How to Create an Effective Human Resources Department from Scratch

by / ⠀Blog Under30CEO / March 10, 2023
human resources department

As your business develops and you start to scale up, it’s only a matter of time before you’ll have to employ additional personnel and set up an efficient HR team. And while you may feel overwhelmed at first, creating an effective HR department doesn’t have to be a daunting process. All it takes is a step-by-step approach and an organized plan to get you on the path toward success; before long, your HR machine will run as smoothly as possible.

What is an HR Department?

An HR department is a vital part of any business, large or small. It is responsible for overseeing key personnel-related functions such as recruitment, onboarding, payroll, employee benefits, and retention. It is also responsible for ensuring that all legal requirements are met and that the company follows good business practices.

Having a dedicated function to take care of these tasks ensures that all personnel-related matters are handled efficiently and appropriately. Not only that but a dedicated HR team will free up a substantial amount of time for other business activities that may otherwise be occupied by personnel-related tasks.

Step One: Establish HR Goals

The first step in creating an effective HR department is to establish goals. What do you want the department to achieve? What challenges must be surmounted in order to achieve success? Setting clear objectives will help ensure that everyone is working towards the same outcome – and will make it easier to measure progress later on.
According to McKinsey, an effective HR department should be the function that drives and maintains the identity of the company. It should clarify and uphold the purpose, value, and culture of the organization, acting as an anchor point from which all other business functions are evaluated.

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Step Two: Recruit Talented Professionals

Once you have your goals established, it’s time to start looking for people who can help you reach them. Of course, recruiting qualified professionals should be your top priority – but don’t forget about culture fit either. When building a successful team, it pays to ensure that everyone possesses both technical and interpersonal skills.

Since you are building a department from scratch, the people that you initially hire will either make or break the success of your HR department. With this in mind, you simply must find an effective HR leader. One that will help you set a strong foundation for the department. If necessary, consider outsourcing an experienced HR consultant to assist you in setting up the department.

Step Three: Set Up Your Tools and Systems

Building the perfect team is only half of the battle. To truly achieve success, it’s essential to also supply them with all of the tools and resources they need to reach their peak performance. That way, you rest assured that you accomplish your goals effectively. Fortunately, HR tech has advanced greatly in recent years and offers solutions to streamline recruitment procedures, payroll, and onboarding processes, as well as employee benefits programs.
With SaaS solutions, you can enjoy lower rates on a monthly subscription basis. Plus, you only pay for what you use. If you are unsure of what tools to prioritize, some of the most popular options include HRIS (Human Resources Information System), Applicant Tracking Systems (ATS), and Unified Communications.

HR departments play an even more crucial role in startups, where the need to scale quickly and efficiently is important for success. For startups, especially those based in the United Kingdom, it’s crucial to choose the right kind of HR software that fits both their budget and operational needs. HR software for startups in UK is particularly beneficial because they’re designed to be in compliance with the country’s specific labor laws and regulations.

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These platforms often offer an all-in-one solution for various HR functions, making it easier for startups to focus on their core business activities. The ability to pay on a monthly subscription basis, as is common with SaaS solutions, adds an extra layer of flexibility, allowing startups to scale their HR tech resources in line with their growth. Therefore, when considering tools and systems for your startup, make sure to explore HR software options that are not only robust but also compliant with local legal requirements.
Step Four: Create Policies and Procedures

Creating clear policies and procedures is essential for any successful HR department. These documents should establish standards for how all aspects of the human resources process will be handled within the organization – from recruiting and hiring practices to performance evaluations and disciplinary actions.
When crafting these policies, it is vital to include compliance information such as those pertaining to the various laws, guidelines, and regulations that the organization must adhere to. Doing so ensures that all organizations meet their legal obligations. If you neglect to cover these topics, your organization may be vulnerable to costly lawsuits and fines.

Step Five: Determine Compensation and Benefits

When you’ve got your HR crew ready to go, the first step is configuring compensation and benefits. You should take into account information such as job title, experience level, market standards, and geographical location when deciding salaries for new or existing employees.
Additionally, consider beneficial options like health insurance, retirement plans (401K), stock options, tuition reimbursement along with vacation days when outlining a comprehensive benefits package. Offering competitive benefits can help your organization attract and retain talent, while also boosting employee morale and engagement.

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Step Six: Set Up An Annual Audit

An annual audit helps ensure the proper implementation of your organization’s HR processes and policies. These audits can also provide an opportunity for the HR team to identify areas that need improvement. Then, make changes where necessary. With the market for talent becoming increasingly competitive, it’s more important than ever to have a strong HR department. One that focuses on employee retention and engagement.

The Takeaway

Growing a business is an exciting yet complex task that requires careful planning and execution. When it comes to setting up a Human Resources department, it’s important to get the basics right. This includes finding the right people to lead the team and equipping them with the necessary tools and systems. Also, creating solid policies and procedures and continually reviewing and auditing your processes. By adhering to these steps, you can guarantee that your Human Resources department will become an invaluable resource for the organization.

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