Know when to hold ‘em, know when to fold. As a Human Resources Consultant, these famous lyrics play on in my head whenever I meet a small business owner that has already gone through the start-up phase of their business and has now had a considerable time to develop and grow the company. It’s about this time that they have increased their human capital by at least 10 people on their payroll and maybe a few third party vendors they pay via 1099. Growth has become inevitable and focus is mostly on assuring the ability to seize opportunities.
From a Human Resources perspective, all needs have been met, in usually some ad hoc way, which was fine for a small start-up company. Whoever was responsible for writing checks probably processed the small payroll, paid the workers’ comp and other employer insurance. Employee benefits that were not a thought have started to become a point of contention as new talent needed to be acquired. Hiring someone new was probably a simple step that involved agreeing o a salary, telling them what they were supposed to do and getting them on payroll – all that was handled by the business owner and maybe their Administrative Assistant. Legal and financial advisors have also been all that most business owners needed and still think that is all they need. I am here to tell you, not only are you stepping into a danger zone but some of your advisors may not know all YOU need to know.
Forget what I know about this and just look at the thousands upon thousands of employer/employee legal issues that come up on court dockets. The Department of Labor and the IRS are not the only regulatory bodies that govern employer/employee relationships. There are a plethora of Acts and other federal and state agencies covering discrimination of all types, compensation, privacy, civil rights, disability, harassment, health and safety, to name but a few of the concerns you as an employer need to consider. And, unfortunately, if an issue should arise, all legal agencies, wait… I mean to say ALL LEGAL AGENCIES, lay responsibility on the employer. Even if you have had legal and financial counsel and were ignorant in what compliance issues you are subject to, it doesn’t matter. In these instances, you as the employer are guilty until proven innocent.
Believe me I know, in my 25+ years of Human Resources experience the HR function is usually looked upon as a necessary evil, a cost center that only subtracts from the bottom line. In those years I have seen remarkable change, especially in the big corporations. From a Human Resources department of 4 – 12 staff members to downsizing, third party suppliers to almost eliminating all but the barest essentials. The growth of the small business has almost mirrored this behavior when it comes to HR. However, if a Human Resources issue arises that needs to be dealt with, a large company can have their legal rep they have on retainer handle it and they can take the hit of paying a fine and compensating the employee for what it is they claimed. A small business owner, no matter how good their service or product is, can be devastated by one employee claim. Legal fees, even if in the end when they prove themselves not guilty, can wipe out a year’s of profit or more and along with fines, can financially cripple or lay to waste a small business.
Know when it’s time to invest in safeguarding your business. Good Human Resources management can protect your business. In addition, a study I came across a few months ago estimated that those companies with good core HR practices experienced up to 3.5 times more growth and 2.1 times more profit margins than those companies that did not have an HR professional managing this area. How’s that for your bottom line?