Issues in Starting a Human Resource Function

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This Paper has looked on to the issues involved in starting a Human resource function in a small business. The paper contains an introduction that looks into the scope of this study and finding more on the importance of having a good human resource function, even in a small business setting. It goes further to outline the main purpose of starting a human resource function that is relevant to any small business. In addition to this, it describes the issues involved in starting this venture, alongside outlining the key components of a human resource function. The main focus is shifted to steps involved in staring of HR function and a conclusion to all that is described.


To start a HR function in a small organization is no mean work. It can be a laborious experience, to bring together all the concepts required in human resource function. Therefore, this process needs the understanding of diverse issues in Human resources. This may range from, operations of policy, establishing and procedure setting, to the strategic actions that may involve the design of a competitive compensation and benefit scheme (Bratton, 2001). The business function that is established should run from staffing through training, management of performance, compensation, benefits, and review to management of HR reports.

Purpose of the paper

The paper has a goal of discussing the process involved in starting a human resources function, and how it can start in a small business. This is attributed to the need(s) that necessitates business, to establish a business human resource functions. The needs may include; enhancing morale and productivity, by putting a limitation to employee turnover, to help the business to increase performance and further improve the effectiveness of the business. This is achieved by the proper use of employee skills, provision of relevant training and development opportunities. This ultimately is aimed at increasing employees' satisfaction, as well as, the achievement of the core business goals.


The task I have of starting up a HR function in a small business: has made me ponder on the following questions. A number of them are addressed in this term paper. They include:

>Why I want this HR function in this small business?

>What changes necessitates the need to have the HR function?

>What do I intend this HR function in the business to do?

>Will this HR function contribute to the success of the small business?

>And more so, how can this HR function start in a small business?

In this overview, I find that before even starting to have the HR function. There is need to have clearly defined goals and mission of the business. Have current personnel files of employees of the business; brainstorm on, up to date policies and procedures of the business in line with the issues such as work harassment, compensation, safety, discipline and benefits. I too find the need to have a strong working knowledge on the law, particularly the labor laws.

Other questions, I found of help is addressing questions that relate to the historical perspectives of the business. For instance, is the small business currently recruiting and selecting the right personnel? Are the talents and skills that HR function will make be relevant? What compensation plans are feasible? What compensation plans are? What compensation plans are feasible? What strategy will meet the organizations needs? The above required information needs to be considered before starting a business HR function, of a small business.

Parts of a HR functions

It becomes a necessity to know the parts of a HR function, for you to start a HR function in a small business. HR function has so many parts that make it up; however, for this case of a small business, it may require only the core parts for it to be effective and functional. This is because, in the small businesses, there is high likelihood of having generalized HR managers as opposed to big businesses that would employ more specialized managers, with specialized responsibilities. The main parts that would form human resource function include the following:

*Manpower planning function

*Recruitment and selection function.

*Employee appraisal, compensation and motivation

*Employee evaluation.

*Employee Development.

When these functions are analyzed and integrated together; they form the HR function of the business.

Steps n how to start a HR function in a small business

For a small business, the steps on how to start a HR function, may include seven simple steps as outlined below:

Step 1

Have a foresight Perspective of the HR function to be designed

This stage may require one to understand the general business strategy of the small business. For instance, the case of a 'Grocery outlet' business may need one to highlight the driving force of the business. This can be technology, competition in the market, the distribution or changing demands in the market that drives one to have this HR function being made professionally.

A keen look at the implications of the driving forces; should be looked, at its effect to the people and to the business itself. For instance if again we use the example of a 'grocery business' and pick the main driving force to be competition. This means that Human resource function should address the needs that this competition will create to the business organization. This is because, the HR function should be specific to the needs of that business, in terms of meeting the demands of employees, employers, consumers and other stakeholders, such as, Government, investors e.t.c.

Finally, in this step, there is need for a clear line of fundamental people, who will contribute to the formulation and performance of HR function. This may call for more information to be gathered. Skills and expertise is also needed to be availed. A rough draft of HR function would be reached out.

