It’s 10 o’clock on a Monday morning. You should be in a strategic planning meeting discussing your five-year roadmap, reviewing progress, and adjusting milestones. But instead, you’re locked in a fraught one-to-one with your Sales/Marketing/Support/Customer Service lead.
When you launched the company a few years ago, having one person cover all of these roles made sense. It was also the only option financially. But now it’s become too much for them. And for you.
Their stress levels are high. And, trying to run the company, while also firefighting day-to-day operations, so are yours. You need to hire someone to take on the role of Head of Marketing to relieve the burden at management level. You also need to grow a team of sales reps to meet demand on the frontline.
The problem is you haven’t had time to focus properly on either. You also don’t really know how best to approach the hiring process. Where should you advertise? What kind of salary and benefits should you offer? You have no HR or training experience. Which means you’ve got more questions than you have answers.
Up until now, you’ve recruited through word of mouth and referrals. But you haven’t been successful this time. None of the few leads you’ve been given have worked out. Not only that, but a quick look at your colleagues in the office (similar age, ethnicity, background, and culture) tells you that maybe hiring from such a closed talent pool isn’t sustainable. Or a great way to realize the vision you have for a diverse, multicultural, creative, and dynamic team.
The good news is, business is booming. Your bottom line’s healthy. And looking at your roadmap (when you get a chance) makes you excited for the future. You just might need a little help getting there. And, given the type of challenges you’re experiencing, the help you need is with HR.
Help with HR
If the scenario above sounds familiar, you’re not alone. In the early stages, most startups don’t have a dedicated HR function. Instead, they focus resources on areas of the business that deliver immediate returns. But as success kicks in, the importance of hiring and retaining good people at scale takes on a new significance. And the long list of responsibilities and skills associated with achieving that start to become evident.
HR training that covers the essentials can certainly tide you over. The right HR tools will also make a difference. But there comes a point when every startup needs to think about hiring an HR manager. The challenge is knowing when.
Luckily there are lots of warning signs to look for. And we’ve compiled them all in one checklist.
A distress warning: The 15 HR red flags that signal danger
When you’re busy running a business, it can be hard to take a step back and look at the bigger picture. The following is a list of HR-related concerns that you might observe on a day-to-day basis.
Individually they may seem harmless. But collectively, they can be cause for concern. However, knowing what to look out for means you can plan your strategy and take appropriate action.
Your legal obligations are unclear or starting to change
Some US employment laws apply even when you have as few as two employees. But the most significant acts of legislation come into effect when your numbers start to grow.
When you reach 15 employees, you have to comply with Title VII of the Civil Rights Act. And when your headcount reaches 50 employees, the Family Leave Medical Act (FMLA) kicks in. There are also laws unique to different federal, local, and state governments that might apply now or in the future. Not meeting or breaching your legal obligations comes at a high cost.
Hiring’s an ongoing need, not an ad-hoc requirement
There’s a point in the life cycle of a fast-growing SMB when recruitment needs evolve. And the hiring workload gets bigger, more complex, and a permanent part of day-to-day life.
Employees who’ve been with you from the start will start to leave or look for promotions internally. So, as well as hiring for new and emerging roles, you’ll need to recruit to fill existing posts. And think about retention strategies to try and minimize churn.
Which leads us to…
Your employee turnover is high
While a lot of the HR red flags in this list are quite subtle, this one’s relatively easy to spot. If significant numbers of new hires are leaving their job with you not long after they’ve started, you’ve got an immediate problem.
An HR manager can help you identify what that problem is. And implement a solution to help you keep hold of employees you’ve spent time and money recruiting.
You have a vision but don’t know how to achieve it
When you set up your company, you had a clear idea of what you wanted it to look like. And feel like. Of course, making a profit was a priority.
But now that your bottom line’s looking healthy, you want to make sure organizational development is on track too. From culture and diversity to what makes a happy and productive workforce, an HR specialist can help keep your vision on track and in focus.
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You’ve got a problem with (lots of) (important) paperwork
HR paperwork is legally binding and exists to protect both employers and employees. Late, missing, or inaccurate documentation can result in fines or lawsuits. Not to mention the risks surrounding compliance and data protection.
For each of your employees, there’s a long list of forms that need to be completed and signed, filed, checked, and regularly reviewed. And keeping on top of this as your company grows isn’t easy. Given that this isn’t a “nice-to-have” option, as soon as it becomes unmanageable, it’s time to hire an HR manager.
