Managing the HR needs of a small, fast-growing company is indeed like trying to manage very young children, says Barbara Beck, director of human resources for Cisco Systems in Menlo Park, California. In just four years, the computer-equipment company has expanded from 50 employees to more than 1,500. As she puts it, "Our company has gone from infancy to young adulthood without spending any time in the adolescent phase."
Believe it or not, despite all the ink about downsizing, there are hundreds of small companies that, like Cisco Systems, are growing at exponential rates every year. Among the countless small companies that are actually adding people to the payroll is MVM Inc., a provider of security services based in Falls Church, Virginia, that has grown from 300 employees in 1990 to more than 1,200 today. There's also Melaleuca Inc., a direct-marketing company in Idaho Falls, Idaho, that has grown from 150 employees and $16 million in sales four years ago to 1,000 employees and $200 million in sales today. Then there's Gateway 2000 in North Sioux City, South Dakota, which assembles and sells personal computers. In just two years, the company has more than doubled its work force, from 1,200 to 2,700 employees.
Adding employees at this rate can be an HR headache or a celebration, depending upon how well the personnel department has prepared for growth. In growing companies, the HR challenge lies not only in providing HR services, but in growing the department itself. Personnel Journal talked to the HR directors of several small but rapidly growing companies to find out how they were managing the growth of their departments. We found that there's no absolute right or wrong way to develop an HR function; the process depends largely on the:
- Type of business
- Resources that are available
- Interests, expertise and goals of the directors themselves.
Because there are no hard-and-fast rules about developing an HR department, we thought that we'd let the human resources directors who are facing this challenge speak for themselves about their experiences.
Personnel Journal: When—and why—did your company create a formal human resources department?
Barbara Beck, Cisco Systems:
I was brought on five years ago when there were just 40 employees. At the time, Cisco had an employee in charge of recruitment who was just starting to develop the personnel files. My job was to formally establish the human resources function, to help with recruitment, to establish the compensation plan and to help in discussions about how the company should be structured.
David Jackson, Complete Health Services:
I took over as director of personnel three years ago when there were 250 employees. Until that point, there was no formal personnel department. Human resources activities were being managed by the director of administration, but there was no centralized function. I was brought in to formalize the human resources department. Because we were in such a high-growth mode, one of my first responsibilities was recruitment. In the beginning, 50% of my time was spent coordinating recruiting activities.
Meg Hawthorne, Clean Sites:
There has been a formal HR department since the organization was created in 1984. Why? Because if the organization was to succeed, we needed credible employees and people who were respected in their various constituencies. You see, we're a widely diversified organization that deals with all aspects of hazardous-waste cleanup—the legal side, the technical side and the policy-analysis side. Our basic function is to work with government, industry and community representatives to facilitate cleanup and negotiation. For us to be involved and considered credible, we had to recruit people from diverse backgrounds and disciplines who were well respected.
Personnel Journal: Who was selected to manage the HR function—a generalist, a specialist or someone who "came up through the ranks?"
Steve Coggin, Melaleuca:
We currently have three HR managers—one at each of our manufacturing facilities. One of them is an HR generalist, one is a recent graduate with a degree in HR management, and the third is a person with no HR experience who was promoted through the ranks. With 15 people in our HR organization, we now are in need of a strong department head. We are looking for a leader... someone who has solid HR experience who can consolidate and support the HR function.
My background is in human resources, and I was brought in because I've been through this a couple of times already with other companies that were in a high-growth mode. Growing the HR function in small companies is my area of expertise.
Before I was promoted to director of HR, I was a special assistant to the company president, which was an administrative function. My background is diverse. I spent time in the military, where I had some personnel responsibilities, but most of my experience is of an administrative nature. When I took over as HR director, I completed a course offered by the American Management Association called the "Fundamentals of Human Resources," and found out that I actually knew more than I thought I did about HR issues. Still, it was a challenge to gain respect in the position and not be viewed as a glorified secretary.
Susan Ferguson, MVM Inc.:
I am an HR generalist with a bachelor's degree and experience in the defense- contracting industry. We recently had to hire an HR director—whom I now report to—because as the company grew, we needed someone with more experience and education. She has a master's degree in HR, has more experience and a more diverse background.
Personnel Journal: What special challenges does HR face in a rapidly growing company?
Making the transition from a small-company to a large-company mentality. As we grow, we need to have more policies and procedures to treat employees fairly and consistently, but we also don't want to set ourselves up as bureaucrats.
