the skills of a wide range of employees and let go of any lingering traditional views that certain jobs are appropriate for men or women only, unsuitable for older people, undesirable for minorities, or can’t be accomplished by people with disabilities. Such views may not only be discriminatory and in violation of certain equal employment opportunity laws but impractical and self-defeating from the standpoint of productivity and profitability."
HR must, therefore, give consideration to programs that increase employee awareness of diversity issues, enhance managers’ people-management skills, and provide a process of dealing with complaints of offensive behavior or harassment. In addition, it must be sensitive to the needs of the changing demographics by supporting flexible work arrangements and telecommuting opportunities as appropriate.
At Select Comfort’s headquarters in Minneapolis, Jones has observed a significant increase in the number of Asian and Hispanic workers who’ve been hired for manufacturing and production jobs. "Our biggest issue is English comprehension in a team-based environment that requires good communication skills," she says. "We’re looking into English-as-a-second-language training and working with the University of Minnesota to develop a validation test that will help us determine the level of comprehension that we need to target our training."
A changing workforce will have other HR implications, such as performance management. Managers need to go beyond simply filling out an appraisal form by engaging a diverse workforce in a meaningful discussion that links employees’ activities to the objectives of the organization in measurable terms. As managers learn to deal with a variety of employee backgrounds and perspectives, performance-review training will become more complex.
Position yourself as a strategic business partner.
In addition to handling specific HRfunctions, those in human resources also will see the importance of strategic planning. According to Teltech’s Losby, "HR isn’t just about policies and procedures, although you need to establish boundaries. It’s more about helping the company get the job done and doing what it takes to help accomplish its objectives."
If HR wants to move beyond the traditional HR role, it needs to establish a presence early in the process as a key contributor on the management team. Professionals who take a broader view of the organization’s vision, mission and business objectives will be able to link human resources programs with deliverable outputs that accomplish the organization’s purpose.
One can build HR programs that incorporate and build on the company’s mission. If the mission is to provide quality products on time and cost-effectively to customers, this translates into quality recruitment and compensation programs. If the mission includes an internal component of valuing employees, this translates into flexible benefits that meet the diverse need of individuals.
Positioning oneself as a player and key information source on the management team takes a proactive effort. You need to become familiar with the company’s financial reports and understand the revenue goals, operating income and annual profit targets. As you become proficient with the language of all the departments, you’ll be able to present HR options to management that fit the specific outputs. And, as a sounding board for managers during performance reviews of their employees, you’ll become more familiar with the goals of each department.
"HR has tentacles that reach into every part of the organization and has a unique opportunity to see what’s going on and to make a difference by getting involved in the important issues," Losby says. She organizes and facilitates the management meetings and takes it upon herself to follow up on management issues. This includes reading and routing business articles to her CEO boss on various issues and ways that other growing companies are handling them.
Work smarter, not harder before adding to the department.
Despite HR’s connectivity to the other departments, the human resources professional in a small but growing organization travels a lonely path. It can be tempting at times to add support positions for handling the mountains of specific, administrative paperwork in order to stay focused on strategic issues.
"Growing the HR department doesn’t always mean adding bodies," says Losby, who was one of Teltech’s first employees and started managing the HR function on a full-time basis when the company had grown to 70 employees. Teltech plans to keep the company’s head count low—currently at 150 employees—which includes staying at two HR people. "It’s more about growing HR’s significance to the company by doing what’s most important to move it forward."
The solo practitioner who wants to push forward on a strategic level needs to get "technology smart." In this rapidly changing age of automation, there are a number of ways in which information can be gathered, tracked and dispensed to eliminate time-consuming processes. The one-person HR department can use various technology resources to expand services and network without necessarily adding support positions.
By simply integrating payroll and HR databases, for example, one can more efficiently generate reports on compensation, benefits administration and affirmative action. Look for shortcuts in the benefits arena such as online-benefits enrollment. New voice-response benefit-enrollment processes also are saving time for HR and employees alike. For offsite locations, especially, be sure to have e-mail set up to enhance communications. Many companies, including Teltech, have developed an intranet for communicating with employees, which eliminates the need to publish an employee handbook.
Additionally, the Internet offers expanded access not only to information but also to job candidates through the use of homepages that include employment opportunities. Internet recruiting services are beginning to provide a significant cost savings over typical classified ads. Advertising also is available with newspapers that offer their own online services.
Another major avenue for maintaining a strategic focus is outsourcing. Says Losby: "You can’t do everything." She suggests you think of the impact of what you’re doing at all times, focusing on what’s most important.
There’s no reason for a solo HR professional to handle it all. You need to be effective time managers and be sure to delegate appropriate resources and programs. Many human resources functions can be outsourced to various service providers including:
- Consultants who can design a new 401(k) plan, compensation program or flexible-benefits package
- Third-party administrators that can manage all the benefits-related paperwork
- Payroll services that can maintain a combined payroll and HR information database and develop reports in addition to handling the payroll function
- Training consultants who can bring a level of expertise in specialty areas, such as diversity, affirmative action and sexual harassment
- Attorneys who can help draft the employee handbook language to manage the risks
- Employee-leasing agencies that hire people and then lease them to organizations.
In the final analysis, Lee recommends maintaining a sense of humor while building up your department. "It’s an incredible amount of work to start an HR function," she says. "But keep in mind that it’s far easier than taking over one that someone else has created because you can establish your own systems and set your own pace."
Personnel Journal, December 1996, Vol. 75, No. 12, pp. 39-45.