In the September 24, 2019 Ask The Headhunter Newsletter an entrepreneur wonders if HR is necessary at all.

Question

HRI am starting a company. I have an absolute disdain for HR as a general rule and wanted to get your thoughts on a company running without an HR department. I feel like HR has hoodwinked so many executives into thinking they’re a necessity for any business, but there’s only a subset of things they do that are actually required. For example, making sure you’re not in violation of labor laws.

Which would you recommend: to have no HR department, or to severely limit HR to only those responsibilities that actually help the company (and hence reduce its size considerably)? One thing is sure: HR should never be involved in hiring decisions. I’ve never seen them help there.

Nick’s Reply

Good luck with your start-up. I’m sure HR folks will have something to say about this.

HR options

I think I would try a hybrid of no HR and limited HR. You can cover the compliance bases by contracting with a good HR consultant and by defining exactly what you want them to cover. But be careful – there are a lot of HR hacks out there. The good ones, however, will cost you and are worth what you’ll spend because they’ll advise you as well as do the work.

I understand why you’re so down on HR — you feel it’s not very helpful. You’re not alone — see FastCompany’s excellent Why We Hate HR. Make sure your HR consultant understands that they will have no decision-making authority, that they report to you, and that their scope of work is narrowly defined. Use them as you need them, just as you’d use any good consultant.

Limiting HR

If you find an HR consultant that’s actually good at recruiting, interviewing and managing the hiring process, you’ll be really lucky. There are some very good HR folks out there who work closely with managers to get jobs filled. They will embed themselves in a manager’s operation to learn how it works and what makes the manager tick. A good HR person will help the manager recruit and hire — but will not do the recruiting or hiring. They will process documentation and ensure the process is compliant with the law.

I think you can take care of important HR functions with just a good consultant for quite a while before you need to worry about hiring a full-time HR person.

HR & Legal

Keep in mind that many HR responsibilities are legal in nature, including  compliance. If you hire lawyers to advise you, make sure they have labor and employment expertise so they can backstop your HR consultant when necessary. Just be careful not to let the lawyers and HR gang up on you and rack up huge bills — or hobble your ability to run your business!

There’s a good, simple rule for managing HR, lawyers and other experts. Explain to them what your objective is; that is, what you want to do. They will often respond with myriad reasons why you mustn’t do it, or why it’s illegal, or why it won’t work. Thank them for their advice and cautions. Then instruct them to find a way to do what you want without violating the law, because that’s their job. If they push back, tell them to also provide you with a risk analysis, because that’s their job, too. Your job, as the principal of the company, is to decide how much risk you want to take — legal or otherwise. Never let a consultant make your decisions for you.

Do it yourself

I agree that HR should not control recruiting and hiring. (See Why HR should get out of the hiring business.)

I think the most important reason to limit any HR function is that being directly involved will force you to understand, grasp and grapple with the challenges of having others working for you. I’ve seen many companies fail because management left that to “experts.” So don’t “let HR do it.” Your people — your workers — are everything. They are your responsibility. The idea that someone else will manage your new company’s “human resources” is akin to suggesting that someone else is going to run your business. Perhaps that’s your goal ultimately, but until you learn the ins and outs of finding, hiring and managing people, you won’t have a business. (See Hiring Manager: HR is the problem, you are the solution.)

An HR function can be helpful if you, as head of the company, manage it like companies used to manage HR — actively. The trouble today is that HR is often left to its own devices because the C-suite sees HR functions as “icky but necessary, so let HR do it…”

Big mistake.

I wish you the best with your new business.

Can a new business operate without an HR department? If you could build an HR department from the ground up, what tasks would you have it handle — and which tasks would you never let it control?

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43 Comments
  1. I’m in a similar position (looking forward to starting my own business), and I’d wager for the same reasons.

    There are several good small business attorneys in the area, and I look forward to working with one of them for the “keep it legal” aspects. Beyond that, I’m fairly sure after 40+ years of work, I can figure out if a potential employee knows how to pet a kitty in a cat cafe … or whatever business I get into.

    • @L.T.: My daughter told me about a cat cafe in her area. What a concept…

  2. I have worked for companies that used consultants and lawyers instead of HR departments. Mostly it worked well — they got good team players who worked hard to make the company succeed. The trouble came when leaders turned a blind eye to hostile work environments (or caused it themselves), or broke promises to employees about raises or promotions, or failed to communicate new directions and decisions. I suspect the key for anyone who wants to start a business is to identify his/her own weaknesses in both personal and business skills, and plan to compensate for them with documented processes and employees or partners they respect and will listen to.