Step 2

Develop a Mission and Goal Statement

All functions in a small and big business are run with set goals. These goals should be understood by all people involved in the functioning of the HR function. Actually, it is these goals that give shape to the management of this HR function. This is why it comes second, so that one can outline the goals and mission of human resource function, as early as possible. It is an important part because, it is the one that makes Human resource function be relevant to the needs of the staff, owners, and stakeholders of business.

It is also helpful in knowing, what other people in the business contribute to Human resource function. You cannot ignore people involved in the design of human resource. This is of importance to note for unlike other areas of business, human resources exclusively, deals with people relations with other areas of the business. It can be people relations to bosses or juniors; it also includes other areas such as ethics and money.

Step 3

Conduct a SWOT analysis of the Business

This is an important step in starting a HR function of a small business. It may be laborious for large business; but for small businesses it can be done in details. Certainly, the small business has both the factors that work for it and the one that works against it. A number of reasons that work against the business may have formed a basis of the need of a HR function. Therefore these issues should be addressed with utmost keenness (Bratton, 2001).

Look at the strengths of the business, if for instance 'Grocery shop', there may be need for strengths in the business and this can be like; commitment of staff to timely supply of fresh groceries. Such strengths should be captured (Davilla, 2008). This at the same time would be exposing the strengths to consumers, due to timely receiving of the goods. Such strengths should be attached to the human resource function of the business. The HR function, should be able to boost the strengths for instance, through compensation plans. It may also be important to look out for the weaknesses of the business; these areas of weakness may expose one to the areas of priority that needs to be addressed. For instance, in this case of a grocery shop there may be a weakness of staff motivation and should be addressed by human resource function. This may be through advocating for policies that will go in line with, employee motivation. This may include policies, such as, proper compensation, and working conditions that the employees are exposed to. A careful study of the available opportunities should also be focused. In essence, this is a small business therefore, may have prospects of growth in different dimensions.

This step is very important because the business is small; therefore, the need for expansion may need to be addressed by human resource function. Opportunities that are found should be able to be slotted in the human resource function, which should address how these opportunities can be addressed. For instance, if a major need for the organization is expansion, the set human resource function can slot in through creating position of business development managers, who can be tasked with this responsibility.

The Human resources function should not be vague at any time, but instead should address the specific needs in HR, with a view to grasp opportunity, maximize strengths, minimize weaknesses, identify the threats as well as get proper positioning for the opportunities. Finally, the issue of threats should be factored in, in a manner that the human resource functions also, comprise of protective measures and mechanisms that should respond to the threats of the business rather than to react on them.

Step 4

Conduct a detailed Human Resources Analysis

This is the most involving and time consuming step in starting a human resource function of a small business. However, again it is very important if proper analysis of HR is not done, then the HR function that would be made, would not address the needs it is supposed to address. HR analysis should concentrate on the business organization, culture, people and HR systems, while addressing the five main parts of a HR function.

A detailed analysis should be done in the following five functions of a HR function:

Man power planning analysis

For a small business, the penalty of inappropriately staffing a business is costly. This is because, understaffing may cause the business to lose out on economies of scale, specialization, meeting the timely demand of consumer orders, and this may impact on to losses. Therefore, this analysis should make the HR function have a framework to avoid understaffing, and its impacts through attending to issues that are likely to improve the sustainability of employees, for a long time.

Overstaffing on the other side is a wasteful and expensive affair, if it is kept in the business. This issue should be analyzed so as to come up with a HR function that will eliminate such incidences. Handling the issue of overstaffing at times is very tricky, due to the costs involved in laying of a worker, in the current legislation. Legal issues such as redundancy payments, minimum notice periods, and consultation among others, makes such issues to be complex affairs. However, there is need for analysis to be done, and the findings may be incorporated in the HR function. The HR function should at least avoid the two extremes. There's also the need to analyze the future needs of the business. These needs should be compared with the available resources of the organization, as well as, with the future predicted resources. The HR function should look at this, and ensure the HR function is inclusive of policies that will bring forth a balance between the demand and supply, of human resources.