Focusing on HR tasks is damaging your bottom line
How much time do you, as a business owner or CEO, spend on HR tasks? If you applied the same amount of time growing your business, what impact would it have on your bottom line?
If there’s a clear discrepancy in value added, it’s time to rethink your strategy.
Paying a salary to an HR manager may initially seem like a big outlay. But remember. As well as managing day-to-day operations, they’ll add value to your business by keeping workflow and engagement levels high. Plus, hiring them frees you up to focus on game-changing activities relating to revenue growth
Pay structure isn’t consistent or competitive
Financial remuneration doesn’t necessarily make employees more engaged or happy. But it is a big demotivator if you get it wrong.
In small companies growing organically, discrepancies in pay often occur unintentionally. But can rise to the surface quite easily. If you’ve received questions about pay disparity or multiple requests for salary increases from different sources, it could be time for a pay review. Hiring an HR manager means you’ll have a dedicated person to take control, introducing and implementing a centrally-managed payment structure that’s consistent, competitive, and fair.
Your team goes missing
Your employees are obviously entitled to time off. But you can’t function if they’re all off at the same time. During the early days of operating as a startup, a casual agreement to request leave and ensure effective cover was probably enough.
But with your workload and workforce growing, it’s harder to informally track and coordinate time off. Which means you risk missing targets and meeting deadlines. If you’ve turned up to work and lots of your managers are missing, or whole teams are absent, and you’re not sure where they are or why they’re off, it’s time to take control.
Communication’s breaking down
As start-ups grow, communicating with employees becomes harder. Company news can no longer be effectively delivered by making ad-hoc announcements when everyone happens to be in the office.
Whether it’s policy updates, announcements about organizational change, benefits, training, or staffing announcements, HR communications can make or break your business. And you know you need an HR manager when important all-staff messages aren’t being communicated or aren’t reaching all the right people at the right time.
You’re struggling to provide answers
As CEO or founder of a company, you’re best placed to answer questions about your business. Whether it’s your product or service, your vision for the future, or your reasons for starting in the first place, your insights will inform your strategy and drive success.
But you can’t also be expected to be an expert in employment law, tax, payroll, health & safety regulations, and employee benefits. If your employees are asking questions you can’t answer—either on the spot or within a reasonable timeframe—hiring an HR manager is the best solution.
Employees are underperforming
Learning and development programs help organizations and employees grow. They also boost retention rates. But setting targeted objectives, providing training, and delivering feedback take more time as your headcount grows.
A disengaged workforce, missed targets, drops in productivity, and higher-than-average employee churn rates all suggest L&D may not be getting the attention it deserves. And indicate that hiring an HR person would be a wise investment.
There are complaints of unfair or inconsistent treatment
Having policies is important. But if they’re not being applied consistently or interpreted accurately, dissatisfaction and discontent among employees start to emerge. There’s even a risk the Department of Labor (DOL) will get involved.
When you start to rely on quiet hiring to fill roles internally or receive internal complaints about lack of transparency, it’s a strong sign you need a professional HR person on board to establish fairness and clarity.
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You’re planning your exit
If you’re thinking of selling your business in the future, you need to plan your strategy well in advance. It may seem too soon to think about it, but hiring an HR manager long before you decide to sell will be seen as an asset by prospective buyers. With protocols and procedures well established, they won’t need to worry about staffing issues, HR policies, or the migration of the business.
Your org chart looks unfinished
Your company org chart says a lot about your business. So step back and take a look.
Has it changed from the early days when a handful of people covered a number of different roles? Are there now narrowly focused departments led by individuals with specialist skills? If the answer is ‘yes,’ you need to update your org chart and find space for an HR manager and HR department.
You’d fail in a crisis
When your business is just starting out, it’s relatively easy to respond to unexpected events as a company because your headcount’s so small. And your dependencies are still emerging. When you grow, it becomes harder to coordinate an approach.
The risks are also a lot higher. Hiring an HR manager means you can prepare for potential threats to what keeps your business going—your people.
Assess the risk
There’s no hard and fast rule when it comes to knowing when you need a dedicated HR professional on payroll. But having a list of red flags to look out for certainly helps you assess the risk.
It can also guide your decisions about what kind of person you need to appoint when you are ready. Do you need someone to focus on strategy and growing a team? Or is having someone to focus on day-to-day tasks enough?
If you’re on a tight budget, it might make sense to hire someone with less experience but lots of potential and then train them up to take on a strategic role in the future. If you’re scaling aggressively, hiring an HR manager to build and lead a team asap makes more sense.
Either way, it’s better to take action before it’s too late. After all, that’s what red flags are for.
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