Many small businesses handle most of their hiring and internal recruitment and employee management themselves. They feel they can interview a few people, hire them, and everything will be fine. However, there’s much to do to make sure employees are performing up to capacity, ensuring they’re happy, and willing to stay working with a company.

There are many other reasons why having a clear human resources (HR) strategy in place can help your business run smoother and can remove many of the risks associated with managing a team of employees.

Here you’ll learn:

  • What human resources is
  • Why you need an HR department
  • How to set up your human resources
  • Mistakes to avoid with your HR

What Is Human Resources Management


Before we get started examining human resources as a practice, it’s important to understand what it is.

HR departments manage hiring and recruitment of new employees. They’re regularly involved with performance management reviews. Beyond this, they’re strongly concerned with making sure that employees are happy and stay with a company as retention is a major goal.

To this end, employee development and training also falls under their bailiwick as well as the overall safety and wellness of employees., including promotion of communication and engagement with the work process. Benefits management is also a major part of HR responsibilities.

Why Create a Human Resources Department?


You need to have a set of clear goals and priorities in place to ensure that your business continues to function properly. Too often, this is left behind and ends up creating many long-term costs to a company.

By having a department in place, you can help increase the quality of the people you hire for your company, and make sure that they remain happy and are more likely to stay.

You need a way of handling the time-consuming process of benefits management. Evidence suggests that employees tend to respond positively to benefits. In many cases, this has more of an impact on productivity and happiness than the amount of money a person is paid.

Since people spend a significant portion of their waking hours at work, a positive experience there will go a long way to ensure that they’re happy in general.

This translates to a better overall sense of morale within the workplace, which also will benefit your company in both tangible and intangible ways. However, beyond this, there are several important factors that’ll have an immediate impact on your business.


There are many employment regulations which vary from region to region. While you could spend a lot of time yourself managing this, if you make a mistake, you could find yourself in violation of the law. A good human resources department should have a clear understanding of the rules and regulations that are crucial for hiring a staff. These rules often change over time. It’s important to have professionals who understand this landscape.

Attract and Retain Talent

Creating an environment where people are happy to work is extremely important. While you may already know how difficult it’s to attract new people, you also need to make sure that your new hires stay at your company and continue to thrive.

This means adapting strong onboarding procedures for new employees, managing their talents, such as making sure they enjoy the work you’re assigning them, and directing them to tasks that are value-added not just for your company but also for the employees themselves. You also need to be able to track how well people are doing their jobs.

Healthy Work Environment

Regardless of how great a boss you think you may be, there’s always the risk that there may be conflict within your company. If there’s no process in place for employees to air grievances without repercussions, then you might find your employee retention rates may suffer, or worse, you could find yourself on the wrong end of a lawsuit.

How Do You Set Up a Human Resources Department?

We suggest following these steps when setting up your HR department:

Create HR Processes

Keeping clear HR processes in place for attracting, sourcing, recruiting, onboarding, and training talent is important. You also need human resources processes in place for handling the off-boarding of employees ― even if you could retain everyone, the reality is that people sometimes move on. You want to be able to find processes to make sure that knowledge gained is transferred to new people. You don’t want an entire employee’s history to leave with them.

Reasons for having processes include the ability to make better and faster decisions, ensuring that employee actions are best aligned with the strategy and goals of the company, and ensuring that the business is staffed adequately.

Build a Structure

HR departments will likely vary in size depending on the size of the company, but you need to make sure that you have all of the necessary roles filled. These include the following job roles:

  • HR manager
  • Director
  • Hiring manager
  • Recruiter
  • Coordinator

Fill Gaps in Skills

Running an HR department requires many different skill sets. Skills that are typically required in HR departments include: performance management, benefits administration, compliance, recruitment, and onboarding.

Set KPIs for Your HR Department

Setting key performance indicators (KPIs) is a good way to measure the effectiveness of various aspects of your HR processes. You can use these to determine whether employees or processes are performing ideally, and if things can remain the same or if they need to be changed.

There are a range of different things that you’ll likely want to track in your organization. This can include the amount of time it takes to hire people, whether those you hire are suited to their roles adequately (how long they stay), employee satisfaction, and how much time people miss work. Other areas that need to be tracked include employee performance, whether training is effective, and overall productivity.

How Do You Delegate HR Responsibilities?

One of the hardest things for business owners to be able to recognize is when to delegate. Most entrepreneurs are self-made people and used to handling things by themselves. However, at a certain point it becomes necessary to move certain tasks into the hands of trained professionals

When Is the Right Time to Begin Delegating?

Once you’ve reached approximately 10 employees, it becomes harder and harder to be able to keep track of all the nuances of employment law. You need to make sure that payroll is accurate.

You may be able to leave some of this up to managers, however once you have more than one manager, you might discover that each handles employees in a different way. It makes more sense to have some solid policies in place that can only be handled by a trained department that handles any of the employment processes. This not only keeps you compliant, but it can also improve morale.

How to Avoid Common HR Mistakes

Of course, simply starting an HR department may not be enough. There are several possible pitfalls.

Hiring the Wrong Person

When you hire an HR professional, it’s just as important as any other position you fill. The person should fit the company culture. A bad HR person ― or just one who isn’t a good fit for your business ― can cause a lot of damage

Bad Job Descriptions

Make sure you provide job descriptions that fit the job that’s being filled. Provide information about what’s expected to prevent people from quitting soon after being picked up.

Poorly Organized Onboarding

Getting started in a company is a stressful time for new employees. Make sure they’re given adequate resources and time to be able to be acclimated not just to the work but also to the company culture. Make sure you leave adequate and well-defined time where a person has time to learn and become educated for the role.

Lack of Performance Documentation

You need a process in place for performance reviews. Clear expectations and clear guidelines for employees not only helps ensure that work is being done properly, but that people are growing in their roles, and that they continually improve along with your business.

No Employee Handbook or Poorly Managed One

Make sure you have employee policies and procedures well documented. You need to address a myriad of legal issues including anti-harassment policies, anti-discrimination policies, rules about vacations, and more. You need to make sure that your background checks adhere to all of the area’s legal requirements.

Ignoring Employment Laws

This doesn’t need much explanation. If you’re in violation of the law, not only can you be sued, but your entire business could be at risk.

Classifying Employees Incorrectly

Make sure to understand the rules in the area regarding overtime, exempt and nonexempt employees, and what full-time and part-time guidelines you follow for different types of staff. Make sure that if you’re using contract employees, that their rights are also being respected. Not doing this correctly can cost you plenty in the long run.

Software Solutions

Finding good software to help manage your HR department can help considerably. Below are some example software solutions that can help you handle many of the responsibilities necessary for running your Human Resources operations:

  • Zenefits: This solution manages everything from benefits to time and attendance features, as well as handling taxes, and deductions.
  • Built for Teams: Are you looking for a good tool for managing your organization charts? Built for Teams helps you establish structures for your company.
  • GetHired: This company provides a wide range of solutions, ranging from Applicant Tracking, Onboarding, Time and Attendance, and Benefits Management.

There’s a wide range of HR software available. Whatever your goals and expectations, you should find something that will suit your business.

This is just a beginning to understanding why you need human resources for your business. Check out this collection of useful resources on HR.

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