If you are in the process of getting your business off the ground, setting up an HR department should be at the top of your checklist.
Whether it’s a startup or a large corporation, having a quality HR team will allow you to focus on the people within the company and, arguably, this is what is going to make you successful in the long run.
So where do you begin?
Our step-by-step guide will help you understand the vital functions of an HR department and give you the necessary tools to build one.
Why you need an HR department
To truly understand the value of building an HR department you must first learn about all that it does for an organization.
The key functions of an HR department include:
- Talent recruitment
- Health and safety
- Employee relations
- Employee training and development
- Compensation and benefits
- Labor law and compliance
- Company culture and engagement.
Without an HR department, it can be difficult to ensure these critical components are being handled effectively. Indeed, when it comes to interviewing top talent, implementing safety policies, creating training programs to develop employees, overseeing payroll and employee benefits, and staying in line with the standard regulatory compliance, the HR department plays a key role.
The proper management of these functions can make or break the success of your company, so prioritizing your HR department will be in the best interest of your organization.
How to build an HR department
Having an HR department is vital but building one can be overwhelming. To help make the process easier, we’ve broken it down to easy steps that you can follow to build an amazing HR department.
Step 1: Start with company culture
Before you set up your HR department, you must first establish the culture of your company.
The main purpose of an HR department is to focus on the people within the organization. This involves protecting, developing, paying, hiring, and promoting them. All of this ties in with company culture as the HR department will focus on fostering it within every function. As a result, it’s important that you establish one.
When your human resources team hires a candidate, they portray the company’s culture to the applicant. Same goes when they are writing policies or creating trainings as they have to ensure that the company culture is reflected in these documents. Even when they are fostering employee engagement and evaluating benefits, company culture acts as the backbone of these processes.
Company culture is at the heart of any major HR function, so if you’re a startup, do not overlook this step - it is, quite possibly, the most important one you’ll take. If you’re a larger organization looking to build your HR department, perhaps re-evaluate the culture you currently have and ensure it’s going to propel your organization in the right direction.
Step 2: Define the company’s “why”
The most fun part about building an HR department from scratch is creating a vision for the company’s professional growth. As a startup, you’re taking the time to think about your organizational “why”.
Why is your company doing what it does? Take some time to do some goal setting as you’re creating a vision and remember: HR is the face of that vision as they are often the first contact candidates have with your company. So, when building this department, your goals, vision, and, ultimately, your ‘’why’’ will play a major role. Quite honestly, an effective HR department cannot be built without one.
Step 3: Establish a mission plan
When establishing the mission for your organization, it's time to get down to the nitty gritty. You’ve established the ‘’why’’, so now it’s time to define what you are going to accomplish and exactly how you’re going to accomplish it.
Think of this as giving your future HR department the tools they need to drive your organization forward by following a detailed mission plan. For instance, it will allow them to create job descriptions, future trainings and employee activities based on the organization’s overall mission.
When candidates apply for jobs at your organization, they may check if your company’s mission plan aligns with their professional objectives. So, you’ll want to make sure your mission clearly defines what you do and how you’re doing it in a concise way. Here are a few mission statement examples to help get you started:
- Tesla: “To accelerate the world’s transition to sustainable energy.”
- Starbucks: “To inspire and nurture the human spirit— one person, one cup, and one neighborhood at a time.”
- Google: “Organize the world’s information and make it universally accessible and useful.”
- JetBlue: “To inspire humanity — both in the air and on the ground.”
- PayPal: “To build the web’s most convenient, secure, cost-effective payment solution.”
Take your time to create a mission plan that people can believe in and make it known as you establish your organization and move forward with building an HR department.
Step 4: Create an HR department proposal
In this step you want to create a list of requirements for your HR team.
Start by evaluating how many staff members the HR department will need and then, define the department’s organizational structure – basically, establish who will report to whom. Lastly, establish a budget and evaluate how much money you’ll allocate to the HR department.
Whilst working on your proposal, consider if you want the HR department to:
- create an on boarding process
- outline specific regulations
- determine employee benefits
- maintain employee recognition programs
- prepare for audits.
Even if your organization does not require approval by senior management before moving forward with the creation of an HR department, creating a proposal would still be extremely beneficial as it will create a road map for you to refer back to.
Step 5: Recruit your HR team
Now that you have established what you want from your HR department, it’s time to write some job descriptions and get started with the hiring process!
First things first, start by recruiting an HR manager who meets the requirements you’ve laid out and who will assist with the next steps in propelling your department, and organization, forward.
