Five Signs Your Business Has Outgrown DIY HR

Every business has people issues from time to time. That is normal. The warning sign is when those issues start dominating your time and impact your ability to do your own role.

If you’re regularly pulled into employee concerns, performance conversations, leave questions, recruitment problems or manager escalations, then HR has probably become more than an occasional task. It is now competing with the work you actually need to be doing: looking after clients, improving operations, growing revenue and leading the business.

Of course this doesn’t mean leaders should step away from people matters altogether. Far from it. It simply means that they should not be carrying them alone or reinventing a process every time something comes up.

A CEO earning $300,000 per year has an effective hourly rate of around $150 per hour. Considering executives in growing SMBs typically spend ten to twenty hours per week on people tasks (in the absence of a dedicated HR function), that is $78,000 to $156,000 in executive time spent per year. While that’s certainly an enormous financial cost the real danger of having the HR vacuum filled like this is the opportunity cost. i.e. the missed opportunities of what that person could be doing instead.

Instances like this are failures of organisational structure, and in a business without a dedicated HR function (like most Australian SMBs) they are almost inevitable.

Many SMEs promote great employees into management roles because they are reliable, technically strong and trusted. The problem with this approach is that managing people is a different skill set.

Without guidance, managers may avoid poor performance, give vague feedback, handle situations inconsistently or escalate everything to senior leadership because they are unsure what to do. Over time, small issues become bigger ones and employees receive mixed messages about expectations.

Good HR support – particularly HR support provided by Distinctive People – helps managers become more confident, consistent and proactive. It gives them practical tools to allow them to execute and not corporate directives that don’t resonate with their team.

Growth often exposes gaps in recruitment and onboarding. One manager conducts interviews one way while another uses a completely different process. Some new starters may receive a structured introduction to the business and others are handed a laptop and left to work things out for themselves.

Just as importantly, many hiring challenges start before the employee even joins the business. We often see roles that have been poorly scoped or designed, resulting in businesses recruiting for one skill set while expecting another. For example, hiring a graphic designer and expecting them to lead marketing strategy, or employing a recruiter and assuming they can manage complex HR matters. They are different disciplines with different skill sets. When expectations, capability and role design do not align, performance suffers, frustration grows and retention becomes far more difficult than it needs to be.

A poor hiring decision can be surprisingly expensive. SEEK research estimates that Australian SMEs lose around $7.3 billion every year from wrong hires, with the average bad hire costing approximately $16,000 once recruitment expenses, onboarding, training and lost productivity are taken into account. (Source: https://www.smartcompany.com.au/people-human-resources/wrong-hires-costing-australian-smes-7-3-billion-year-seek/ )

A poor onboarding experience can affect performance, engagement and retention. It can also create unnecessary frustration for managers who are trying to get new team members settled into their roles and deliverables quickly.

When hiring becomes regular rather than occasional, the business needs a consistent approach. That includes clear roles, consistent position descriptions, strong interview processes, compliant documents, structured onboarding and a better way to set expectations from day one.

As businesses grow, employment obligations change. If you and your teams are not confident that contracts, policies, position descriptions, leave processes and performance documentation are current, that uncertainty can create real risk.

Too often, the documents sitting behind a growing business are a patchwork of templates borrowed from previous employers, adapted from old versions or pulled together after a quick Google search. They may have been enough in the early days, but they are rarely fit for purpose once the business has more employees, more managers and more complex obligations.

A contract that misses the correct award, leaves out an entitlement, uses outdated wording or fails to capture the right allowance can quickly expose the business to underpayments, disputes and costs that were never planned for.

Having an HR partner to manage your people needs, anticipate legislative and award changes, and give leaders confidence that the basics are covered can make a significant difference. It means the business is not waiting for a problem to expose a gap. Instead, contracts, policies, processes and advice are kept current, practical and aligned to business operations.

One of the clearest signs you've outgrown DIY HR is when people issues are constantly pulling you away from running the business. All business owners have encountered these scenarios to some extent:

• Someone resigns unexpectedly.

• A manager raises a performance issue just as an employee’s probation is due to be signed off.

• An employee complaint lands in your inbox instead of their manager’s.

• A policy is created in response to a significant employee issue.

• You’ve found that the legislation chance and what you were managing against no longer exists. 

The issue isn't just the problem itself. It's the cost of constantly reacting to it.

Every unexpected resignation means recruiting and onboarding again. Every unresolved people issue consumes leadership time that should be spent serving customers, developing staff, improving operations or growing revenue. Managers become distracted, decisions are delayed, and the business spends more time putting out fires than moving forward.

Reactive HR is expensive, not only in direct costs, but in lost productivity, missed opportunities and the countless hours business owners and leaders spend dealing with people issues instead of focusing on the work that creates value.

Proactive HR looks very different. Managers are equipped to handle issues early. Roles are clearly defined. Employees know what's expected of them. Processes are consistent, risks are identified before they become problems, and leaders can focus their attention where it belongs: building the business rather than constantly fixing it.

If HR issues are regularly appearing on your to-do list ahead of customers, strategy, growth or profitability, you've probably outgrown DIY HR.