    • Similar to what you’re saying Carol, the places where I’ve seen a very limited HR presence work is where the organization focused on leadership and team development. That way, they don’t have HR trying to “babysit” the organization. Leaders are equipped to handle challenging solutions appropriately themselves.

    • @Carol: Good point. But I suspect that the problem isn’t HR consultants, but the company leadership. I’ll bet they’d have the same problem if they had a FT HR dept. Jerks are always jerks.

    • Carol this problem can happen with or without HR

  3. I’d be curious why the reader who submitted their question has such a *generalized* disdain for HR. Is the reader Theory X in leadership style? Were they not selected for a job they applied to? With employees litigious and eager to complain, if the reader hires employees then s/he better be prepared to nurture and lead. The HR’s I’ve dealt with don’t hold true power and they clearly communicate that they aren’t decision makers, but rather they execute the decisions (and provide advice) to leaders while also advocating for the employee base. HR wears two main hats: Chief Advocate for the business and Chief Advocate for the employee population. I think the main reason why the reader has a bad taste in their mouth for HR probably has to do with a bad experience from a bad boss and HR took the blame because the execution was passed to HR like a hot potato. It feels easier to blame HR, right? That’s because they don’t hold power and can’t attack back.

    • @K-Ster: I think there are plenty of data points to support the OP’s concerns about HR. And you actually reveal one of them.

      “HR wears two main hats: Chief Advocate for the business and Chief Advocate for the employee population.

      This is a common and very troubling misconception that the HR profession actually promotes, wink-wink. HR cannot be, and is never, the chief advocate for employees. HR works for and has a fiduciary obligation to the employer only. Good HR people do advocate for employees, but when the rubber hits the road, even they have to act in the interests of the employer.

      I also disagree that HR doesn’t hold true power. In some companies, HR is allowed by boards of directors to wield tremendous power.

      • As a manager I’ve been in many meetings with HR, and never once did they advocate for employees against management.

        • Along those lines, I’ve heard of HR basically say “so what? everyone else has a problem too.” if someone approaches them with a management concern.

      • >HR works for and has a fiduciary obligation to the employer only

        >HR cannot be, and is never, the chief advocate for employees

        European works councils work for the employer and are the chief advocate for their employees. I have no idea if they have fiduciary obligation or not. HR can be chief adovcate for the business and management steps in where there are disagreements.

        Of course where employees find a failing with a works council most will find a union.

      • For what it’s worth, I know HR folks that really do advocate for employees. Trouble is, if management overrides them, it ends there. Even the best HR workers are bound by their obligations to the employer.

    • K-Ster,
      The you are incorrect about the main role of HR. Fundamentally HR is a legal compliance department. As part of this compliance comes the duties of risk management as they relate to the risk of lawsuits between employee and employer.
      The role of Chief Advocate is a politically correct term to make us feel better that the only reason HR exists is to keep the company from getting sued or fined.
      The problem is that HR personnel are not properly trained in risk management, nor are they properly trained in law.
      Additionally, HR fundamentally misrepresents their role by claiming to be an advocate when they are not. They are at best a liaison. The difference is that HR ultimately cannot take the side of the employee, but rather must take the side of the company. Their perceived goal is to serve as a channel for communication and aid in translating the issues for all parties to understand, but even that is rarely ever done well.
      The foundational problem with having an HR department is that it immediately sets up a divide between leadership and employees in an us verses them scenario. Even if this is only on a subconscious level because its mere presence suggests that you must have a liaison to approach leadership with employment challenges.

      • >Fundamentally HR is a legal compliance department

        Shouldn’t they report to the company counsel then?

        I always thought they were more of an admin role.

        • @Craig: “Shouldn’t they [HR] report to the company counsel then?”

          That’s an important question. In many companies HR reports to Finance. Fancy that.

          • @Nick
            Would be intresting to see how counsel might change HR.

            I’d imagine they would be unafraid to spend a bit of cash tp hedge legal risks,I like to think the personality tests would be quickly thrown out by the lawyers.

  4. I am also looking at starting a business, but it will be several months to maybe a couple or so years before I’m even ready to think about hiring people (I won’t quit my day job until I have a self sustaining company, and I will not do entrepreneur work while at my day job – I am keeping those two entirely separate).

    Before I start earning money, my plan is to hire an attorney to help me set up everything to be legal. Insofar as HR, I remember that one company I used for had their accounting person do HR tasks, but they used their payroll company to help out with various HR tasks. I think that was a good thing.

    https://www.adp.com/what-we-offer/hr-services.aspx

    Of course, as a business owner, you get to decide the scope of work of HR. Even though you and department managers might do recruiting, HR will probably need to officially post your positions to meet legal requirements. How this is executed is something you get to determine.

