How to set up HR functions in your small business?

Many companies start off with the founder and just one or two non-HR employees. This means that all HR-related matters are handled by the founder or someone else in the team. But as the team grows, more and more HR matters are coming up. And this means that at some point every company needs proper HR procedures and strategy.

Setting up your HR functions from the ground up seems like a big project – where to start from? We have listed down some steps that might help you see that it is totally doable. Here they are – go step by step and you will soon have a HR function up and running.

1. Creating HR process should start with values and culture

Start off with thinking about your company values and culture. Culture exists in every company. It is up to you whether it is intentionally created or not. What is it that your company stands for? How is work done in your company? What kind of behavior is expected from each other? Your company culture and values will be the core for everything else.

2. Plan the workforce that will help your company succeed

Workforce planning includes staffing needs, absence management, shift planning and scheduling, and managing overtime. We recommend starting workforce planning by mapping your current team and the skills that they hold. Then list down all the skills that your current team is missing – this will give you the answer to what kind of people you need to bring to your team.

You should also think about your business goals and bigger picture. Forecast the skills and number of people you would need in order to meet your company goals. Based on that – what is the right company structure for you and what kind of roles will you need in your company.


3. The next step is to have an HR strategy and budget

Every company has a business strategy that they follow to succeed. The same goes about HR – for starters you will need an HR strategy. HR strategy means a system of human resource practices aimed at achieving employee performance that would help the company achieve their goals. What would you need from your human resources in order to achieve your company’s ultimate goals? What is your budget for that?

4. Keeping your HR strategy in mind – what kind of talent would you need to attract?

Knowing your company goals and how your human resources can support this gives you the understanding of what kind of talent you need in your team in order to achieve the best results. Once you know who you want to have in your team, the next step in to learn what is important for them and how to attract them to your company. Create yourself an employer branding strategy that speaks to your target audience.

5. Map your recruitment process

Next step is to plan your recruitment process and hiring policy in a way that would suit your company’s strategy and values. Think ahead about who will be your hiring managers and what kind of prior training they would need. Make sure that your hiring managers know the bigger picture – introduce them to your company, HR and employer branding strategies so that they could recruit new talent in line with those.

Before you start off with your recruitment project, you would need to pause and think whether you have all the needed resources – are your managers up to the challenge, do they have the needed skills and time to really focus on quality or maybe it would be wise to use external resources to support you in finding the best talent.

6. Master your onboarding in order to seal the deal

Once you have found the perfect fit for your company, the next thing to focus on is nailing the onboarding. Getting onboarding right is fundamental for employee engagement and getting real results. Make sure your new hires feel welcome and have everything they need for a great kick-off.

As part of onboarding, make sure your new hires have the workspace and resources that they need from day one. This brings us to the next step.

7. Care about your emplyees’ work safety and wellbeing

Learn to know your local legislation and make sure your workspace and processes are aligned with the law. It might seem that the work safety topic is something that many companies do just to tick the boxes and be aligned with the legislation, but companies that really care about their employees will take a deeper dive into this topic. Healthy and happy employees are the key to company success and happy clients. Find a partner to review your current work safety situation and give you advice on how to improve. Your employees will benefit and so will you.

8. Build a performance management process to help people grow in your company

It is often seen as something that starts with assessing employees performance. But actually, like most things in life, it should start with planning. Start your performance management with setting key performance indicators (KPIs) or objective and key results (OKRs). After that you can assess performance against what was agreed on. Think about your assessment process – what, how and by who is being assessed? Also, think about the feedback process in your company.

9. Rewarding talent for their engagement and results

Be clear about your rewarding practices. Best would be to map salary levels and bonus programs for all the roles in your company. Use this as your guideline when rewarding people and recognising extra effort. It is wise to have a clear plan for rewarding in order to be objective in your decisions about salary. Aside from salary – how do you recognise a job well done?

Another thing that goes hand in hand with salary and individual growth is promotion. What is your company’s view on promotions? Align this with your hiring policy – do you prioritize internal career paths and promoting people or hiring needed skill sets from external pools?

10. Be proactive when it comes to talent development

Once your new hire is onboarded it is time to be proactive and think ahead about learning and development. What are the next skills that everyone in your team needs? Find training solutions to fit those needs. But keep in mind that you also need to think about individual learning and development needs. Another thing to consider is career paths in your company – what could be the next step for different roles in your company?

Create a system that will help you track individual development needs and find yourself a good external training partner that will help you in achieving your goals.

11. Think about retention before it is too late

Many small companies start to think about retention the moment someone gives them a resignation letter. Usually then it is too late to think about retaining that person and your attempts fail. That’s why you need to think ahead and plan your retention from the beginning. List down all the things that your employees like about your company and all the things that they are currently missing. Engage your team and ask them for their opinion – things that you see as benefits might not seem like that for your employees.

People have different backgrounds, expectations and needs. One-on-one meetings are a good tool to implement – showing your employees that you care about what they have to say, you care about their needs and want to offer them just that. But keep in mind, you need to act on the input that your employees give you.

12. Benefits

Benefits are related to many HR matters – HR budgeting, attracting and hiring talent, rewarding and retaining talent. Plan ahead to budget all the benefits that you wish to offer your employees. All those benefits also work as additional selling points when attracting new talent to your team. Benefits can also work as rewarding and retention tools for existing employees. Do your research – what are your competitors offering? But don’t limit your research to just your competitors. You are actually competing with many more industries that you first seem to. Look at all the best practices out there – what could  you implement in your company?

PS! Keep in mind that some things might not work for your company. Learn to know your people and select suitable benefits based on what could matter for them.

13. Offboarding should show respect and gratitude for time spent in the company

Why is offboarding important? Why should you invest in those who are leaving you company? When people leave your company with a positive impression then it helps to make your employer branding stronger. It is normal that people move from one company to another, but you never know when they might become your partners, clients or even returning talent.

We recommend taking offboarding as seriously as onboarding. Create a proper process and think ahead about all the things that need to be done.

14. Don’t forget the admin side of HR – it will help you keep things under control

Once you have managed to think through all the needed steps, it is wise to think about the admin side of all those processes as well. Think about all the documentation and HR systems/tools that you might need in order to keep all those processes under control and working smoothly.

15. In doing all that, keep in mind that processes are important, but people should come first

We hope that this list helps you organize your thoughts and get on the right track with building up the HR function in your company. Start with company culture and values. Value your people in every step of the way when setting up your HR functions.

Feel free to reach out to us, if you feel that we could help you any step of the way. We are happy to help!

Let’s talk. Helen Pärli | +372 55617100 | |

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