An analysis of this, may take the form of taking a satellite picture of the current profile of workforce for a business in terms of the numbers, age, gender, flexibility, experience, character. Forecast ability and their potentials. Then the finding is adjusted to one to ten years ahead; by using the current state in turn over, retirements, staff movements and so on.The future staffing needs to be addressed in planning; this will be subject to the forecast done, in the first step. However, for planning purpose and analysis, planning needs is likely to be derived from:

(i)Production and sales forecasts

If the production and the forecasts are high, then the HR function should be designed to be flexible to the increasing number of staff. For small businesses like this one, there may be need for flexibility approaches in planning for staffing demands, since the demand for staff may be fluctuating according to the sales and production volumes.

(ii)Effect of technological change on task needs

In manpower planning; there may be need to analyze the impact of technology to the staffing needs. In this case of a small business, minimal technology may be already in place; but caution should be taken in that as the business grows, the provision of technology should be addressed.

(iii)Variation in the productivity and flexibility of labor

This is as a result of the training programs, work study, new motivations and organization change. For instance, if proper training is captured in HR function, and then productivity will be increased, therefore, more staff may be required in the small business.

(iv) Change in employment practices

There may be some changes in employment practices that are brought due to external factors. Changes such as the use of subcontractors of agency staff, may come in as the small business expands.

(v)Variations that respond to new legislation

This may include payroll taxes and/or their abolition; as well as, the new safety and health requirements.

(vi)Government policy changes that may affect the small businesses

This may include policies such as investment incentives. Manpower planning analysis may too, extend to the other functions in HR function, such as, recruitment, training, labor, retraining band training practices that are directed to employees of this small business. Note, is to be taken that the workforce planning should be done consistently and periodically, and the findings should be used to improve the HR function over time.

Recruitment and selection of Employees

This is the second part of HR function, yet a very important process that should be analyzed. There is need to analytically study employees tasks of the small business, in order to determine the most important parts. This will facilitate the writing of a job description; so that in the HR function, there is clear provision for the panelists and guidelines for selectors/panelist, who will work on behalf of the business to know the desired mental and physical characteristics that applicants ought to have. Since it is a small business, it may be easier to come up with key qualities and attitudes that are desired in business.

The HR function should address the issue of staff replacement, procedures and timelines to be observed. As it is said that selection involves an action of 'buying' employees at a price being the wage rate; and this is multiplied to the probable years this individual will stay in the business. Therefore, if it is not properly done, then it will be an expensive affair.

Also, even as one starts a HR function, the presence of some small organizations attracts staff with high reputation. Therefore, the HR function should address issues that will maintain staff commitment rather than have high turnover. The main sources of recruitment that could be considered include:

*Internal positions and internal introductions, this is desirable to increase the morale of workers.

*Use of career masters or officers at schools and/or training colleges.

*University appointments boards.

*Advertising through radio and newspaper.

*Agencies for the unemployed.

When there's use of print advertising, it is important for it to have a logo for identity purposes. The HR function can also be made to cater for the methodologies of interviewing. However, the technique used to pass judgment in recruitments, may test for aptitude, attainments, and general intelligence. In most senior positions in small businesses, the recruitment activity may include:

*Group Leadership

*Group solving problems

*Command exercises.

HR function being designed, should to see to it that priority is given to training, interviewing and employee appraisal.

3 Employee Motivations

This is an essential part to be analyzed. A good HR function should be able to serve staff/employees in a manner that they feel they are part of the business. This means that there's need to retain good staff in the small business; this needs attention being paid to the psychological and even physiological rewards. The HR function should too attend to the need of availing the basic financial rewards, as well as, provision of good working conditions of service. This may include determining the hours worked per week. In the same way, the staffing needs change with productivity, good personnel policies should be factored on to the HR function (Davilla, 2008).

