When to Set Up the HR Functions


If the business is growing, small and medium enterprise (SMEs) often grew to a size when the business owner thinks that he will need to hire a person dedicated to the HR functions. As the business tries to save on costs, it usually brings such a person onboard when the number of employees grows to 60 to 100. However, that is often too late.


Based on some business management literature, the widest management span is 1 to 14, based on the traditional hierarchical structure. Others pointed out that the perfect group size is 8 to 12 persons. Thus you can see that when the number of employees gets to 35, it starts to get overwhelming for 1 man to manage alone. 45 is normally the number for maximum tolerance.

The Push Factors

There are 4 key push factors to prompt a business to hire a person fully dedicated to HR matters:

  • Increase in personnel related transactions.
  • Personal problems get in the way of work and work performance.
  • Working relationship problems arise between supervisor and subordinate.
  • The organizational grapevine starts to develop and grow.

A Personal Experience

This example will give you some insight on the push factors. Recently, I had a conversation with the Managing Director of a family business dealing in medical supplies. His parents started with 2 retail stores selling items such as wheelchairs, first aid boxes, hot water bags, blood pressure monitor machines, antiseptic solutions, nutritional supplements.

The business expanded to include a new office cum warehouse, delivery vehicles and 60 employees. At this point, HR matters were handled by his secretary or finance staff.

With this number of people: Work performance due to absences and personal problems such as miscarriages, pregnancies out of wed locks, extra marital affairs. Supervisor-subordinate conflicts start to show. One of his supervisor was punched by a subordinate after a heated argument, which landed the supervisor into hospital.

Interesting Observation

You will notice that the last 2 factors arise from the conscious effort of the business to create some kind of pyramid control structure. Often business owners are quick to implement a pecking order, which they hope that it will dispel their troubles. This is often a mistake. What is needed is work arrangement that a person hired into the job can understand and work with and focused on hiring people who are self-organized and motivated.

Ryan Carson of Treehouse explained in his article ”No Managers – Why We Removed Managers At Treehouse”: “In my experience, managers started off as workers and then moved up the ladder, getting further and further from the front line. They gained power but slowly lose their touch with the day to day realities of talking to customers and actually creating solutions to their problems. The manager’s team lost respect for them because they could no longer produce, which means that they would set unrealistic deadlines.”

Possible Alternative

Instead of trying to do something drastic such as doing without a hierarchical structure or trying to adopt a lattice structure, the company may want to consider the implementation of self-managed teams.

Here is an excerpt taken from the article “The Process Managed Org Chart: The End of Management and the Rise of Bioteams” written by Peter Fingar: According to the distinguished Indiana University technology professor, Dr. Curtis Bonk, “This is the age of employee participation, multiple leaders and yet no leader, and prompt communication, as well as the technologies that make all this possible.” Got team? You’d better. To succeed in today’s dynamic, technology-enabled environment, you must be able to function in and through teams. But, if we stick with our current pyramid-style designs of our organizations, we will not be able to meet the growing needs of our communities in the high-change global economy.

However, this alternative does not forgo the need to hire a person dedicated to HR functions. It will probably buy time to minimize supervisor-subordinate problems.

Concluding Remarks

When the number of employee grows to 35 to 45, it is time for the business to consider putting the HR functions in place. An experienced professional is recommended. When the number of staff grows to 60 to 70, it is time to add a support staff. At 250 employees, the HR team required would be about 5 persons, comprising of a Manager and 4 support staff. You will see that it is not a linear line.