Today’s episode is the sixth installment of our introductory 10-Part Strategic Planning Series, focused on Human Resources. This Strategic Planning Series is kicking off our new podcast, Cultivating Business Growth.
We are answering questions like, when do you need an HR plan, how much involvement do you need as a business owner and what are the risks involved in bringing on employees? We are talking high level about the factors you will want to consider as you incorporate your HR plan into your strategic planning process.
What we cover in this episode:
- 1:35 – Introduction to Jami Johnson
- 3:36 – Effectively managing HR and how that can affect your impact as a business owner
- 7:58 – What are the triggers that you need to start hiring?
- 11:30 – How to let go of control
- 13:30 – Risk factors in HR
- 19:44 – Building HR infrastructure and scalability
- 25:00 – Outsourcing HR
- 28:40 – What roles do you need and how will you fill them?
We want to start by highlighting the importance and legal ramifications that you can run into as a business owner if you aren’t consulting with an advisor or educated about the legal requirements and considerations when you begin bringing people onto your team. You need to know the difference between an independent contractor and an employee and ensure you are meeting the payroll tax requirements so you avoid legal trouble. If you are unsure of any of these things, please consult with an advisor or outsource your HR with a company, like ADP.
Understanding why you need an HR Plan
Time is limited. If you’re in the trenches, there’s no time for innovation. As a business owner, you have to be able to step back and work “on” the business rather than “in” the business. Not only do you need a strategic plan for the roles you want to fill, but also to find the right people to fill those roles. You have to value your own time and realize that your time is better spent on tasks that are truly developing your business. When you have the right people and you’re able to free up your time, this gives you the freedom to innovate. You, as the business owner, should be able to step back and manage the business high-level and direct where your company is going.
Unload the tasks that can be done by someone else. Delegating will allow you to pivot, focus on networking and create relationships with centers of influence to take your business to the next level, keeping you on a positive upward path.
What are the triggers that can tell you that you need to assemble a team?
There is no easy answer for this. There are financial triggers, seasonal triggers, etc. that depend on what your needs are as a company.
Having the right advisor is crucial. Because we have a background as CPAs, we analyze the financials to help make that determination. Sometimes we have the tendency to ask the question, “Can I afford this?” Alternatively, the question can be “How can I not afford this?” because you may be facing burnout as an owner and the business may not be around for another year if you continue down the same path. Ultimately, we may have to invest in others to invest in our business.
You can start slow. If you aren’t sure if you’re ready for an employee, you can start with an independent contractor or fill a role part-time. Once you have established trust with that individual or proven that having someone in that position truly helps your workload, you can go from there.
How to let go of the control
Letting go of the full control of our business can be difficult as an owner. It’s important to build trust with your colleagues and establishing a climate of confidence will take time.
On the flip side of this, we have to understand that there is risk and we are going to get burnt. Just as there are risks with other aspects of business, we cannot avoid them in HR, but there are also AMAZING people you will find on your team who truly bring a huge value to the team. Having that mutual respect for the strengths you each bring to the table is something that will breed a great culture within your company and give you better collaboration and results from your team.
Risk Factors of HR
One of the most common conversations we have with business owners is “Should this be an employee or an independent contractor?” The IRS is very strict on this, so you must make sure your classification is correct.
The #1 differentiator is control. If you control their schedule, when they work, what they do, etc. that aligns more with an employee classification. If you’re asking for a finished product and giving them the freedom to work their own hours, that could be more of an independent contractor. It is important to consult the IRS website we mention in this episode to ensure that you are following the laws and guidelines the IRS has established.
The IRS has three main factors:
- Behavioral control – Control over worker’s behavior and work results
- Financial control – How much control does the employer have over finances? This means do you control that person’s profit and loss (i.e. expenses, business write-offs, etc.)
- Relationship – This involves the way the worker and business perceive how they interact. Does the worker receive benefits? You wouldn’t provide health insurance to an independent contractor but you may for an employee depending on the situation.
Building infrastructure and scalability
Loyalty is a big factor in creating infrastructure and scalability. Companies used to incorporate pensions, but as a society we have seen a large shift away from this structure. Now, company culture has a large impact on employee loyalty. By getting to know your team and taking the time to find out what is important to them, you can nurture the culture you want to provide and will usually get a better output from your team.
As you build your infrastructure and consider scalability, you will also want to consider how your current team can expand and grow? What is their skillset? What are the gaps you will need to fill in your organization?
You also want to incorporate cross-training. Cross-training can protect your business model and shouldn’t be viewed negatively. It can be helpful to communicate that your employees should want to be replaceable because that means they can continually learn and grow with the company.
Think about your goals and keep that in mind as you build your infrastructure. Make sure you’re putting the right processes and resources in place. Be proactive as opposed to reacting constantly.
While payroll and HR may seem like an easy task, companies like ADP and Paychex offer affordable solutions that can eliminate risk factors. Payroll is an area we recommend keeping your hands out of as a business owner.
These third party companies not only mitigate your liability, but can also offer HR consultations and answer questions about policies and federal regulations. Some packages offer assistance getting your company policies and procedures together as well. There are reasonably priced packages and many options available. Let them be the pros so you can run your company.
It’s important to understand the implications of completing payroll yourself. If you forget to submit payroll taxes, submit them late, or submit the incorrect amounts, the IRS can come after you personally. If you hire a third party payroll processor, you must provide the correct information but they take on the responsibility of paying taxes and handle any notices the IRS issues. The peace of mind is well worth the cost.
We talk about payroll and time tracking further in episode #7, when we discuss Infrastructure.
What roles do you need and how will you fill them?
We discussed this a bit earlier under, but you must consider your future plans to scale. Can your current team grow with you to fill your needs as a company? You may need to consider expanding.
You can find independent contractors or employees through a variety of sites now. Indeed, LinkedIn, Fiverr, Upwork, and VirtualVocations are all good examples of sites that you can utilize to fill roles within your company.
Thinking about this during your strategic planning process allows you to incorporate your marketing and budgetary concerns as well.
Advisors are another resource to utilize if you’re looking for help in planning or implementing processes. When it comes to hiring, we always recommend background checks and references. They are traditional but for good reason.
People will make you or break you. As long as you’re investing the time necessary to consider both the needs of the business and yourself as the owner, you will be able to approach HR much more mindfully and allow yourself and your team to push your business forward rather than letting payroll and HR hinder you.
Take the time to learn how to effectively manage HR and know the signs that it is time to bring on a team. You will hold yourself back as a business owner and lessen the impact you can make if you try to do everything yourself. We also covered some ways you can practice letting go.
It is important to consider the risk factors of bringing employees onto your team and the necessity for infrastructure in your HR plan. Don’t hire people just to fill seats. Invest time into creating the right roles and finding the right people for the job. Understand the liability you take on in completing payroll yourself and consider hiring a third party company to help.
If you take a long-term approach to HR, as with the rest of your strategic plan, you will be able to create stability and lessen the stress on yourself as your business continues to grow.