The influence of behavioral science discoveries is becoming important, due to the modern changing mix in jobs. For instance, we are moving to an era where there are more professional and service jobs, and very few jobs for the unskilled. These jobs demand for better educated, mobile and multi-skilled employees. These employees are likely to be influenced by things like job satisfaction, participation, and involvement rather than the economically dependent employees. In this regard, for the human resource function to start; it should act as a source of data as well as source of inspiration to the employees.

4 Employee Evaluations

The human resource function to be created should serve the needs such as taking stock of its work force, as well as, assessing the performance in the existing jobs, and evaluate employees with a view to improve performance. Employee performance, should be evaluated because of the following:

(i)To improve organizational performance .This could be done through improving the individual performance in the work place.

(ii)To identify the potential of individual staff members, this may involve recognition of existing talent and using the findings to fix vacancies that are higher in an organization; or rather to, transfer different employees to areas where they can appropriately apply these skills and abilities.

(iii)To provide equity measures that link performance to rewards/payments. The Human resource function should look at the feasibility of this provision.

The Human resource function should specify who is to carry out evaluations; it is advised to use the spot managers and the supervisors to do this function. The evaluations are strictly not to be carried out by HR staffs. Human resource function should further outline the personnel role.

In most contexts, personnel role may comprise of the following functions:

>Advising the top management about objectives and the set principle inscribed in the evaluation system.

>Develop a system(s) that are functional; in consultation with staff, supervisors and management.

>They should offer assistance in setting objective, standards of evaluation, for instance, in helping out defining targets against which it can be measured against performance, to help others understand the said objectives, to introduce self assessment and finally to get rid of complexity and duplication, which are much costly to the business.

>They ought also to air out the exercise and explain to staff how the system is used.

>To ensure there's necessary training of managers and supervisors, who will deal with the actual exercise and explain to staff how the system is used.

>To ensure there's necessary training of managers and supervisors, who will deal with the actual exercise of evaluation and appraisal.

>They should also monitor the scheme.

Periodic full scale reviews may form part of the standard feature of schemes. This is because, there's always resistance to evaluation. In basic language, evaluation/appraisal scheme is to make formal what is often done in casual manner. For instance, in a vacancy situation, most managers approve merit payments and this action calls for evaluation (Pynes, 2008). The making of standard routine tasks also aids the developments of talent, and this can be an effective form of motivation.

5. Employee Training, Education and Development

In the general term, education involves the preparedness of the employees; and is often carried out away from the actual area of work. Training is the orderly development of knowledge, attitude and skill pattern required by an individual, to perform certain tasks or work adequately. Finally, development is the progress of the individual in terms of ability, understanding and awareness.

Human resource function should capture the three concepts in order to:

*Develop workers to take up of more tasks.

*Provide all round training of new workers.

*Increase the levels of efficiency and standards of performance.

*Meet the legislative requirements e.g. demands of labor laws with regard to health and safety.

The methods of knowing the needs apart from conventional needs approach is complex and at times depended on the intuition of the manager. Other sources of inspiration for training that would be included in human resource function include the following:

(i) Suggestions made by specialists e.g. those from education and training offices.

(ii)Inspiration that is advocated through training journals, reports of other peoples experience.

(iii)The staffing needs forecasts and predictions.

(iv) The inspirations and innovations of supervisors and managers.

(v) Recommendations made by the Government(s) and other training organizations.

(vi)The shortcoming exposed by statistics of output per head.

(vii)Common sense argument, it defends that it is often obvious that new machines, work systems, task requirements, and job requirement change will require the preparedness of workers (The Hum Pynes, 2008).

The Human resource function should also cater for the design of training programs. Designing training programs however, is more than just coming up with more courses; it may also involve other activities such as:

*Learning from apprentice of trained workers/staff.

*Coaching services from the senior staffs of the small business.

*Job swaps being carried in and out of the business setting.

*The individuals and employees planned reading program or follow up of self teaching texts and video tapes.

