How is the HR function different in a large organization versus a small company?

Ask a few business owners of different sized companies what HR means to their business and you will hear that it takes on a unique role in each. What HR means to a small business might be completely different from what it means to a large business.

See also: HR Software vs. PEO Services

We asked some of our experienced business consultants to chime in on what they have seen when looking at the role of HR in small vs. large businesses and how a PEO might serve a business in each situation. Read each of their answers below and see what they had to say. Let us know how you would answer this question in the comment section at the bottom.

The Question

1. What does HR really mean for a small business? How is this different compared to a large business?
2. How/where can a PEO best serve both types of companies?

The Answers

Here’s some of the responses from our team of experienced business consultants

HR is an expense for small companies and a profit center for large companies. By offering a full suite of HR services, our value proposition is fully scalable and designed to grow as the company grows.

For a small company HR can be the difference of survival and closing their doors.  When working within small revenue margins, inefficiencies or one compliance issue might force them to close their doors.

Larger companies can absorb these hits more easily, but they still are better off choosing not to handle these transactional HR tasks and re-focusing their HR dollars on the bottom line. A PEO helps them do this by assisting with lower turn over, higher productivity and greater profitability. For an HR professional in a larger company delegation is key. They must choose how to spend their time on HR tasks that will profit the company. 

Multi-site/multi-state companies are Employers Resource SWEET SPOT being the 1st in all 50 states. Payroll taxes are getting to be tough and we have experience processing payroll in every state. We provide cost sharing of expertise and a way to replicate and duplicate processes and systems to make money while you sleep. One of the great things about our service is the scalability in that we can serve all sizes. We can go as deep as they want and at a pace that works for them. 

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To large companies, the HR support they are looking for from a PEO is more “transactional”.  They usually have a qualified HR pro but she is bogged down in administration and has no time for the “strategic” HR for which she was trained.  She wants to focus on better hiring, better training, employee satisfaction, workplace productivity, and all the other high level HR tasks she knows will impact the companies bottom line profitability.  These are the HR pro’s we “elevate” into the roles they only wish they had more time for.

Small companies have a person who wears the HR hat but also does all sorts of other tasks for the company.  They are not trained in HR and really don’t know what they are doing.  I think these folks are actually very nervous to wear the HR hat because they hear about the world of compliance, fines, and legal exposures but they know little about it.  These companies are looking for a PEO to keep them out of trouble.  We bring in the HR expertise so the “HR lady” no longer has to worry about whether or not she is doing the HR part of her job properly.  We help her sleep better at night.  And that is a good thing because these people are usually critically important to the day to day running of the business.

For a small business, HR means the ability to be in compliance. Information that protects the business owner is what makes this possible.

A PEO can best serve both companies with the assurance of A,B,C.  A –  Relieve Administrative Burden, B – Help control business cost. C – Make sure the client is in compliance with all state and Federal Laws.

HR to a small business, particularly a first-time owned one, is most probably a vague set of regulations, guidelines and requirements that most owners feel are not at the top of their priority list for resolving.  If there is some set of folders that has personal information on each employee, like their job application and offer letter, I think most owners would say that would be adequate for the first year (or possibly two).  Running the business, growing client accounts and keeping production levels ahead of demand would be more pressing issues for the small business owner.  They just want to survive the first year.

Larger businesses, on the other hand, realize the importance of HR and compliance with rules and regulations.  They have most commonly hired someone with business office acumen, particularly as it relates to employee administration, to ensure that they are not in jeopardy of illegally crossing any government guidelines.   They view HR as a “necessary evil” that needs to be under someone’s care and attention in the organization — this may not be a certified HR person, but is most probably experienced in handling most HR issues.

A PEO can be a true value-added partner to each category.  For the small business that has no one truly “watching the shop” (as regards HR), this can be an instantaneous asset to the owner who is desperately trying to grow and sustain his business.  Employee handbooks, safety manuals, personnel files, background checks and drug screens, interviewing / hiring / firing guidelines and other administrative details that have been either ignored or given only passive attention, can now be added to the owner’s checklist of items that he wanted to get done from the beginning but just never had the time or personnel in place to handle it.   As regards the larger company, the PEO can become the “back office” for the person assigned those duties in the company, making them more valuable, more knowledgeable and more reliable to the company and the owner because they can now rely on “multiple experts” in different areas of HR responsibility to ensure the right thing is done at the right time.  HR audits, exit interviews, help with finding and keeping the best employees are now attainable goals for the larger company without having to hire additional HR staff personnel.

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