The biggest HR challenge in growing companies is recruitment. In fact, all positions in HR should be considered responsible for recruitment. But you also have to prepare and plan for a larger organization and pay careful attention to the way you structure HR programs.
Keeping up with state and federal laws, and training managers in the field to provide HR services.
Earle Grueskin, Gateway 2000:
The toughest part is keeping up with the impact of heavy hiring... keeping up with benefits, health insurance, compensation, and so on, while continuing to recruit more employees.
Personnel Journal: Who is responsible for making key HR decisions in your company?
Our CEO is very interested in the people in this organization, so he approves all new HR programs and any major changes to them. But he trusts us to come up with recommendations and to actually run the programs.
This is an entrepreneurial environment, so we tend to get involved in decisions about HR from the back end—it isn't a problem, it's just the way it is in this kind of company. There are certain decisions related to HR—for example, percentage salary increases and manpower forecasts—that we're involved in, but there are many decisions that are made strictly at the executive level. In this kind of environment, it isn't uncommon for the CEO to hear about a great new HR program and come in and tell us, "Hey, we need to do this," without thinking about the repercussions. In a sense, we have to train the CEO [to understand] that we can't implement every new HR program that comes along.
This is true in our organization as well. Our CEO is typical of those found in fast-growing companies. He's enthusiastic, has many great ideas and tends to get "gung-ho" on certain projects. For example, he wanted us to implement a new interviewing process that he heard about at a seminar. We told him that the process would work well for technical employees, but not for the blue-collar employees that form the majority of our work force. There's a high turn-over rate among this group, and it just didn't make sense to spend hours interviewing candidates for those jobs. I would say that a lot of recommendations on HR issues come from the CEO, but our arrangement is collaborative.
Personnel Journal: As the company has grown, how has your HR department kept up with and managed the services you've needed to provide?
We've kept up by strategically planning our needs. For example, we've hired approximately 800 employees in the last six months, but we knew ahead of time we'd be facing this employment surge. How? We're a direct-mail company, and phone calls were on the increase, our products were being praised in the trade press and the marketing department was forecasting a dramatic sales increase. As we've added more people throughout the rest of the company, we've added more people in compensation, employee relations, recruiting and in clerical areas. We didn't add staff to HR after these new employees were on board, we added them along the way.
Here, there's no thought given to "if we grow." Our attitude is "when we grow." We are continually planning for a larger organization, and each department regularly projects what kind of staffing and resource needs it will have when the company grows to 1,200, 1,500, or 1,800 employees. We are more likely to have the resources we need allocated to us if we planned for that need ahead of time. This obviously means that we have to be prepared, but it helps us meet critical HR needs, such as hiring 270 people with just a week's notice.
For years, we've relied on a consulting firm to supply needed expertise in areas such as benefits, compensation, performance appraisals, policies and procedures, health insurance, training, worker's compensation and Department of Labor requirements. By contracting with this firm, we were able to gain a lot of skills and experience at a very reasonable cost. It was a cost-effective, "make-vs.-buy" decision. Many of the programs they developed—such as the procedure to follow when someone is accused of substance abuse—only have to be developed once. Once the programs are in place, our goal is simply to manage them.
We're very conservative when it comes to adding HR staff, so at times when we've needed extra help—for example, when we had to get 200 people on the payroll immediately—we got employees from other departments to help us with recruitment temporarily. They worked with us for three weeks until the new hires were on the job, then the borrowed employees went back to their own responsibilities.
Typically, we borrow employees from departments such as customer service and in-bound sales. They have good phone manners, are excellent problem solvers, and they know a great deal about the company. We don't try to make instant HR specialists out of them. Instead, we give them administrative duties, such as scheduling interviews, setting up appointments for drug screenings and assisting with reference checks.
Because the customer-service and sales departments have so many employees, it isn't necessary to find other employees to take over the responsibilities of those we borrow. Also, when we need the most help in HR is usually at a time that is slow for those departments. For example, we may be in a hiring mode because we are getting ready to launch a new product. Customer service isn't going to get busy until those new people are hired and the new product is officially launched. Our culture allows this kind of employee borrowing because, as our CEO says, we operate under a "sports car" mentality. Our people move in high speed to do whatever needs to be done. If customer service temporarily needed people from HR, they could have them.
Personnel Journal: To what extent have you relied on a human resources information system (HRIS)?
We installed a large, companywide computer system two years ago, but the only HR module we had was a payroll program. The biggest mistake we made was not obtaining good HR software at the time that system was installed. We need to track such things as attendance and actual-versus-budgeted expenditures, and we need help with planning the appraisal process. Today, we're doing all this manually. We will have major productivity gains when we finally get some good HR software.
