Business Management / Human Resources

4 ways HR is different for small businesses than for large organizations

Manish Dudjarejia

Updated: Jun 08, 2023 · 5 min read

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human resources for small business

It’s a well-known fact that businesses that value their employees tend to perform better than those that don’t. Happy and satisfied employees are more productive, which, in turn, helps improve their overall quality of work.

However, with nearly 85 percent of employed Americans leaving their current job for better benefits (50 percent) and a flexible work environment (42 percent)—among other reasons—recruiting and retaining the right talent is not easy for most employers. This is why human resources is an essential factor in running a successful business, big or small.

Although most HR departments operate with the well-being of their employees as their priority, the approach they take may vary according to the size of their organization. In other words, a small business may look at HR and its role from a completely different perspective compared to a big organization. It’s important to understand some of the differences between HR at small businesses vs. large organizations.

Here is a list of four factors that differentiate the role played by HR for small businesses from that in large corporations.

1. Resources or the lack thereof

One of the most common differences between small and big organizations is the availability of resources. Naturally, small businesses tend to have limited resources, including a small HR team (usually one to three employees) and a restrictive budget, owing to their modest earnings.

As a result, the HR systems for small business can’t afford to do much when it comes to employee training, team building, and a long–term work policy development. This means HR pros in small companies have to get creative when fulfilling their responsibilities. But, the element of creativity in this regard is almost non-existent in large organizations.

For example, if you’re a small business HR professional, you might consider consulting seasoned industry veterans to see if your work policy is in line with your business goals and industry regulations. Or, you could hire or consult a third-party business learning program to boost your employees’ morales or help them develop their skills.

Not only are these creative means to an end, they can also be more affordable alternatives. On the other hand, larger organizations often have internal HR leadership and mentorship at their disposal. This allows them to execute more than one program simultaneously. However, because of their size and bureaucratic-like systems most large businesses have in place for precautionary reasons, implementing changes to the HR program can make it a slow and complex process. It can sometimes take months or even years to see any major change all the way through.

2. Recruitment and retention processes

Recruitment and retention are perhaps some of the most time-consuming aspects of an HR department, but the process differs significantly in small and large companies.

Usually, an HR professional has to manually search and post advertisements on social media and professional networks like LinkedIn to find suitable candidates. Internal job posting is also a popular recruitment process in many businesses.

Recently, however, small and medium companies have turned to more affordable solutions, such as pre-employment assessment platforms to substantially automate their recruitment process. These platforms use cloud-based computing, data analytics, and AI to evaluate candidates. Candidates can be assessed for intelligence, personality, professional knowledge, and logical reasoning. Some tools may also allow you to create customized assessment tests.

Large organizations, however, have a tried and tested recruitment process in place. It often involves multiple rounds of interviews, assessment tests, and background and reference checks. You can also afford to outsource the recruitment process partially or completely.

When it comes to retention, however, small organizations are at an advantage. Small HR departments know their employees personally. Also, unlike large organizations, employees have direct access to the decision-makers of the company. Depending on the type of business, many can also offer flexible work schedules and provide tailored benefits, resulting in higher employee satisfaction. While large organizations can also seek this approach, it is often limited to high-tier employees.

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3. Level of responsibility

In small businesses, many owners and managers have to wear more hats, especially when it comes to HR. This means roles and responsibilities will often overlap. These can range from recruitment, creating HR budgets or policies, creating financial statements, and managing payroll.

In a large company, however, you have to play a more specific role. For example, your responsibility may include only payroll management or employee training.

4. Organizational structure

A large organization has a more formal and well-established organizational hierarchy. Their HR department is no exception. In other words, HR is just a small cog in one of the large wheels moving the entire organization.

While this may be beneficial by reducing workloads and the need to multitask, this bureaucratic structure can make it difficult to connect HR’s outcomes to the organization’s bottom line.

Unlike large organizations, their smaller counterparts often lack well-established structures and processes. Usually, it’s more of a family affair. So, you are required to handle each task on a case-by-case basis. Some people may find this work style challenging, while others may like it.

However, as you have direct access to the decision-makers, you can show exactly how much money was saved or productivity was increased for each decision you have made. Your role also remains that of an HR “firefighter”. As a result, you are less likely to get the chance to learn long-term HR planning.

Parting words

The most important aspects of HR differs significantly from small to large businesses. While small businesses have limitedresources, more responsibilities, and rudimentary recruiting methods, they offer more flexibility and a multifaceted work environment. Large organizations, on the other hand, tend to offer targeted workloads, less room for creativity, and a more structured work environment.

Manish Dudharejia is the President and Founder of E2M Solutions Inc, a San Diego Based Digital Agency that specializes in Website Design & Development and eCommerce SEO. With over 10 years of experience in the Technology and Digital Marketing industry, Manish is passionate about helping online businesses to take their branding to the next level.

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