*Learning via research involvement, writing of reports and other sources/works of different businesses.

*For a small business, the Human resource function may take group training approach in addition to formal courses. This may be in the form of lecturers, management talks that have specialty; having discussion groups activities and role playing exercises. In addition to these we may also have computer learning activities.

The purpose of inclusion of evaluation of the effectiveness of the training program is done so as to see to it that is most effective; and two is to reveal the new needs and where necessary redefine priorities and of greatest importance is to ensure that objectives of training are arrived at.

Step 5

Determine Critical Issues in the Staff

This involves going deeper to identify the issues; namely the issues that are in the small business that HR function should address. This should be looked at with priority to those that have got key impact in the delivery of the business objectives. This step calls in for the need to prioritize the very critical people issues. The issues that affect the current staff in the small business and that they may expect to be addressed by the human resources function. This helps further to know where one would focus efforts and resources. Human resources function may require lots of effort from employees and staff in general. It may also require lots of resources that are essential to the success of the HR department of the organization (Amoore, 2002).

Step 6

Develop HR Consequences and solutions

This implies that for each critical issue identified; then one should highlight the managerial actions that should be taken as a response. This is a vital step, for most people wouldn't mind to take a short cut, by moving from the known to unknown; rather than challenge the underlying assumptions undertaken in the past (Davilla, 2008).

This step is brief but of great importance. Further, one should note that after developing consequences and their solutions. It should be possible to translate the action plans into broad objectives. For feasibility purposes, the broad objectives are further broken into specialist HR systems in the area of training and development of workers, management development, organizational development and performance appraisal. In addition to this, there may still be the need to look at employee reward, their selection, recruitment, and communication among others.

Step 7

Implementation and Evaluation of the HR function

This is the last step that involves the real ground work. It involves two broad areas:

1 Setting up the office and physical space

This is where the Human resource function will be practiced from. For a small business, it may require at least two offices for Human resources. These offices will be used for the following functions:

-Attending to visitors who visit the human resource unit of the business.

-Keeping of Human resource records of which some should be kept confidential.

-Host the human resource manager(s) who will be in charge of implementation of Human resource function that will have been established.

-For PR purposes of the organization and carrying of some other key activities such as interviews and meetings with other stakeholders of the business.

The ultimate goal of developing a HR function is to see to it that the business objectives are mutually supportive, so as to achieve the main goals of the organization.

In conclusion, there may be the need to ensure that the implementation is all round particularly addressing the five areas.

2 HR planning function

This means that the implementation process should not run away from the planned actions. One should not be carried by excitation to implement, otherwise to what was planned. This is a risk that occurs especially when everything is working. A manager can get tempted to try out on what was not planned and if it backfires, it may lead to serious damages of the human resources. The damages may spread widely from financial impacts to reputational losses that should be avoided. Therefore, to make the risk lower, let only the planned actions be implemented

3 Recruitment and selection function

Implementation of this may include the actions of the business that will reflect proper, open and transparent recruiting and selection of the workforce. The process should be fair from any bias and prejudice of any kind. Effective implementation of recruitment and selection, will add greater value to the quality of staff that will be picked, and this means the small company will work to arrive at the results.

The main goal of recruitment and selection is to use minimum costs, to get the best quality of employees in an organization. The business being small in size, it entails that the issues of costs should be minimized, so as to be invested in areas that may help in expansion. As much as these costs are minimized, there is the need to ensure that quality is not compromised by any slightest measure.

The implementation of recruitment and selection is done in three stages. These involve:

(i)Defining the Requirements: This involves the preparation of job descriptions and specifications as well as deciding the terms and conditions of the employment opportunity, given to an applicant or potential employee. This is applied through specifying the number and category of people required in the recruitment program. This is at times derived from the HR plan that was arrived at in the first process. In addition to these, there are demands for the new jobs that may arise, to be filled alongside other jobs that will require replacements. The requirements in the recruitment process may be done through personal specifications. The personal specification issues can be summarized as follows:

*Technical competencies-This entails all the things that the individual needs to be aware of as well as the issues that the prospect employee should be able to perform.

