Making your 1st HR hire is more than a “personnel” preference (pun intended). It’s a big and important moment when an organization decides to do this. When’s the right time? We get asked this all the time. We’ve put together these 5 Q&As that will help you decide whether and when to hire an in-house HR person.
Successful business leaders’ confess: one of their most important skills is time management. They know their top priorities and what eats up time, i.e. what to get off their plate. Work smarter, not harder.
So, to save time in answering this question, here are 2 quick scenarios that could trigger the need to hire an HR professional.
1. How far in advance should I hire HR before seeing the need?
- Planned growth. If a company sees themselves hiring employees in the immediate future, they will need an HR professional to support them in these efforts.
- Admin black-hole. If business leaders are currently experiencing time management issues related to HR (or things beyond their sphere of knowledge), they will want to hire an HR professional.
Solid HR professionals can help take a lot of weight off of business leaders’ shoulders. They can free up a business leader’s day so that he or she can become more productive and spend time more wisely.
2. I need data. Which metrics give me a sign that I’m ready for this hire?
There are some metrics that companies use as triggers for hiring their 1st HR person. While revenue, in the past, has served as an indicator of company size, this is not always true nowadays. Hiring for HR is a little different than hiring a finance person.
- In finance, you can say that you are ready to hire a finance person “when we reach x transactions or y revenue.” There seems to be common consensus that you should consider hiring your 1st finance person when you hit double digits in millions of revenue.
- Best practice is that companies hire their 1st general administrative professional when they hit 10 employees.
- The 1st HR professional is usually needed when they hit 50 employees. That’s when it’s simply too much for someone to “handle on the side.”
However, it’s important to note that these are broad generalizations. It’s best to compare these numbers and metrics with industry standards. For example, a tech startup like Snapchat was a billion dollar company with 10 employees. They would fall outside of the standards that we are talking about here.
3. How do I know which skill set is needed for my 1st HR hire?
There are other common triggers that could indicate your company needs an HR professional. But what skills this person needs depends on what your company really needs. Look at these needs and the corresponding skill sets:
- Setting up various systems like time tracking, PTO tracking, and/or employee engagement surveys (due to absenteeism or “bad vibes”): You need an HR professional with strong project management skills and people skills;
- Hiring many employees in the near future, and/or being overwhelmed by vendor questions and issues: You need an HR professional with recruitment and procurement experience;
- Facing a lot of issues around leave, and being overwhelmed by employee HR questions: You need an HR professional familiar with policies and procedures;
- Running into job-specific issues: You need an HR professional familiar with establishing performance management guidelines.
- Reducing your workforce size and increasing job specializations: You need an HR professional familiar with strategic workforce planning and knowledge of your industry’s necessary skills.
4. How much should I pay an HR employee?
Tough one. We get this question a lot. The answer is… “It depends.”
Some of the factors that you have to consider include: company location, how much experience you want, what sort of industry you are in, and what this person will be doing. Will this person be an army of one or will she/he be managing and leading a team? Will this person focus on administrative tasks, or help build the team strategically with key hires and training for personnel?
Comp depends on what they’ll do and what seniority level you need. We’ve seen it range from $40,000 in South Carolina for an entry-level HR person, to $120,000+ in New York for a rockstar workforce planner. The median is in the $60-80k range for a talented person.
You may also want to consider paying variable compensation, like a bonus or equity/employee stock options. General guidance around what HR professionals earn in total comp can be found on Glassdoor with filters for cities and industries.
5. Last but not least: Hire an HR or finance person first?
Budget trumps everything in this question. The HR and finance functions often get lumped together. Interestingly, you can often find controllers or directors of finance who have experience in basic HR (aka HR familiarity). It is less common however to find HR professionals who also have a familiarity with corporate finance.
So the real question is whether you need a true HR person or whether you want to hire a finance person who handles pieces of HR. Remember: budget matters. It’s often easier to find a good outsourced finance professional than it is to find a good outsourced HR professional. The most budget-friendly we’ve seen is our own solution: don’t hire anyone yet. Use a fully integrated HR service for small businesses, and we’ll help you grow into your 1st HR hire.
Summing it up
Timing matters. This is more than a “personnel” question. It’s a “budget impact” and “productivity impact” question, too. If you’re too fast to hire your 1st HR person, you may have an expensive liability that doesn’t have enough substantive work to do. This could lead to boredom and potentially turn over. If you hire too slowly, you could end up bringing someone on board who immediately becomes overwhelmed. She or he could quickly face burnout (and, again, turnover).
At Suitless, we’re experts in helping companies find the right timing and budget for these topics. Call or email us about your situation. We’d be happy to answer questions about hiring decisions related to human resources or finance. We work with a number of small businesses and can provide guidance on these as well as other important decisions.