Small Versus Large – an HR Perspective

Big dog nose to nose with small dog.

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Welcome back to TAPE’s Alexia Groszer, GPHR, senior human resources generalist. In a previous post, she answered some common questions about HR for small business. Today, we’re looking at size issues from an HR perspective.

Let’s look first at things from an employee’s view. What are the pros and cons of being employed by a small business versus a large business?

Small business:

Pros: Employees at a small company typically wear more hats, thereby getting exposure to more business areas and skills. The owners and management know employees by name. Good ideas can be implemented quickly. The employee often sees a direct impact of the work they perform and may feel an essential part of a team.

Cons: Job growth is often dependent on the company’s growth. If the company grows rapidly, this could be a pro for the employee who rides the wave of prosperity with the company. Employees who were with Microsoft and AOL in the early days benefited greatly from the rapid growth. However, few small companies have exponential growth. If the company does not grow, the employee may be feel their only option for growth is to leave the company.

Large business:

Pros: A large company may offer more avenues for career development (types of jobs, levels of management, and more internal job opportunities). Employees may be able to move up or laterally while gaining years of service and benefits within the same organization. Large companies often have more structure. They have tried and true processes which provide excellent on the job training for those new in their careers.

Cons: Since large companies often do work on a large scale, employees at a large company often perform a high volume of work of more limited scope. This could mean limited learning/ growth within the job depending on the position they are in. Large companies can also be very bureaucratic. New ideas may take a long time to get implemented. Employees may not feel any direct impact of their work. They may even feel that they a just a number or not essential to the organization.

One person may prefer a smaller more personable environment where they know everyone by name and can make an immediate impact. Another may thrive working amongst many people at a large corporation with brand recognition and the security of a larger and more established pipeline of continued work. Choosing an employer, small or large, depends on many factors. Researching potential employers and comparing it to your own list of preferences is a good place to begin. 

As a small business grows, their HR needs grow and change with them. When should a small business have an in-house HR department versus outsourcing to an HR vendor?

Each company has different business needs, so there is no absolute answer. However, as companies grow they will likely have a bigger need for human resources support. Often they will move from outsourcing to in-house support due to cost.

For start-ups or small companies (5-25) employees, outsourcing HR may be a more cost-effective option, especially if their needs are mainly payroll/benefit administration with only an occasional compliance issue. Advantages of outsourcing include: the employer pays the vendor for support only when it is needed instead of paying for a fulltime employee, they have access to different HR disciplines/experts but only pay for a few hours of advice at time, and they can easily increase or reduce hours of support to match their business needs.

When a company gets bigger and begins using their vendor 40 hours per week or more, they may discover it is more cost-effective to hire their own HR staff. There are advantages to an in-house HR department, too. An internal staff will be more vested in the company’s culture and mission. They can customize policies and processes to fit the needs of that business. The HR staff can build a rapport with employees, providing better customer service and continuity.

This can be especially helpful when there is an employee relations issue or when a manager is seeking general guidance. All of these can create a more cohesive company culture and greater employee engagement.


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