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What Every Small-Business Owner Needs to Know About HR

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Companies in California saw a minimum-wage increase this year, from $10 per hour to $10.50, and there are plans to go to $11 on Jan. 1, with more increases until a $15 minimum is achieved in 2022 — if they have 26 or more employees. Those with 25 or fewer employees are also inching toward a $15 minimum, but one year behind larger companies. However, the city of Los Angeles has a minimum right now of $12 for most businesses.

Did you catch all that?

You may not have any employees in California, but chances are the payroll and human resources functions are no less complex where you are. As a business owner, you’re trying to build a company. You probably don’t have time to master HR at the same time.

But that doesn’t mean you can ignore HR issues. To find out how to get a better handle on small business HR, we reached out to Franny Oxford, vice president of HR for a privately held manufacturing company in Houston. Here’s what she had to say.

Outsource, Outsource, Outsource

As a small company you’re unlikely to have enough HR-specific work to justify an HR staff member yet. In such cases you need to hire someone whose business is HR so they can accomplish these basic functions, Oxford says.

“Do some networking, talk to other business owners, contact your local chamber of commerce and ask for some good consultant referrals,” she says. A part-time HR staffer is an option, but Oxford really recommends an outsider for now. “A good rule is one full-time HR hire for every 100 to 200 employees, depending on your industry, goals and turnover,” she says.

Oxford recommends performing a gap analysis to find out which areas you need assistance with: payroll, compliance, legal matters, benefits, employee relations, recruiting, performance management, etc. If you’re stumped by all of it, look for an HR generalist consultant.

You may need to hire more than one consultant or contractor; it’s fine to have more than one as long as they complement one another. “You should find people you get along with and who understand the needs and goals of your organization,” she says.

Establish an Objective Framework for Performance Management

If your company has five employees and two of them hate a new policy or procedure, that’s 40 percent of the staff that’s upset. “Everything is magnified and feels more intimate and more personal at a small company. Small issues can quickly grow and kill a business,” Oxford says. If you have an outside consultant with a high degree of experience, they can mediate any issues and de-personalize situations. They can be objective because they aren’t involved in the day-to-day stresses and friendships that arise in small companies.

This objectivity can be especially helpful when it comes to evaluating staff performance. As the owner, you may be hesitant to give negative feedback if it seems harsh, even if it’s necessary to grow the company, Oxford says. And while a consultant won’t have the conversations for you, he or she can help you develop a framework for this process that measures performance, frames the results and conversations about the organization’s goals and accomplishments, and includes an action plan to address feedback. This keeps feedback conversations productive and less personal, she says.

Think Strategically About Talent Acquisition

One of the most important HR-related needs for a small business is talent acquisition and management. Small businesses live and die on the strength of their talent and in knowing when and how to make changes.

Are you missing a certain skill set, for example? Does this mean you need to hire someone to fill that gap, or would it be possible, and more economical, to train an existing person?

This is another area where an outsider can help, Oxford says. “Recruiting is best done from the outside for smaller organizations,” she says. This could include the use of staffing firms or independent recruiters, as well as fee-based consultants.

But whether you hire someone to help you or not, it’s important to make these moves thoughtfully. If you become overwhelmed with a temporary business need and then make a permanent hire, if you hire people just to make yourself feel like your business is bigger than it is, or if you hire a candidate who’s overqualified and expensive mostly because “She used to work at Google!” then these situations can wind up being expensive mistakes.

Stephen Loy