When to establish an HR Department

Human Resource Options

Human resource options include internal and external solutions. Internal Human Resource Departments make most sense for somewhat larger organizations. They can also make sense if your organization is has a trend toward increasing the number of employees. Experts suggest that unless your organization has 50 employees, it makes mores sense to pursue the HR resources needed externally. When an organization is smaller it makes sense for talent to be focused on the primary focus of the organization rather than diffusing focus by creating additional HR duties for them to manage. According to the Society for Human Resource Management (SHRM) these are some of the key questions for organizational leaders to consider when evaluating establishment of an internal HR department:

  • What was the purpose for creating this new department?
  • Who made the decision to create the position, and who understands the inner workings of the organization and knows the key decision-makers?
  • How were human resource activities handled in the past and by whom?
  • What is the culture of the workplace?

According to Peter Rosen, President of the Consulting Firm, HR Strategies and Solutions, it makes most sense to break out the staffing piece of the HR function, “because it is such a full-time type of thing.  If the volume of hiring is pretty high and consistent, either through growth or turnover, then you’re going to need a person dedicated the recruiting aspect of HR early.”  (Peter Rosen, President of consulting form HR Strategies and Solutions). He points out that it is challenging to have recruiting skills in smaller organization because of the many other responsibilities HR generalists have. 

In smaller organizations, even if there is not a formal HR department, the work of human resources is being done. It is recommended that leadership of smaller organizations evaluate what human resource activities are being done and try to assess how effectively they are being managed.  SHRM recommends an HR Audit. This type of evaluation also helps an organization take a snapshot of current effectiveness of HR related programs. Once priorities are determined based on reviewing each of the HR type activities and functions, then it is up to the leadership to create an action plan determine the structure of the department and the types of duties that could be more effectively performed. 

There are many ways to structure a human resource department. Much depends on the current size of the organization and its growth plans as well as whether it has had any human resource issues like organizational staffing strategies, benefits and payroll administration, training and orientation, recruitment, policies and procedures, conflict resolution or other issues. It is helpful to think about growth, industry, closest competitors’ strategies, the industry and how best to meet the needs of the end users of your organization. 

Size of the HR department is often a question that those organizations creating an HR department need to consider. Many will start with an HR generalist, and some will start with a two-person HR department. Others will hire multiple specialists on a part time basis or will outsource some specialties.  It is helpful to think about what will be most cost effective and support the organizations current and near future needs.

Hire Outcomes HR, gives small organizations, big-organization results through our recruiting expertise. We are specialists in recruiting talent. Unlike many smaller SMBs, where HR generalists are typically responsible for recruiting, our team focuses on recruiting. We are not distracted by the dozens of other responsibilities we know HR generalists face every day. 

Source: Starting an HR Department from the Ground Up (shrm.org)


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