Once you’ve hired the head of HR, you’ll be well on your way to a fully functioning human resources department! If your organization needs more HR professionals to their team, consider adding some of the below roles to grow your human resources department:
- HR director
- Chief HR officer
- Recruitment manager
- HR coordinator
- Payroll coordinator
- Recruiting coordinator
- HR generalist
- Benefits administrator
- HR specialist
- HR administrator
Utilize the expertise of your new HR professional to fulfill your staffing needs and continue the recruiting process as needed.
Step 6: Outline employee compensation and benefits
As you set up your human resources department, you must also establish employee compensation and benefits that will be offered by your organization. Some specific benefits to consider are:
- Insurance (medical, dental, vision, life)
- Retirement accounts (401k, pension, IRA)
- Paid time off (sick leave, vacation, holidays)
- Employee perks (bonus’, gift cards)
Take your company culture and mission into account and choose specific benefits that would fit your organization’s profile.
As for employee compensation, check the market and ensure that your pay structure is competitive and fair. Keep in mind that, as the economy changes, your compensation plans will need to be adjusted accordingly.
Step 7: Develop HR policies
Developing HR policies will help you manage employee expectations but also provide you with the necessary structure to address issues that may arise within the workplace.
To do this, you must first consider what are the organization’s non-negotiable’s and what rules all team members should abide by. These could revolve around issues such as:
- Discrimination and harassment
- Leave and time off
- Health and safety
- Disciplinary action
- Employee conduct
- Applicable state/federal law policies (at-will employment etc).
Step 8: Define safety and health regulations
While health and safety regulations will vary greatly based on your organization’s location, in the US federal compliance with the Occupational Safety and Health Act (OSHA) will be required, to ensure of the safety of your employees.
Focus on introducing specific health and safety measures such as:
- Establishing emergency evacuation plans and exit routes
- Having first aid and medical supplies
- Ensuring safe working conditions
- Providing safety equipment and gear
Prioritizing health and safety will allow your employees to focus on their duties without concerns about their working conditions.
Step 9: Put together an employee handbook
After you have developed your policies and regulations, it’s time to put them into a comprehensive employee handbook that all team members can refer back to over the course of their employment.
The handbook should be a manual for your employees, outlining company rules, vision and mission, policies, and expectations. It’s best practice to continually update the handbook as your organization and policies change. Establishing clear expectations through an employee handbook effectively will help support your new HR department moving forward.
Step 10: Set up your payroll system
One of the main functions of any human resource department is payroll. So, establishing this system early on is crucial.
In order to effectively pay your employees on time, you must establish appropriate policies and procedures as well as guidelines for what to do when errors occur. Consistent, timely pay is the best way to build trust with your employees, so take the time to ensure this system is set up correctly and is fully integrated within your HR department.
Step 11: Create onboarding and recruitment procedures
When it comes to onboarding and recruitment, it’s essential to create a streamlined system by implementing procedures that will support your organization. You should also take into account how you the onboarding process will flow from the candidate’s perspective, too and ensure it includes following documentation for compliance purposes:
- Signed/accepted offer letter
- Work verification (I-9 for US)
- Company specific documents (signed policies, NDA, non-compete, proprietary property etc)
- Payroll information
Create a fun and engaging onboarding experience for your employees but ensure the above items are included to maintain appropriate records and effectively welcome your new employees to the team!
Step 12: Create quantifiable metrics
Now it’s time to establish deliverable metrics for your HR department. When your employees understand what is required of them, you're defining what success means to the organization. Some examples of metrics specific to hiring could include:
- Time to hire
- Interview to offer ratio
- Offer acceptance rate
- Cost per hire
- Quality of hire
Be sure your organization sets clear deliverables and communicates them effectively to ensure the continued success of your HR department.
Step 13: Review the department’s growth
The final step to build an HR department is to review its growth down the line.
Start by evaluating components that worked and those that didn’t. You can summarize your findings in a document and keep track of ongoing changes through it.
One of the best things you can do as a company is to review results and make appropriate changes for the future. By setting up an effective HR department will help you maintain steady growth!
Now that you know what steps you need to take to build an HR department from scratch, it’s time to get started! To stay on track, make sure to utilize this checklist:
- Define company culture
- Set down long-term and short-term organizational goals
- Establish a mission plan
- Draft an HR department proposal
- Establish employee compensation and benefits
- Create HR policies
- Outline safety and health regulations
- Put together an employee handbook
- Set up a payroll system
- Build your onboarding and recruitment process
- Create deliverable metrics
- Review growth
If your organization follows these steps, building an HR department should be a breezy process.
By taking the time to set the right foundations, you’ll establish an HR department that supports and propels your company forward! Remember, building this critical department requires clear vision and goals but also solid structures and expertise.
What other steps are necessary to set up an HR department? Let us know in the comments section below!
This article is an updated version of an earlier article originally published in November 2016.