Looking to Build a Strong HR Department from Scratch? Follow These 6 Steps

Looking to Build a Strong HR Department From Scratch? Follow These 6 Steps

Building an in-house human resources department for your business, or a company where people can outsource their HR needs to you? The initial steps can be overwhelming. The best way to build a solid HR foundation is to create policies, standard operating procedures, and risk mitigation plans. Implementing policies that align with your workplace culture will improve overall employee experience and mitigate operational and reputational risk. Here are some important components to keep in mind to build the foundation for a strong HR department–from scratch. 

1. Organizational Design

Organizational design is the backbone of the company. It facilitates efficiency by eliminating double work and smooths out bumpy processes and procedures that may be in place. That’s because it delivers the proper information to the right employees at the right time. While this is a relatively new element in human resource departments, organizational design has been around for decades. A tried and true method is the McKinsey 7-S Framework created in the 1970s. You use it to see whether different parts of your organization are operating harmoniously together and find ways to improve. The structure is split into seven key components, and at the center of the framework is the company’s shared values. These components comprise of the following:

  • Strategy (your business plan)
  • Structure (how your business is organized)
  • Systems (daily activities)
  • Shared values (mission statement and goals)
  • Style (the leadership)
  • Staff (the culture and the capabilities of the staff)
  • Skills (what the organization is actually capable of)

2. Employee Compensation and Benefits

Workers search for companies that focus on well-being, meaning the best talent is looking for the best compensation and benefits. According to a recent study, 32 percent of businesses with 10 or fewer employees are now offering benefits packages. Your business should also have something to offer. Principally, the larger your business grows, the more comprehensive your compensation and benefits package will need to become. In-house HR departments should know what employees want so that they can attract and retain talent

3. Onboarding/Recruiting Procedures

Proper onboarding is important because it can cost 90 to 200 percent of an employee’s annual salary to replace them. Effective onboarding will reduce the chance of quick employee turnover while potentially increasing retention. Listen to what your employees want and give them a full idea of what their job will entail. In a BambooHR survey, of the employees who left within six months, 26 percent didn’t believe it met their expectations.

4. Occupational Health and Safety Program

According to a study published in 2018, 1,027 Canadians die a year due to work-related accidents. That’s about three people a day. Therefore, you should adhere to the Occupational Health and Safety Act set by your province and the Canada Labour Code. All employers in Canada are required to follow these by law.

5. Training and Development

When it comes to recruitment, you want to have a good training and development program implemented within your business. An IMB study showed that 35 percent of millennials felt compelled to work at a company with optimal training programs. In fact, it’s one of the top reasons they are likely to sign on with a business. Plus, 52 percent of millennials are drawn to companies that give them the opportunity to advance in the workplace. Furthermore, employees that don’t receive the training they need are 12 times more likely to quit their job. 

That’s not all. A recent study found that businesses with thorough training programs had more than twice the income per employee than those without them. The American Society of Training and Development also found that those who spend $1,500 on training generated 24 percent more profit than those who spent less. This is evidence that skimping on training affects your bottom line and hurts you financially in the long run. 

6. Internal vs. External HR Teams

There are many pros to having an in-house HR department. Specifically, it is a lot easier to cultivate a positive culture, resolve problems, and adjust practices to enable organic development. The cons of having an internal HR team are that it can be expensive. Additionally, it can be hard to find the right specialist or team that aligns with your company values.

A pro of having an external HR team is that specialist companies have in-depth knowledge and skills in specialized areas. These may include legal compliance, coaching and development, and benchmarking. It also gives companies the time to focus on their business rather than human resources and employee compliance issues. 

The cons of outsourcing your HR team are that it can feel impersonal and disconnected from the company’s culture. This department outside the company can be an issue as you are giving up control of select processes. You also won’t be able to keep track of daily startup operations and related HR concerns. What is best for your company will depend on your own set of challenges and the resources you can access.

It’s a good idea to plan and have realistic HR goals that align with your company values. As your team grows, your business needs will require some tweaking. Having a plan in place from the outset will make this process a lot simpler and allow for organic development.