One of my first jobs as personnel manager was to establish the information flow—to get everybody onto some sort of PC system so that we knew how many people we had, how many openings we had and where the people were. We didn't have an HRIS previously, and our budgets were—and are—very limited. We had a lot of priorities, and putting money into an HRIS wasn't one of them. What we did was establish a system to serve our purposes in the short term. We simply set up a data-base program in which we could add fields and put up to 150 pieces of data in order to generate reports. It was a low-budget kind of approach.
When we put in an HRIS three years ago, we didn't have any idea what we were doing. We accepted the vendor's assurances that anyone can input and manage the data, but it wasn't that easy. For example, we didn't have a system that could provide monthly head-count reports and organizational charts, and it wasn't till much later that I found out from the HRIS manager that she was retyping the organizational charts and doing a download from the main HRIS system. This didn't make sense; it took a lot of time, and there was much greater potential for error. Through this experience, I found how important it is to set up an HRIS early that will allow you to function productively later on. If I were to do this over again, I would hire a senior person with a programming background to manage the system. I advise people to invest in a staff programmer or hire an HRIS consultant to create the capabilities you need.
Personnel Journal: How would you describe the role of HR in your company, and how is HR linked to company goals?
We consider ourselves to be internal consultants who develop policies and procedures that managers in the field can follow. We are so labor intensive that the company can't make a move without HR being involved. For example, we are involved in sensitive government business. Before accepting the government contract, the company wanted to know how this kind of hush-hush business would affect HR—how employees would get the work done, how many people would need security clearances and what kind of effect the new business would have on existing work load. I would say we're helping to guide the company.
Our role is to help managers be successful in this company. We don't set their agenda, we help them reach the agenda. For example, for every company goal, I develop a goal for the HR department. So, when managers talk about developing a strong, productive team, for instance, we help them by creating management- and employee-development programs, and providing employee support through the employee-assistance program. HR is involved in setting company goals, and we participate on the executive staff, but I'm not on equal footing with the vice presidents. We're still perceived as more of an influencing function.
Personnel Journal: How is the effectiveness of HR measured?
By the service we provide to our constituencies... in other words, customer satisfaction. We measure the number of complaints we receive, the turnaround time on requests, that sort of thing.
We are held accountable in a number of ways: the effectiveness of recruitment (e.g. keeping turnover low); projected vs. actual compensation costs; performance statistics on existing vs. newer employees; and affirmative-action data.
Customer satisfaction. We work to make sure we get employees to the field in time, and that turnover and overtime are kept to a minimum.
Personnel Journal: Are there any external resources you've found to be especially helpful?
I've found it valuable to network with HR managers of other companies in this industry. These individuals recently formed the HR Council, an association through which they talk about personnel issues relative to our line of work. Clean Sites is very small compared to the other companies in this business, and I have found the other, larger companies to be a great source of employees when we are recruiting.
I have learned that good ideas often come from outside of the HR department. I used to take it as an insult when ideas were presented to me from people outside of HR, but now I know to keep my ears open for those ideas.
I rely on organizations, such as the Saratoga Institute [in Saratoga, California], to learn what other companies are doing in HR. I also have taken a look at many companies that are similar in size and growth to find out how they're doing, what they're doing and what they consider to be important facets of their HR operation. This kind of benchmarking is extremely important.
What advice would you give to other HR professionals in growing companies?
Expect to make mistakes and forget things. It's difficult to get a large number of employees up and running quickly without having things go wrong once in a while. Don't expect to be proactive. Work to keep up.
Plan ahead as much as you can. Anticipate HR needs in training, compensation, clerical support and so on. Contact other companies to find out how they've managed rapid growth.
Some people believe that their role in HR is to serve as police officer or paper processors. They don't think of themselves as providing a service to managers and employees. Some HR people, for instance, think that if an employee didn't complete a form correctly, the form should be sent back, and whatever the request was should be denied. If you get too caught up in processes, policies and procedures, you may lose sight of your objective, which is for HR to service the needs of the organization.
Hire as high as you can when finding someone to lead the human resources department, with the expectation that you can build staff underneath that person. You want someone who can grow with the company and who takes a long-term approach to human resources planning. This kind of environment, while exciting, is very challenging. I relate it to being in a bicycle race, in which you're riding the bike and trying to get ahead as fast as you can, while at the same time, you're having to pump up the tire.
Personnel Journal, November 1993, Vol. 72, No.11, pp. 56-63.