    So Nick, I have a question: Is there a requirement that you interview a certain number of people? What are the posting requirements?

    • @Kevin: I never wade into the compliance waters — just not enough time to keep up with the law! You’ll have to check with a good lawyer. Maybe someone with expertise can advise here…?

    • So Kevin doesn’t want HR but wants free HR consultation?

  5. I’ve had success in getting HR to help with hiring, and I emphasize help. I had an advantage in that the HR people did not understand the acronyms found in relevant resumes, and knew they didn’t understand it. If they think they understand the job, and helpfully screen for you, you are going to miss good people.
    The other advantage is when managers don’t work at recruiting. HR might be useful in prodding them.

  6. “HR wears two main hats: Chief Advocate for the business and Chief Advocate for the employee population.”

    As someone who worked in HR sub-specialties for most of my career, that sentence sums up the main issue for HR. Ideally you have to dispassionate and un-biased toward each side. However, as the Bible says, “No man can serve two masters”. From experience, I know it’s, hard, really hard, to be put in a position of making on side happy at the expense of the other. If you are doing it right, it wears you down after a while.

    If anyone is thinking about using dedicated HR staff in a start-up business, be sure to hire only well-trained professionals. Very often, HR people are those who did not work out in other fields, are assigned HR tasks along with their regular work (like the bookkeeper who does payroll and HR), or took a couple of short course of limited value. It takes a lot of training and experience to become the kind of HR person needed to serve the needs of both employer and employees.

    To confirm my value to my employer. I decided to try for the PHR certification then offered by the Society for Human Resource Management (SHRM), the principal industry association. The certification was earned by passing a lengthy exam which was comprised of questions on what SHRM called the body of knowledge on HR The body of knowledge was contained in a series of workbook sized publication that stacked up over ten-inches tall. My company paid for me to take a “prep” course at a local university, two and a half hours weekly for a semester taught by someone with an extensive HR background. The books and the course covered what every HR professional should be expected to know: wage and labor laws, non-discrimination laws and decisions of ever type, collective bargaining, workplace safety, employee benefits, FMLA, workers comp, employee relations, etc., etc. The test was tough. Maintaining the certification once granted required a lot of continuing education.

    Requiring a certification for potential HR managers will weed out most of the ones that lack the professional knowledge essential for the job. You then can pick the person whose vision for HR matches yours.

    • @Mimi: Is there a college curriculum for HR that covers what SHRM’s certification cover? What are the best college programs for an HR degree?

      • Sorry for the late reply. Yes, there are supposedly colleges programs that grant a BS in Human Resources. From my perspective, I don’t know how such a degree would be an indicator of competence without a very large amount of related work experience and structured internships. I would rather see a solid undergraduate degree in a field that requires one to learn a subject matter, interpret that subject matter, and then write about it. The HR specific material should be taught in grad school with a pre-req that the student have some real progressive HR experience behind them.

        I am a fossil as far as the HR field is concerned. I graduated from that well-respected woman’s college at your alma mater forty-mumblety years ago with a degree in history. Reading a lot of material, sometimes in another language, and interpreting it in writing, also sometimes in another language, comprised 85-90% of my course load. I learned my sub-specialty on the job and was fortunate to have a couple of bosses who taught me a lot of general “HR” skills. My lack of an HR degree when applying for a promotion was an issue twice with a former employer. When I pointed out to them that, since HR degrees did not exist when I was an undergrad, their requirement was discrimination on the basis of age. They backed down quickly.

    • The SHRM certificate program is a money making sham. SHRM is nothing more than a Lobbying Group masquerading as an HR Professional Association. I have been lucky to work for some of the most respected HR functions in FORTUNE 100 companies and it was generally accepted that SHRM certifications were worthless. Typically only HR functions in small to medium organizations will sometimes recognize these ” certificates.” Compliance issues are constantly changing so anything learned on a one time basis, whether through graduate school or to a lesser degree with a certification, are quickly outdated.

      • Wait, so the bar exam for lawyers is a sham because that stuff is quickly outdated? Nope. These exams establish a baseline of professional knowledge. Professionals are expected to keep up with things after that.