*Behavioral and attitudinal requirements- It includes the behavior patterns that are needed for successful performance of the role that an applicant has applied for. It relates to the core values and competency needs of the organization, with respect to role performance in that area.

*Qualification and Training- This is inclusive of how practical the academic, technical, and professional qualification is to the job. Human resource function will already be into place to give further guidance on the matter. This means that once qualifications should be checked though not in isolation but with its relation to the functions that the individual can do. Therefore, an individual's capacity to be functional to the organizations needs should be of priority.

*Experience: The previous experience of a worker that is related to the new job may make the new employee be more effective. In addition to this it also saves the organization the costs that are tagged to training. Therefore, for a small organization the experience required may be less as compared to other big organizations that can afford employees with high experience. The company may opt to have a mix of employees, with a few who are more experienced to give guidance to the inexperienced (Amoore, 2002).

*Specific demands: The personal specification should also capture the specific demands of the job. For instance, if the job holder is expected to handle tasks such as the development of new markets, introduce new systems, improve sales. This should be outlined clearly, so that the person can get acquainted or will not base the job on speculation. The specific demand increases relevance in the working place and to avoid cases of dilution of quality of work, due to ignorance of the work expectation, all through the recruitment and selection processes.

*Special requirements that are associated with the job should be clearly outlined. For instance, if the job requires much travelling, then it should be outlined so that the prospective worker can be relevant to this requirement. This may be through being flexible to move from place to place, of good health to be able to travel or with few commitments that can block one from travelling. Other special requirements may include things such as, the need for unsocial hours and so on. This is an important part to look, bearing in mind that an organization is made of different types of people; it is just the goals that bind these people together. In addition to this, we know that the human person is not homogeneous, in relation to many areas of life, be it attitudes, behavior, likes and dislikes, thought patterns and so on. This makes specifying the requirement not only a requirement for recruitment but a very essential activity that should be comprehensive in any organization.

(ii) Attracting Candidates: This is the act of reviewing and evaluation of other alternative sources of getting employees. The process can be done from within and without the organization. It may also involve other means, such as, advertisements on the media. The latest trend on the market with regards to recruitment of staff has been using recruiting agencies to recruit staff. However, for a small company using agencies may not be applicable, but in the event it is used; then the following steps should be observed:

1 Check the reputation of the agency with other users. The other users may include the businesses that already use the services from that recruiting agency.

2 Look at the advertisements of the other firms that were done through this agency to obtain an idea of the quality of consultancy/agency; and the level of jobs that it deals with.

3 Check the special expertise, for instance the large firms in accountancy are obviously skilled in dealing with matters of recruiting accountants.

4 Meet the consultant who will work on the assignment to see to it that all is done well.

5 Compare the fees charged in different agencies, and make a decision on which is best for the organization.

(iii)Selecting candidates: This involves the actions of sifting application, interviewing, testing, assessing the candidate, establishing assessment areas, offering employment, obtaining references and finally preparing the contract of employment.

In a small business, there may not be any need to have selection centres; but the human resource offices can serve this function. However, even in the small organization, there is need to apply a range of assessment techniques that may include:

*Having the focal; point of assessment to be the behavior of the individual.

*Inclusion of exercises to capture and simulate the key dimension of the job. The exercises may include one to one plays as well as group games. Previous research has shown that performance in this simulation may predict the behavior on of the job.

*There's also the recommendation of using tests, and interviews may also be used in addition to the exercises.

*The practice of assessing several candidates may make the exercise be more interactive; as compared to assessing the employees separately, which may sound like a punishment or boring activity.


A human resource function is such an important aspect in any organization, whether big or small. There is need to look at specific needs, in coming up with HR function of a smaller organization, as compared with well established business. The HR function that is developed should be implemented with partiality to all the staff, and stakeholders that it is made to serve.