  7. Sounds like an easy way to get sued because there was no one to lodge a complaint to when a manager started harrassing employees or asking illegal questions in interviews like “how old are you?”, “when did you graduate?” or (in CA) “what did your last employer pay you?” because there was no one around to explain to them those important points. Eliminating the HR department doesn’t eliminate the work that needs to be done. It makes that work to be everyone else’s responsibility. It simply means someone else has to become the ‘hr expert’. You may be able to get by with a consultant that comes in every now and then as a smaller company but as you grow larger than may become a full time job.
    You may want someone to track salaries, so there is an equity across the same job description (again to do with morale and perceived fairness).
    You also need someone to administer health plans and retirement plans. So there’s a bunch there beyond hiring.

    • @Chris: Where was I to turn when the the VP of HR started coming on to me; e.g., coming to talk to me, sitting on the desk of my cubicle and crossing her legs and coming up unexpectedly and massaging my neck and shoulders? It was rather embarrassing and annoying, and my colleagues–especially the women–pretty much said straight out, “wtf is with you and Susan?”

      Where was I to turn when that same VP of HR later wanted to send me to re-education camp because of an unfounded complaint against me by a woman in a different office who claimed that I was rude to her on a conference call with a vendor? Fortunately, the vendor in question is a pretty damn big company and ALL calls are recorded. I called the vendor and asked them to send me the recordings of the phone conversation, which proved that I was innocent and my accuser was guilty of been abusive to our vendor. I told the VP of HR that I had the recording, but she initially refused to listen to it. She only did so after I threatened to file a complaint with the appropriate governmental authority. When she and my boss listened to the recorded conversation, her jaw dropped at several points listening to what my assuser was saying to our vendor.

      I received a brief apology. My assuser (and her accusations against me had led to me being scolded by a Sr. Executive VP) was never reprimanded. And although I was found to be innocent, the VP of HR had lost face. I managed to last 18 months after that, only by tranferring away to another office, but you don’t ever spurn the affections of the VP of HR or cause her to lose face without consequences.

      So, again, please explain to all of us why we need HR as place to go to for complaints.

      • @Bill: The HR VP as Company Ombudsman is a ridiculous proposition propped up on the widespread but incorrect notion that if you have a problem with anyone at work, “Go talk to HR.”

        Your experience is a good example.

    • Chris,
      Illegal questions are all over the place. If you do an online application for almost every company one question is “Do you need now or in the future a visa or any kind of sponsorship?” so you are identifying nationality and some of the other questions about disability, gender, race could be a way to play games rather than comply to federal law or a way to discriminate.
      Disclaimer: I am a USA citizen but bother me all the time how some of these questions can be used for discrimination.
      Sorry, HR people I believe there are competent ones but they are few. Lately, some HR and recruiters find a fancy title ” Talent specialist” and other titles with the talent attached. I wonder what makes an HR person a talent specialist. I work in the Data Science industry and have the suspicious that the so claimed lack of Data Engineers, Data Scientist, Data Analyst and so on, it has been created in part for the ignorance of HR and managers and the defected job descriptions.

    • >there was no one to lodge a complaint to when a manager started harrassing employees or asking illegal questions in interviews like “how old are you?”, “when did you graduate?” or (in CA) “what did your last employer pay you?” because there was no one around to explain to them those important points.

      That’s a lawyer’s job. If they can’t trust the staff to avoid asking those questions, perhaps they need to be in the room too.

      Company Counsel or whomever they have delegated can deal with this.

  8. Good luck when you exit someone from your business and they sue you for everything because it wasn’t handled in the correct way.

  9. HR is a speciality you can’t do without. FLSA and other compliance, the tedium of payroll and other ‘housekeeping’ activities will distract you from startup activities.
    Get good consultants to set you up and prop you up while you grow. Add select stuff only as you identify needs that the outsiders can’t handle.

    Just don’t think they can recruit key personnel effectively. That’s part of your job, and that of any manager you hire.

  10. How did we ever survive before HR, as we know it today, came into existence? Quite well, and if we just went back to those days everything would function just fine without them–much, much better, to be more honest. And we don’t have to go back far–only to the early 90s, when Admin handled payroll and benefits, and certainly did not get involved in hiring.

    I could go on and on about the evils of HR, especially when it comes to their “involvement” in hiring (as well as pay and promotions). I say “involvement” because they have staged a coup and in most companies have almost completely taken over the hiring process from beginning to end.

    For a startup company, I’d even be wary of HR consultants, as I fear they’d still have the HR mentality (which is basically to control people and eff them over).

    I liked the approach of Dreyer’s Ice Cream and their “Grooves” company culture. They avoided having an HR function as long as possible, until their growth across multiple States made it necessary. And even then, the people who were first tasked with the “HR” function called it “people support.”

    Here are a couple of quotes from an interview with Sherrie Cornett about Dreyer’s Grooves, and I will provide some links below:

    “We didn’t want to be a traditional human resources department, and so we named ourselves and we called ourselves people support. I love that title. I think it resonates with who we were and what our mission was and what we were here to do. We had a Groove that said Management is People. And our managers were responsible for hiring, training, developing, motivating, coaching, disciplining if necessary, and firing if necessary. You don’t want to rely on an HR department to do all those things for you. That’s the work of the manager. So we didn’t want to start going down those paths of being a traditional HR partner; but it was the early days of recognizing that those people need help. They’re not HR managers.”

    “But it became clear that the larger we got, that there would be a lot of things we could head off with, like you said, the right advice and counsel internally, and just make sure that people had a resource to go to. That’s what People Support was. It was a resource for managers to help them with employee issues and concerns.”

    I do have some issues with Cornett: she embraced the idea of behavioral interview questions (which in my opinion were designed as a crutch for interviewers who know nothing about the work in question and have absolutely no business conducting an interview, or evaluating a resume, for that position), she seems to be a bit of a female supremacist, and she also bought into the group interview and consensus bit. However, I must admit that in the context of Dreyer’s strong company culture–people sought out to work for the company because of the culture embodied in the “Grooves”–the group consensus approach made sense.

    http://digitalassets.lib.berkeley.edu/roho/ucb/text/cornett_sherrie.pdf

    http://www.pmhub.org/the-phenomenon-called-culture-dreyers-grand-ice-cream-case-study/

    I wish I could dig up more information about Dreyer’s, their “Grooves,” and how they dealt with what we now call HR issues. I cannot help but think that if other companies followed this example of HR being in the business of “People Support”–meaning providing useful and welcome support to the managers and supervisors who have the real authority–then HR wouldn’t be universally despised, as it so rightly is.

    • @Bill, your comment makes so many good points that I’m not even going to list them. But here’s the real gem, and possibly the solution to the HR problem:

      “…we don’t have to go back far–only to the early 90s, when Admin handled payroll and benefits, and certainly did not get involved in hiring…”

      Who needs HR if you have an Administration department? It seems a bunch of people got together and created a new, mis-named Department of Overhead.

    • @Bill

      >How did we ever survive before HR, as we know it today, came into existence?

      Because managers had secretaries that reported to them and did their adminstative work so the managers could get on with hiring.

      If HR directly reported to each hiring manager for the job they were filling it might work out okay.

      • @Craig: Interesting suggestion that HR report directly to the hiring manager. Makes total sense. Otherwise, who is qualified to judge the performance of HR?

  11. @Nick Corcordillos, you wrote in your original post:

    “There’s a good, simple rule for managing HR, lawyers and other experts. Explain to them what your objective is; that is, what you want to do. They will often respond with myriad reasons why you mustn’t do it, or why it’s illegal, or why it won’t work. Thank them for their advice and cautions. Then instruct them to find a way to do what you want without violating the law, because that’s their job. If they push back, tell them to also provide you with a risk analysis, because that’s their job, too. Your job, as the principal of the company, is to decide how much risk you want to take — legal or otherwise. Never let a consultant make your decisions for you.”

    That reminded me of a quote from a famous American businessman, which I vaguely recalled because I’m an armchair student of business history. And I found it!

    “Well, I don’t know as I want a lawyer to tell me what I cannot do. I hire him to tell how to do what I want to do.”

    J. P. Morgan

    • @Bill: Thanks for that. I probably encountered that long ago and made it my own :-)

  12. In my experience working for smaller companies, the basic compliance, payroll, and benefits functions of HR can be contracted to companies such as Insperity and TriNet. They did a good job. The rest could be through an attorney and an HR consultant, if needed.

    • They also can get you a higher level of benefits and even 401K than you could obtain on your own as they qualify as a group. Not an ad, but I found this very attractive in my last company–and when they went out of business I had no worries about who to contact for my COBRA or UI.

  13. Long I have quoted my late father: “Payroll and Benefits used to make sure the pay envelopes were correct and the insurance paid up so that when benefits were needed, they were there.”

    Makes me wonder: Does anyone who correctly does payroll deductions still pay in cash? I knew one place that did in the early 2000’s.

  14. My late father referred to HR as “frustrated psychologists”. I agree with the writer’s disdain for HR, I’d say they’re mostly worthless. I’ve been job hunting and interviewing for a new position, and I’ve been seeing HR less and less out there. Unfortunately, I’m seeing more low-level clerks and grunts doing the initial screening and interviewing, so the problem still exists.

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